Is It Legal To Wholesale Real Estate?

It is absolutely legal to wholesale real estate so long as you abide by the laws already in place. That said, wholesaling is not without its fair share of misconceptions. Namely, there are a lot of professionals in the real estate industry that assume wholesaling is illegal. In reality, there is nothing illegal about selling a contract. Perhaps even more importantly, you are not acting as an unlicensed agent.

When all is said and done, wholesaling is relatively simple and completely legal: you are the buyer who is principal to the transaction and you are selling your contract to another buyer. You are, therefore, not listing the property for a commission, as an agent would. To make sure you are wholesaling within the boundaries of the law, you must also:

  • Be the principal buyer in the transaction
  • Execute a valid agreement
  • Include the required agreement language
  • Include a deposit that is properly exchanged
  • Only market and sell interest you own
  • Disclose agent licensing
  • Be fully transparent with all parties involved

Some states may have different laws regarding the wholesaling legal process, so make sure you understand the laws in the area you intend to wholesale. These points are, in no way, universal to each state and can change depending on where the deal takes place. Before you intend to wholesale a deal, check with a real estate attorney in your area that understands creative real estate transactions.

Do You Have To Have A License To Wholesale Real Estate?

You do not need to have a license to wholesale real estate; you just need to be the principal buyer in the transaction.

How Do You Become A Real Estate Wholesaler?

Wholesaling real estate is often viewed as an entry level exit strategy, as it exposes investors to less risk than, say, a rehab. That said, the barrier to entry is relatively low; becoming a real estate wholesale only requires that you want to do it. Of course, it’s easier said than done, but there really isn’t any reason anyone can’t wholesale a real estate deal. Provided all laws are followed, anyone can wholesale a home.

Disclaimer: When you sell a contract, you aren’t actually selling the property itself; you are actually selling your right to buy the property to another buyer. Under what is known as the doctrine of equitable conversion, once a real estate purchase agreement is signed by every party involved in a wholesale deal, the buyer becomes the equitable owner and the seller retains the bare legal title to the property under the terms of the agreement. A double closing, on the other hand, will have you purchase the subject property and sell it immediately after the acquisition (without rehabbing it). This page is for informational purposes only.  We are not lawyers or financial advisors or counselors. Please seek the advise of independent counsel to insure that you fully understand the laws in your city or state.