Is Wholesaling Real Estate Legal In Colorado? A 2024 Guide For Investors

The great thing about a career in real estate is that there are many avenues you can pursue to make a living. Some people choose a traditional route, get their real estate or broker’s licenses, and do pretty well buying and selling all types of properties in Colorado.

However, there are many other ways to succeed in real estate. One of these is wholesaling, which has gained more attention recently as people look for flexible and creative ways to pursue a full-time real estate investing career.

If you’re considering wholesaling as an option, there's one question you must address first: Is wholesaling real estate legal in Colorado?

Here’s what you need to know:

• What Do You Need To Know About Wholesaling Real Estate In Colorado?
• Is Wholesaling Real Estate Legal In Colorado?
• Do You Need A Real Estate License To Wholesale Houses In Colorado?
• What Are The Wholesaling Laws In Colorado?
• Is Co-Wholesaling Real Estate Legal In Colorado?
• Is Reverse Wholesaling Real Estate Legal In Colorado?
• How Can I Legally Wholesale Real Estate In Colorado?
• Final Thoughts

*Before we begin our guide on whether wholesaling is legal in Colorado, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and C.E.O. of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!

What Do You Need To Know About Wholesaling Real Estate In Colorado?

It doesn’t matter if you live in Denver, Colorado Springs, Fort Collins, Pueblo, or any other community in Colorado. You can start and run a thriving wholesale business just about anywhere.

You need to know about some key provisions; otherwise, you could encounter problems that result in serious fines and penalties.

The good news is that with a little bit of direction, wholesaling is a repeatable business model that can be mastered, allowing you to grow and produce results over time.

You have options for how you can wholesale. These options may be driven by necessity, the unique nature of each deal, or how you choose to pursue your wholesaling efforts.

For example, the assignment of contract method is the lowest barrier to entry into wholesaling. However, you must understand that you cannot market a property under contract with a homeowner. You can only market the rights to the contract you have entered into with the seller.

You can also wholesale using either the double close or a buy-and-sell agreement. These are separate transactions for investment properties that require larger amounts of cash or financing. However, because they are treated separately, a wholesaler has free reign to set market value and purchase price after acquiring the property. When using these methods, the wholesaler does not need to reveal how much money they will make to sellers, rehabbers, or real estate investors.

You don’t need a real estate license to complete these transactions. Some people choose to obtain a license or become real estate brokers, but it is a personal choice.

Read Also: How To Wholesale Real Estate Step By Step (The Simple Process)

Is Wholesaling Real Estate Legal In Colorado?

Wholesaling real estate in Colorado is legal, but specific rules and regulations must be followed to ensure investors do so legally and ethically.

It’s legal if you follow state rules and regulations set forth by the Colorado Department of Regulatory Agency's Division of Real Estate. This state agency oversees all aspects of real estate transactions in Colorado. Consequently, it's a great source for anyone asking, "Is wholesaling real estate legal in Colorado?"

The Division of Real Estate protects consumers through licensing, regulating, and enforcing licensed real estate professionals. It also helps the public navigate real estate regulations through a collaborative, transparent, and user-friendly approach.

Even though you’re not required to have a real estate license to wholesale properties in Colorado, it’s critical to understand the real estate regulations because any real estate transaction must follow guidelines to avoid legal issues.

Colorado real estate statutes regulate all aspects of real and personal real property in the state. The 2016 Colorado Revised Statutes, Title 38 (Property – Real and Personal Real Property), define all aspects of real estate laws and real estate transactions.

You can also view the full official Title 38 contents here as well.

Do You Need A Real Estate License To Wholesale Houses In Colorado?

A real estate license is not necessary if you want to wholesale property in Colorado. However, if you don’t have a license, you need to understand the limitations so you don’t violate the law.

If you are not a licensed real estate agent, you cannot market a property if you want to assign a contract. You can only market the rights to your contract; this is a critical distinction.

As a wholesaler, you’ll collect an assignment fee for your efforts when you assign a contract. However, you will earn a commission as a licensed Realtor when you sell your client’s property.

Many wholesalers choose to get a Colorado real estate license rather than take chances. Applicants must go through the Department of Regulatory Agencies, Division of Real Estate, and complete prerequisites before making an application.

Applicants must be at least 18 years old, complete 168 hours of education, pass a course exam and broker exam, submit fingerprints to the Colorado Bureau of Investigation, get Errors & Omissions insurance, and apply for a license online.

Read Also: How To Become A Real Estate Agent In Colorado (5 Steps)

What Are The Wholesaling Laws In Colorado?

There is no specific body of laws covering real estate wholesaling in Colorado, so as a wholesaler, you will need to combine various existing real estate statutes to ensure you stay within the limits of Colorado law; this is made more accessible by the fact that if you want to wholesale properties in Denver, Colorado Springs, or anywhere else in the state, the laws will apply equally in all instances.

As we already mentioned, Title 38 contains the complete laws governing real estate transactions. However, much of the excess legal jargon in Title 38 doesn’t apply to a wholesaler, so let's try to zero in on a few things that do, including pertinent tools from other places.

For example, you can access a generic contract to buy and sell real estate in Colorado here. Keep in mind that this form is only an example, and it is always wise to work with a real estate attorney who can review your legal documents related to wholesaling to ensure they fully protect your interests.

The Colorado Statute governing the assignment of a contract is CO Rev Stat § 4-2-210 (2016), which refers to Title 4—Uniform Commercial Code in specific legal terms.

Article 2 – Sales Part 2 - Form, Formation, and Readjustment of Contract § 4-2-210. Delegation of performance - assignment of rights. Specific language from this statute states:

"Except as otherwise provided in section 4-9-406, unless otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him or her by his or her contract, or impair materially his or her chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his or her entire obligation can be assigned despite agreement otherwise."

It’s strongly suggested that you use Colorado Department of Regulatory Agency (DORA) approved real estate contract forms to ensure that your deal is compliant.

Licensed brokers must provide transparency, disclaimers, and full disclosure to sellers. If you have a license and want to wholesale a property, you must complete a Colorado Real Estate Commission Form DD25-5-09; this provides the seller with definitions of working relationships.

If you’re a wholesaler without a license, you still need to be transparent with the seller and let them know that you intend to market the contract ultimately as a way to assign it. Disclosure protects you as the wholesaler and the seller who fully understands the nature of the deal you’re trying to complete.

If you assign a contract, you must disclose the fee you’ll receive for acting as the middleman for the transaction.

When you use a double close or a buy-&-sell method, you do not need to disclose the amount of money you’ll receive because you are facilitating two separate transactions. The potential to make more money is possible, but you'll have to use a hard money lender or obtain transactional funding and come up with financing to complete the deals.

Unless you’re a seasoned real estate professional or an experienced contracts attorney, it’s probably best to work with these professionals and get critical legal advice to help you avoid costly mistakes.

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment. Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

Is Co-Wholesaling Real Estate Legal In Colorado?

Larger real estate markets such as Denver or Colorado Springs provide more opportunities for wholesalers and flippers simply because the markets and the corresponding number of properties are greater.

While this creates more opportunities, it can also create more competition. Sometimes, the best way to compete in wholesaling more properties is to join forces with someone else—this is known as co-wholesaling. To be clear, co-wholesaling is legal in Colorado.

A joint partnership brings two or more entities together with diverse skill sets and strengths. For example, one person may actively search for wholesaling deals while the other partner provides real estate investment, financing, legal, or contract expertise to create a more desirable outcome. This arrangement makes it easier to do more deals since the workload is distributed between multiple partners.

With a co-wholesaling agreement, the key caveat is to be transparent and identify all partners in the deal upfront. All other wholesaling requirements are the same.

Is Reverse Wholesaling Real Estate Legal In Colorado?

Reverse wholesaling is the same process as wholesaling, except that you develop a buyer's list and line up buyers before you find specific properties that fit the buyer’s needs. Because it is essentially the same transaction, Colorado has no restrictions unique to reverse wholesaling, so this form of wholesaling is legal in the state.

The approach does build closer relationships with cash buyers and creates a more reliable exit strategy for wholesalers, so it is often a preferred way to conduct business.

How Can I Legally Wholesale Real Estate In Colorado?

The right way to wholesale real estate legally in Colorado is to follow all state laws and statutes regarding this activity. The wrong way is to ignore restrictions on wholesaling, which could result in onerous penalties.

The key points are simple. You can wholesale using an assignment of a contract, a double close, or a buy-&-sell strategy. You must be well versed with how each of these works before attempting to complete your first deal.

Many wholesalers add critical layers of protection by working closely with an experienced real estate and contracts attorney. Although some costs are involved, the peace of mind that comes from knowing you are in full compliance is well worth the legal fees you’ll incur.

Read Also: How To Wholesale Real Estate In Colorado: Step By Step

Final Thoughts

The answer to "Is wholesaling real estate legal in Colorado?" is yes, provided that the transactions comply with state-specific real estate regulations. Colorado offers a promising avenue for wholesaling real estate for investors looking to engage in this market, with substantial profits achievable for those who operate within the legal framework. To maximize success, ensure that all wholesaling activities are performed ethically and in accordance with the law.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.