Home Buying/Selling Specialist: Is Wholesaling Legal in Your State?

Is Wholesaling Legal in Your State?

I get this question a lot. I believe the question comes from confusing wholesaling with assignments, 2 very different types of transactions.

Wholesaling is a normal selling transaction and, therefore, should be perfectly legal in all states. Simply contact your local real estate attorney to confirm.

To wholesale, you purchased a property. Once you purchase, you can do anything you want with it and, because you own it, you do not need a license of any type. You can for-sale-by-owner or use an agent to sell any property you own.

When you sell a property wholesale, you simply mark it up a small amount from your purchase price and wholesale properties typically sell in a “relatively” short time frame. Note: the phrase “small amount” is relative to what you paid and the property ARV (after repaired value). It’s certainly possible to make six figures off a wholesale deal.

Assignments, on the other hand, are not legal in all states but they are an entirely different type of transaction.

With an assignment, you never own the property. You simply get the property under contract and assign the contract. To repeat: you are assigning the contract, not the property.

This is why assignments are not legal in every state. Not all states allow contracts to be assigned. Here in North Carolina, every contract is assignable. In some states, you must specifically write into the contract that it is assignable. In some states, NO contracts are assignable no matter what you write in.

To summarize:

Wholesaling – often described as the quickest, easiest, lowest risk way to make money in real estate. When wholesaling, you buy properties cheap, sell cheap, and sell fast with little or no money out of your own pocket.

Assignment – finding a deal, putting it under contract, then selling that contract to someone else. With an assignment, you are never actually on the property – you never go on title.

Have you done wholesaling and/or assignments? Which do you prefer and why?

Karen Rittenhouse | www.JKKPropertyInvestors.com | 336-834-0614 | karen@karensperspective.com
Comment balloon 2 commentsKaren Rittenhouse • August 26 2018 02:16AM

Comments

I do not see the term "wholesaling" used here. By the description, seems like this is what is called "a flip" here.

As for assignment, in our standard contract, we can choose and mark how we want it. Sometimes we use assignment simply because at the time the buyer puts the property under contract, s/he has not yet decided who s/he should be on the Deed. Often times the Buyer then goes to the attorney and figures it out, so if the names on the Deed would be different from the contract, we do the assignment.

Posted by Vadim Zolotarevskiy (FunCoast Realty & Management, LLC) 3 months ago

Hi Vadim.

The ONLY difference between wholesaling and a flip is that a flip is typically rehabbed where, with a wholesale, investors purchase and resell for a smaller profit in a shorter time frame without doing the needed rehab. A wholesale is typically a transaction between the investor who buys and resells to another investor who does the rehab flip.

And not all states allow assignment of any kind. If you needed to change the name, you would need a new contract in those states. It appears that your state allows assignment as do most states, including mine - North Carolina.

Thanks for responding!

Posted by Karen Rittenhouse, Real Estate Investor (www.JKKPropertyInvestors.com) 3 months ago

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