Is Wholesaling Real Estate Legal In Alaska?

Wholesaling real estate as an investment strategy has become one of the preferred real estate investments in today’s real estate market. Its popularity is because real estate investors who choose to wholesale –

• Have easy access to available wholesale properties in a digital landscape that includes online auctions, foreclosure info sites, and websites like Zillow and Redfin, among others.
• Have only small capital requirements to complete the wholesale deals in terms of the earnest money deposit given in good faith.
• And perhaps, the most important aspect of the current market – located in Stage 2 of a robust expansion stage of a real estate cycle –

Current Real Estate Market Metrics at the National Level

According to the Core Logic HIP index (an indicator designed to demonstrate early home price trends), prices for real estate and homes in the United States have increased 18% between September 2020 & September 2021.

Remarkably, this year-over-year increase is noted to be driven by the western portion of the United States leading the way, and not one state posted a price decline during that time.

Home prices have a tendency to increase over time, but as the graph below notes, recessions and other economic events may depress home prices, even if only temporarily.

The Current Alaska Real Estate Market

Like most real estate markets, Alaska has seen robust home price growth. According to the Alaska Housing Finance Corporation (AHFC), the average home price of a single-family home in Anchorage rose to $397,000 – almost 6%. When considering all of Alaska's real estate, Zillow notes that as of October 2021, the median home value was $310,373.

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But, like all real estate investing, there are benefits and concerns influenced by market factors that must be understood to be successful.

• What Is Real Estate Wholesaling?
• What Do You Need To Know About Wholesaling Houses In Alaska?
• Is Wholesaling Real Estate Legal In Alaska?
• What Are The Wholesaling Laws In Alaska?
• Do You Need A License To Wholesale Real Estate In Alaska?
• Final Thoughts

What Is Real Estate Wholesaling?

Wholesaling a real estate deal is simply an investment strategy where the investor/wholesaler finds a home to buy that is typically priced below market value. The reasons for the reduced price tend to center around the financial difficulties the seller is facing.

When the terms of the transaction are agreeable to both, the seller and homeowner execute a legally enforceable purchase contract in which the buyer/wholesaler is awarded a saleable, liquid asset – equitable ownership of the contracted subject property.

The equitable interest is granted by the Principle of Equitable Conversion or Equitable Interest. As an asset, the contracted buyer has the right to sell their ‘equitable rights’ to another buyer or cash buyer – using the legal instrument known as an assignment of contract.

The final buyer in the wholesale real estate transaction is usually a cash buyer, one of many potential buyers a wholesaler may have an existing affiliation with.

A wholesaler can profit by:

1. Finding a motivated homeowner with a well-priced home – i.e., rental property or investment property.
2. Executing a contract to purchase the property.
3. Assigning the contract of sale to another buyer – for a higher price. By acting as a middleman, real estate wholesaling professionals profit by buying properties from owners in need of a quick sale and assigning the right to buy the property to another interested investor. The difference in price is known as the assignment fee or gross profit.

What Do You Need To Know About Wholesaling Houses In Alaska?

The state of Alaska, known as the Last Frontier, was the second to last state admitted to Union in 1959, only followed by Hawaii. By far, the state of Alaska – which occupies a peninsula, is the largest in terms of land area with more than 660,000 square miles, of which about 14% is covered by water.

The United States federal government owns/manages about 2/3’s of the state’s land – including two dozen national parks and sixteen wildlife refuges.

Alaska is the northernmost state and one of two outside the contiguous 48 states. Alaska is the home to some amazing, picturesque views and is home to Mount McKinley (aka Denali – see below), the highest peak in North America and the third-largest in the world behind Mt. Everest and Aconcagua.

From 2010 to the most recent census, the population of Alaska grew by 3.3%, with a total 2020 population of 733,391. Just the southern country of Broward, Florida, has a population that is nearly three times that of the entire state of Alaska, with Maryland checking in with about ten times the population.

Fascinating, the population of Alaska is only one-fifth of the population of Oregon and less than 10% of the population of New York City.

More specifically, the map shown below offers a visual representation of the population growth for the state over the two previous decades – with green and dark-green displaying those areas with the most impressive growth numbers.

The six largest cities in Alaska are  –

The following represents the larger trade and professional organizations in Alaska that are specifically dedicated to the real estate profession, each brokerage and individual working in the Alaskan real estate market. Each of these professional organizations is a member of the National Association of REALTORS  (NAR) –

• Alaska REALTORS (AR)

The Alaska REALTORS is the statewide organization offering a united voice for real estate property owners and real estate agents throughout the state. In addition, the AR is the marketplace’s benchmark for ethical conduct, an exceptional source for continuing education, and an active legislative committee, to name a few.

• The Anchorage Board of REALTORS (ABOR)

Located in the state capital, the Anchorage Board of REALTORS is known as Alaska’s voice for real estate in Anchorage. This professional organization is among the largest in the state and includes professionals working in real estate-related fields.

• The Southeast Alaska Board of REALTORS (SEABR)

The Southeast Alaska Board of REALTORS, with more than 120 active members, serves the communities in the southeastern portion of the estate, including Prince of Wales Island, and Juneau, among others.

• The Valley Board of REALTORS (VBR)

Located in Wasilla, the VBR is the voice for property owners, real estate, and related professionals throughout the valley. The Valley Board of REALTORS offers advocacy, continuing education, and community engagement.    

• The Greater Fairbanks Board of REALTORS (GFBOR)

With nearly 300 members, the Greater Fairbanks Board of REALTORS is one of the largest professional organizations in the state, supporting the rights of professionals and all property owners in the greater Fairbanks area.

The Alaska Real Estate Commission (AREC)

The Alaska Real Estate Commission is the state-run agency that is housed within the Alaska Division of Corporations, Business, & Professional Licensing. AREC is responsible for administering and enforcing the laws that govern real estate activities and licensees in Alaska. Their duties and powers are found in 08-88-071 of the Alaska Statutes and Regulations - Real Estate Commission.

Sec. 08.88.011. Creation and membership of commission. There is created a Real Estate Commission. It consists of seven members.

The two primary legislative acts in Alaska that govern real estate practices and activities in the Alaskan industry.

• The Alaska Statutes AS 08-88 – Real Estate Brokers & Other Licensees, with these specific articles:
  • Article 1 – Real Estate Commission
  • Article 2 – Licensing
  • Article 3 – Miscellaneous Provisions
  • Article 4 – Real Estate Recovery Fund
  • Article 5 – License Relationships and Duties
  • Article 6 – General Provisions
• The Alaska Administrative Code 12 AAC 64

Alaska real estate law offers this guidance with regard to the need for obtaining an Alaska real estate license –

Sec. 08.88.161. License required. Unless licensed as a real estate broker, associate real estate broker, or real estate salesperson in this state, a person may not, except as otherwise provided in this chapter,

(1) sell, exchange, rent, lease, auction, or purchase real estate;

(2) list real estate for sale, exchange, rent, lease, auction, or purchase;

(3) collect rent for the use of real estate or collect fees for property management;

(4) practice, or negotiate for a contract to practice, property management;

(5) collect fees for community association management;

(6) practice, or negotiate for a contract to practice, community association management;

(7) as a business, buy, sell, or deal in

(A) options in real estate; or

(B) options in improvements to real estate;

(8) assist in or direct the procuring of prospective buyers and sellers of real estate, communicate with prospective buyers and sellers of real estate, or assist in the negotiation of a transaction that results or is calculated to result in the sale, exchange, rent, lease, auction, or purchase of real estate;

(9) accept or pay a fee for the performance of any of the activities listed in this section except as otherwise specifically provided in this chapter;

(10) hold out to the public as being engaged in the business of doing any of the things listed in this section; or

(11) attempt or offer to do any of the things listed in this section.

Types of Real Estate Licenses Offered by The Alaska Real Estate Commission

A Real Estate Broker

"A real estate broker who represents or provides specific assistance to a person in a real estate transaction when another licensee who is working for the broker represents or provides specific assistance to another person in the same transaction;

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• A Real Estate Broker by Examination
• A Real Estate Broker by Endorsement

An Associate Real Estate Broker

"A real estate licensee who works for a real estate broker and represents or provides specific assistance to a person in a real estate transaction when another licensee who is working for the same broker represents or provides specific assistance to an unrepresented person in the same transaction; or

• An Associate Broker by Endorsement Online or Paper Application
• An Associate Broker by Examination

A Real Estate Salesperson

"A real estate licensee who works for a real estate broker and represents or provides specific assistance to a person in a real estate transaction when another licensee who is working for the same broker represents or provides specific assistance to an unrepresented person in the same transaction; or

Source

• A Salesperson by Examination Online or Paper Application
• A Salesperson by Endorsement Online or Paper Application

Licensee Exemptions in Alaska - Article 6. General Provisions (§§ 08.88.900)

Real Estate License Reciprocity In Alaska

Alaska has no active reciprocity agreements with any other state. The law offers this guidance as stated:

Sec. 08.88.263. License by endorsement. A person who holds a valid active real estate license issued by another state shall be granted an equivalent Alaska real estate license if that person (1) passes the portion of the real estate examination which examines on state law; (2) meets the requirements of AS 08.88.171; and (3) satisfies the educational requirements under AS 08.88.095(a) if the person has not held the license issued by the other state for one year or more.

Note – Alaska Is Not An Attorney Close State

Although wholesalers are encouraged to seek legal advice regarding Alaska’s laws and closing costs, if unfamiliar.

Is Wholesaling Real Estate Legal In Alaska?

Yes.

Wholesaling real estate in Alaska is lawful if the real estate investor/wholesaler proactively avoids violating Alaska's real estate and license law.  Real estate wholesalers in Alaska are acting like any other middleman in a free and open market economy - if their actions do not violate the legal limits of Alaska law.

A real estate wholesaler’s ‘equitable rights’ are delineated by the terms denoted in the contract or sale or purchase agreement. Most contracts are, by default, assignable, although a real estate attorney or fiduciary representative may modify the contract and ask that these revisions be initialed by all parties to the contract.

Remember, a real estate wholesaler is awarded the right to assign their ‘right to purchase the contracted property’ to another willing buyer if there are no prohibitions or required conditions provided for in the purchase agreement.  Most real estate contracts are, by default, assignable, although the motivated seller or their representative may choose to modify the contract in this regard.

Wholesalers are advised that it is prudent to consult with an Alaskan real estate attorney should a question of legality arise regarding the contract or the overall transaction. 

What Are The Wholesaling Laws In Alaska?

The two primary legislative acts in Alaska that govern real estate practices and activities in the Alaskan industry.

• The Alaska Statutes AS 08-88 – Real Estate Brokers & Other Licensees, with these specific articles:
  • Article 1 – Real Estate Commission
  • Article 2 – Licensing
  • Article 3 – Miscellaneous Provisions
  • Article 4 – Real Estate Recovery Fund
  • Article 5 – License Relationships and Duties
  • Article 6 – General Provisions
• The Alaska Administrative Code 12 AAC 64
• Proposed Regulations & FAQs

Alaska real estate law offers this guidance with regard to the need for obtaining an Alaska real estate license –

The potential consequences and penalties for violations include -

Do You Need A License To Wholesale Real Estate In Alaska

No, real estate wholesalers working in Alaska are not required to hold a state-issued real estate license (as a real estate agent, associate broker, or real estate broker) if their choices/actions remain within the legal confines of license law in the Frontier State.

To sidestep potential legality issues in the state of Alaska, wholesalers will find these suggestions quite insightful - 

• Actions should be done with integrity and full transparency. Seek an attorney’s help to ensure the contract is correctly worded and without ambiguity.
• Manage the expectations of all parties with honesty and candor.
• Do NOT sell or market real property – sell or market the equitable rights awarded when signing a real estate contract.

Final Thoughts

A real estate wholesaler’s goal is to generate a profit. This is accomplished by acting as a middleman in assigning the rights awarded in a contract of sale for a well-priced property that is priced below market value to another interested end-buyer – at a price higher than the original sales price – often called the assignment fee. 

As many real estate wholesaling investment strategists can attest, wholesaling is a smart way to learn how to assess the potential of available properties for sale while curating a buyers list of end buyers and a network of lenders.

Wholesaling can be done -

• With minimal capital expenditures.
• With either an investment property or rental property that meets their investment criteria.
• With less risk compared to fix and flippers investments.
• In less time, which is why it is often the preferred investment model.