This is the third part of our three-part series on “Is Wholesaling Legal.” (Have you seen part 1 and part 2?) In the video below Jeff Watson, General Counsel for the National Association of Real Estate Investors Association, discusses wholesaling with two regulators from the Ohio Department of Commerce – Division of Real Estate.
In part 3 of this series – is wholesaling legal – the discussion focuses on marketing wholesale properties. We often hear the question “How do I market a wholesale property in DC, Maryland or Virginia?” This video explains what you can and can’t do regarding marketing a home that one has under contract.
Jeff begins by asking an important question for wholesalers: Can I market a property that I do not legally own?
Kimberly Wells says that “no, you cannot market something that you don’t own. I can’t enter into a contract to purchase and then turn around and market to sell that property. You can only market the legal interest in the contract – not the actual home.” Jeff clarifies by asking “If I only have a contract and I want to market that contract, I can’t be showing pictures of that house?” Kimberly’s answer is a resounding “No!”
Don’t panic just yet though, because then Jeff asks, “Is it permissible for a person to market and assign a contract which that person holds as a principal to buy real estate?”
Sheila Vitale responds,”Under contract law, contracts are assignable, unless they say otherwise. If you enter into a purchase contract with the intention to close on that contract (you can’t enter into the contract as a way to circumvent license law) then you can market your interest to another party if, in the future, you decide not to close on that contract and you know someone who would want to close on the property. You can’t just tie up a property.”
Jeff confirms that you if you put something under contract you must have the intent to purchase it. This is obviously a gray area as I am not sure how you would prove what your original intent was. Sometimes the contract is so blatant to the point that it’s not the intent of the buyer to ever buy the property. This is a big no-no. Jeff believes that if the contract says those things that it really isn’t a contract to begin with.
Jeff clarifies that it is perfectly legal to market and assign a contract on a property that you intended to close on. He then asks the question: “what are the unacceptable ways of marketing that contract?” Their answer is: “if you identify solely the property and not the contract. Acting as if you own the property in the marketing is not acceptable and goes against the real estate regulations. Your ad should specifically state that you are marketing your interest in the contract and not marketing the property.”
Did you miss part 2 of this article/video series? Read and see it HERE.
Keep in mind that if you’re concerned about potential legal pitfalls of marketing your DC Metro-area contracts, you can co-wholesale with Express Homebuyers. To find out more and to submit a deal click here.
Please note that this article does not serve as legal advice. To safely practice wholesaling, consult the Federal and State laws specific to your area before executing any deals.