Wholesaleing in Omaha, NE. Is it really legal?

Question

Ok so I was introduced to real estate investing last year. I had very little capital. I came across wholesaleing. And I thought that sounds great! I was not fully informed or educated on it at the time but went ahead and moved forward with it. I came across a local wholesaler and paid for a mentorship program which I will say has not gone that well so far. I have done some further research and spoke with an attorney. What I have gathered is that it is not legal. But there seems to be some grey area. And I know there are a bunch of people doing it. Interested to hear your feed back and knowledge on this.

Owen Dashner · Answer

I think the next obvious question is, if assignment of contract by an unlicensed person is not an "above board" transaction, why is the real estate commission allowing title companies to complete these types of closings?

It would seem that the easiest way to snuff out these "small fires" is for the commission to explicitly direct title companies and attorneys that they are not allowed to complete assignment transactions with unlicensed wholesalers. Much easier than trying to herd cats by chasing around wholesalers. This seems like an easily solveable problem to me, unless I am missing something?

David Neese · Answer

Hey Matt,

This is totally my opinion and I express this often to new wholesalers at meetups in both Omaha and Memphis.

Wholesaling is legal in NE.  At its most basic level, you are simply assigning a contract to someone else and that doesn't require a real estate license.  However, I believe(not a lawyer), that if your intent is to never close on a home then you probably should have a license.   I do not believe you should put a contract on a house unless you know you can perform on the contract if you don't have a buyer.  This may mean you need a partner, or hard money lender lined up to help you acquire the deal.  This also means the deal must be good enough for a partner or hard money lender to be willing to participate so it acts as a check and balance for your deal.

Where you can get in trouble with wholesaling is when you don't perform on a contract and someone sues you for non-performance and it comes out you were trying to sell their house to another party and never had any real intent to buy the house.

With all of this being said, I always try to wholesale any deal I pick up first.  I try to assign it first or simultaneous close.  If I have to close on it I do and then keep trying to sell it while I fix it up.   Once it is all fixed up I either lease it out or sell it retail.

I believe you should always try to wholesale your deals first for cash flow speed.

If you find a deal that is a real deal you should have zero problems finding a buyer for it.

I do think if your intent is only to assign contracts and never close on a loan you should probably be licensed.  This will also expand how you are able to work your leads as you will have more opportunities.

I have had some wholesalers tell me they fully disclose their intent to flip to another buyer and never close to the seller, they are probably safe doing this in that the seller will probably never complain to the real estate commission, but that is openly admitting that they intend to fulfill what the state considers to be the role of an agent.

Mark Maly · Answer

@Matt Mcnulty yes you would be operating "legally" if you had a license. Though technically going this route, all monies made would have to be paid directly to your broker and then from your broker to you.  As a side note though, there are a ton of investors in the area that are wholesaling and assigning contracts that are not licensed.

Matt Mcnulty · Answer

@David Neese Sounds like I should get licensed. Just seems crazy to me how much of this happens every day even. There are a lot of people out there wholesaling homes with no intent to ever close on it.

Matt Mcnulty · Answer

@Mark Maly So if I get licensed then it is totally legit for me to market to distressed properties and get them under contract and then assign the contract to another buyer?

Matt Mcnulty · Answer

@Jay Hinrichs thank you for your in depth feedback and response.

Matt Mcnulty · Answer

@David Neese thank you for your in depth response and feedback.

Matt Mcnulty · Answer

@Mark Maly thank you for your feedback and info.

Jay Hinrichs · Answer

exactly its the same in all states its just if the state wants to enforce the rules..

here is a e mail I got from state of Oregon on the matter.. I wanted to know bottom line can someone advertise a home they don't own so I sent in a e mail solicitation showing the house bed bath price etc.. including assignment fee.  Here was my response from the state of Oregon

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Best regards,

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction.  Addressing the problems is like trying to put out small individual fires in a forest that is burning.  The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful.  Thanks!

So yes it happens if you get turned in your going to have to deal with the state.. So really depends on your personal ability to handle state regulators and the drama and stress that would come with that.. Oregon like NB I am sure is very friendly but regulators are not.. I know first hand.

Mark Maly · Answer

No matter how you spin it (i.e. selling/assigning a contract) according to the NE real estate commission you need to be on title to a property in order to make money off of it, otherwise you have to have a license. I’ve had really in depth conversations with Greg Lemon the head of the real estate commission about it. Even if attorneys tell you otherwise, the commission is the judge and jury and dictate legally what you can/can’t do.

Wholesaleing in Omaha, NE. Is it really legal?

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