Wholesaling rules are changing. Five checks before you assign a contract.

Wholesaling means signing a purchase contract and passing it on for a fee. For years, many people treated it as ordinary investing. Several states have since adopted rules aimed at it. Illinois, Oklahoma and Virginia are often named, and the list keeps changing. Some require written disclosure that you hold only a contract right. Some treat repeated assignments or public marketing of a property as brokerage that needs a license. Penalties can include fines and, in some states, loss of the right to collect the fee.

We cannot say what your state requires today. Here are five checks you can do yourself before you assign.

1. Read your state real estate commission's guidance on wholesaling. Many have posted it. If not, call and ask.
2. Look at what you will do. Buying for yourself and reselling is different from marketing a property you only have under contract.
3. Read your contract's assignment clause. "And/or assigns" language matters, and so does any seller consent right.
4. Disclose. Tell the seller and the end buyer in writing what your interest is, and that you may assign.
5. Ask a real estate attorney. One hour of advice before the first assignment costs less than a dispute.

What it means for terms deals

Terms deals sometimes involve assignment, and a double close can change the analysis in some states but not all. Our broker partners can help structure a deal so that a licensed person handles the parts that need a license.

Sources

• State real estate commission websites: check your state's site for wholesaling guidance.
• Illinois Real Estate License Act of 2000, 225 ILCS 454 (confirm current text).

Statutes and guidance change. Confirm current text before relying on this note.

This is general information, not legal or tax advice. Please check with a licensed professional in your state.