Is wholesaling real estate legal or not? Do you need a license to wholesale a property? How to do wholesale legally? I will explain all that in this article by following a few rules and regulations. And I will also share what real estate wholesaling is exactly.
But first, I want to know that in modern days people are crazy about wholesale. Everyone wants to become an agent and earn big bucks by selling real estate. But it’s not that easy.
Most people will fail because finding an undervalued property and a good customer with a great commission is always tough, and the game involves a lot of competition.
So, before you start your career in real estate wholesaling, know well how this works and how to make the most money from this. Talk to a professional real estate attorney about the rules and regulations of wholesale in your area, then start.
Also, read: How to start real estate wholesaling
Table of Contents
What Is Real Estate Wholesaling Exactly?
Many people think that wholesaling real estate means flipping properties. But that is not wholesaling. A wholesale agent does not sell properties directly. They sell a contract of those properties they have found in the area by doing their due diligence like an undervalued discounted property is ready for sale.
As a wholesaler, you shall find an undervalued property that has motivated the seller and agrees to sell it below market price. You will create a contract for that property with the help of the Property Owner.
The agreement is called the Right to Sell contract. Then you will sell the contract to an investor, not the property, who will be happy to buy it for your price as it is an undervalued house, and he can make a great profit from it.
For example, you agree with the property owner by saying I will help get $50,000 for this house, and the rest profit will be mine, or you will buy that house and later will sell it for a higher price.
Then you will find a buyer and sell that property via the contract for $60,000. You will give him $50k and make a profit of $10,000. It is the whole concept of wholesaling, and people are making a lot of money doing so.
Those sellers will agree to sell it at a price lower than the market value because they want to sell it fast. Investors look for sellers who need quick money to solve their financial problems. At times the wholesaler agent is a perfect man to get help from.
But as I have said earlier, finding those undervalued homes is not easy. But if you can, then the profit is waiting for you. Know it.
The Right to Sell Contract Laws in Wholesaling
But you might be asking if I hold the contract and the seller sells the house to somebody else without my approval, then what will happen? No, he can not sell it.
When the contract is signed, you hold the Right to Sell the paper of that house. Without your permission, no one can sell the house, not even the Owner, under some terms and conditions until you leave that property. That’s what the whole contract says.
If you do not have that contract, people will scam you, and you will earn nothing. All the work you have done by finding the house, analyzing it, and offering it to an investor will become a complete waste, and you will have no proof to sue them in court. That’s why wholesale contact is required.
Is Wholesaling Real Estate Legal in my Country?
Wholesale real estate is legal as long as you follow the laws of your state government. Never try to do anything that can harm any party, either the investor, the property seller, or the final buyer. If you do, then there are laws that will come for you. It is like becoming a real estate agent but in a different manner.
You must also know that the laws for wholesaling real estate may vary in every state and every country. Some countries do not use the term Wholesale. They use other something different, but the ideas are the same.
For example, in some countries, people take a signed contract as an agent that says, I am going to give your $60,000 of this property, and whatever the extra price I sell will be mine. If I sell it for $80,000, the $20,000 shall be mine.
People do it indirectly in a different name, but it’s all wholesaling real estate. You can ask your agent if something similar is done in your area.
- So that means, my friends, it is legal in every country. You can do it and make money.
But before you become overconfident, consult with an experienced real estate attorney to guide you through everything as I am not a lawyer and this article is for informational purposes only. Contact a good personal property lawyer and have clear answers to your doubts before you start taking any real estate deals.
Can You Wholesale Real Estate without a License?
The simple answer is YES. It is not necessary to be a licensed agent. But a license will save you from many legal property disputes and build your wholesale real estate business along the way.
If you are a licensed real estate agent, disclose that. Plus, you are not the property’s current owner, but rather that you hold the right to purchase the property from the buyer. Both sides always love a professional guy with a government license when they make an agreement with a buyer or seller.
If you are purchasing the property to resell it without really owning it, you must disclose that you are not the owner on record. But you have signed a valid purchase agreement and will close escrow in the future.
How to Wholesale A Real Estate Legally?
Now you know that wholesaling is legal if you do it right, and a license is not required at the beginning level. But you need to understand how to wholesale houses the right way. There are some best practices that can help you with it.
- Become the principal buyer in each part of the transaction.
- Ensure all agreements are valid legally in the process.
- Disclose the wholesale agent licensing.
- Always exercise transparency in everything.
- Have a backup plan in place.
There are many basic guidelines, but these are the main point while wholesaling a real estate deal. Follow it, and you will be safe from any legal disputes.
The article is not a piece of legal advice, and I am not an attorney. The information is for educational purposes only for a beginner.
Is wholesaling real estate legal in your area or not, to know more details about that, contact a certified lawyer and then start the business.
Tell me, Is wholesaling real estate legal? Yes, it is. Do you need a real estate license for it? No, but a license will always help. You got it. I hope you got your answer and are confident to start the real estate wholesaling business. Good luck. Thanks for reading. See you soon.