With an increasingly seller-friendly real estate market, the practice of wholesaling has become more prevalent and resulted in more complaints before the Oklahoma Real Estate Commission. A law that went into effect Nov. 1 requires wholesalers to obtain a license and abide by the same laws and regulations as other real estate professionals. (Photo by Daniel Tuttle via Unsplash)
No-fuss offers to buy your house that arrive in the mail and are posted along busy streets have become common in the current sellers’ market.
These enticements come from real estate wholesalers who want to sign a purchase contract and then sell it to a third party for a profit. Until recently, the practice was unregulated in Oklahoma.
Wholesaling has generated a growing number of complaints filed at the Oklahoma Real Estate Commission about misleading sales tactics, predatory contracts and clouding titles.
“Many Oklahomans who agree to sell their homes to a wholesaler are upset when they learn that the person who offered to purchase their home is actually assigning the purchase contract to a third party for a profit instead of purchasing it themselves,” said Grant Cody, executive director of the OREC.
“They’re upset to find out they could have made another $30,000 or $40,000,” he said. “It’s taking their equity in the home.”
Issues raised by both sellers and licensed real estate agents are addressed in a state law that went into effect Nov. 1.
The Predatory Real Estate Wholesaler Act requires wholesalers to obtain a real estate license and abide by the same laws and regulations as other real estate professionals in Oklahoma.
“There are people who do this correctly. They act ethically and openly to help people move distressed properties,” Cody said. “But unfortunately, an increasing number of individuals are doing it in a most predatory manner.”
Angelena Harris, the managing broker at Spearhead Realty, said wholesaling can help homeowners who prefer a quick transaction.
Perhaps the property is in bad shape and needs extensive repairs or someone must be hired to clean up liens on the property before it can be sold. The seller might not have the money or time to take care of those issues.
“I see both sides of it. I give people both sides of it,” said Harris, a real estate investor and president-elect of MLSOK, the state’s multiple listing service.
When she makes an offer, she explains that it is based on the estimated cost to fix up the house and the profit she needs to make when she sells it.
Harris said the new law gives the Real Estate Commission some teeth to go after the bad actors.
“There’s a lot of unlicensed activity going on right now that they are investigating,” she said. “The local market is definitely aware of the law. The ones that took it seriously went out and got their license.”
Harris and Cody said the majority of complaints involved out-of-state wholesalers who put the property under contract and hold it hostage while searching for an investor to buy it.
After signing a contract with an unlicensed wholesaler in California or New Jersey, the seller may not hear anything for months and cannot get in touch with the person, Cody said. Meanwhile, the wholesaler might file an interest on the property with the county assessor, clouding the title, he said.
These instances have increased during the pandemic with predators often preying on the elderly and people in financial distress, Cody said. It can be difficult for investigators to find these wholesalers, especially if they are out of state, he said.
Oklahoma is one of the first states to take action to address the issues created by this growing trend, Harris said.
Cody said officials from 14 states have contacted him in the past six months, asking about Oklahoma’s approach.
Wholesalers now are required to comply with the Oklahoma Real Estate License Code and Administrative Rules, which mandate a number of duties and responsibilities that cannot be waived, Cody said.
Sellers considering signing a purchase contract with someone, can check to see if the person is licensed at oklahoma.gov/orec.