Legal documents needed for wholesaling.

[Kyle Newman]

hi my name is Kyle and me and my wife are still very fresh to the wholesaling concept. I am running into alot of different answers on what leagl documents are needed to do a wholesale here in missouri. I am a resident in the kansas city metro area. What i am trying to figure out is if there are any liscense or documents needed to wholesale. If so what would those be..and which type of buisness liscense i would need. Thank you

[Chris Dawson]

@Kyle Newman, wholesaling is a touchy subject when it comes to the law.  That is why you are getting so many different answers.

In the states of Missouri and Kansas it is illegal to collect any kind of payment/fee for helping someone else buy or sell real estate unless you are a licensed real estate agent, real estate broker, or a lawyer.

Now, to determine if what you are wanting to do is legal or not, I need to know how you plan to wholesale.  There are several ways to wholesale:

1. Option 1) You actually buy the property (taking title in your name/company name) and then you sell it to somebody else at a latter time, for a higher price.
2. Option 2) Same as Option 1 but you close both transaction on the same day, at the same title company.  This is known as a double closing.
3. Option 3) Same as Option 2 but you don't ever take title to the property yourself.  You do what is called an open ended closing where you sign both contracts but a deed is never recorded in your name.  The title company essentially keeps the contract "open" until your buyer closes.  Then the title company records the deed between the original owner and your buyer.
4. Option 4) You do what is called an Assignment where you write yourself as the buyer , "and/or assigns".  This essentially gives you the right to assign (aka sell) the property to another buyer.  There is only 1 contract written.  There is only one seller and one buyer (neither are you). 

Option 1 and Option 2 are completely legal.  

Option 3 is VERY GRAY.  Technically, unless you are a lawyer or you have a real estate license, this is illegal because you are getting paid to sell a property that you don't own.

Option 4 is legal as described above (because you are not making any money) but if you add an assignment clause that pays you for assigning the contract, then technically you are breaking the law (unless you are a lawyer or an RE agent).

I hope this helps.  I'm sure there will be much debate on this, but these are the rules as defined by the Kansas and Missouri real estate commissions.