I seem to come across a lot of wholesaling via assignment activity in NC, but according to this NC Real Estate Commission bulletin, this appears to violate the General Statutes. I had been considering jumping on the wholesale via assignment bandwagon to be able to make my offers competitive with theirs, but after reading this, it sounds like that would be illegal.
Wholesale via double closing is clearly ok.
The way I read the bulletin, wholesaling via assignment would be ok as long as that isnât the sole intent of the wholesaler. What I see a lot of, and had been considering myself, is if the wholesaler doesnât find a buyer, they back out of the contract. Their intent was never to purchase the property at the price they offered.
I also donât think we can get off the hook by letting the Sellers know that our intention is only to wholesale the property, because that would put us under the licensed activity of offering to buy/sell for others.
It seems like the only legal wholesale option for us investors in NC would be double closing except for incidental assignments during the course of business.
What are your thoughts and experiences regarding wholesaling via assignment in NC?
Disclaimer: Iâm not an attorney. This isnât legal advice.
It looks like NC is distinguishing between a âbona fide buyerâ (someone who genuinely plans to buy a property and has the financial means to do so) and someone who gets a property under contract with the intent to assign it and collect a fee.
In other words, it may be okay to assign the contract as long as you can prove you actually meant to buy it outright and had the money to do so.
How would you prove this? Thatâs probably subjective, as these things often are, but perhaps you could demonstrate this through clear contract terms, honest communication with sellers, and showing proof of funds or loan pre-approval, to indicate you were all set to buy it yourself.
On the other hand, if you market the property heavily to other buyers or have a long history of assigning contracts rather than closing deals, it might be a sign that you donât genuinely intend to purchase the property.
This is just my take on it though. A legal professional might think differently. Either way, I would think regulatory bodies could use these indicators to enforce laws and weed out their definition of âunlicensed brokerage activities.â
If youâre ever curious how this works in other states, you can see the nationwide interactive map we put together here:
On a related issue, if you do wholesale a property in NC and intend to use a real estate broker to handle the disposition, it could be problematic.
In a recent NCREC publication, the say:
May a real estate broker market a property on behalf of their principal, the wholesaler, when the principal only has equitable interest?
According to Rule 58A .0104, an agent must have a written agreement with an owner prior to listing/advertising their property. The real estate broker who represents the wholesaler does not have a written agreement with the owner of the property to provide brokerage services; therefore, the real estate broker of the wholesaler may not advertise the property that is the subject of the purchase contract. The wholesaler only has equitable interest and not legal title to the property. Consequently, the real estate broker may not market/advertise the property as if their principal, the wholesaler, is selling the property. If the broker participates in this conduct, they may be in violation of License Law and Commission rules.
Interestingly, it appears that if you have a NC license, you can sell a property with equitable interest so long as you âinform prospective sellers of their intent to assign their equitable interests in the purchase contract to an end buyer for a fee.â
If you are wholesaling in NC and are not licensed, it would be best to sell by owner.
