Is Wholesaling Real Estate Legal In Georgia?Mar 30, 2021
Georgia is considered one of the primary economic hubs of the southern United States.
Centrally located between Florida, the Carolinas, and the Atlantic Ocean, the state is home to Atlanta, a modern, dynamic metro area that is Georgia’s capital and home to six million people.
According to World Population Review, the state also has the distinction of being the largest east of the Mississippi River and boasts a healthy homeownership rate of 63.3%
This means the housing market in Georgia remains strong, with lots of transactional opportunities for people considering a real estate career.
Many opt for a traditional career path, but others are also intrigued by the possibility of wholesaling real estate in Georgia as a viable alternative.
- What Do You Need To Know About Wholesaling In Georgia?
- Is Wholesaling Real Estate Legal in Georgia?
- What Are The Wholesaling Laws in Georgia?
- Do You Need A Real Estate License To Wholesale In Georgia?
- Is Co-Wholesaling Real Estate Legal in Georgia?
- Is Reverse Wholesaling Real Estate Legal in Georgia?
- Georgia Wholesale Contract
- Tips for Wholesaling Real Estate In Georgia
- Is Wholesaling Real Estate Legal In Atlanta?
- Final Thoughts
What Do You Need To Know About Wholesaling In Georgia?
As the eighth-most populous state in the country and with a strong and steady influx of people who continue to move to the Peach State, Georgia offers many attractive options to wholesale real estate.
One essential thing you must do is become an expert on local markets and market conditions. When you understand the forces that drive real estate in communities where you want to focus, you’ll be better equipped to structure deals appropriately, saving you time and money so that you can focus on deals with the highest potential for upside.
The best place to start is often with Realtor associations. Georgia Realtors (GAR) is the statewide association that will give you a birds-eye view of real estate information and issues in the state.
According to GAR in 2019:
- Total new listings increased by 5.9%
- Total closed sales were up by 3.5%
- Average days on market decreased by 6.8%
- Average sales price increased from $161,204 to $270,608
Depending on where you want to focus, there are several local Realtor Associations you can tap into as well. A few of the large groups include:
Local communities and the state also have various economic development entities. These are also great places to tap into when looking for demographic information and economic indicators.
Start at the state level with the Georgia Department of Economic Development (GDEcD) and then conduct more due diligence once you’ve defined where you want to conduct your wholesaling activities.
Consider starting with GDEcD’s Fiscal Year in Review whitepaper for some high-level information.
To learn more about how real estate transactions are governed in the state, visit the Georgia Real Estate Commission (GREC) where you’ll find a wealth of information
Is Wholesaling Real Estate Legal In Georgia?
Absolutely! Wholesaling real estate is legal in Georgia.
The key to successful wholesaling in Georgia lies in clearly understanding the state’s real estate laws and becoming intimately familiar with the various strategies wholesalers use.
These strategies include the Assignment of a Contract, The Double Close, or a Buy and Sell arrangement which is also known as Wholetailing. Some wholesalers also effectively use co-wholesaling or reverse wholesaling to achieve outstanding results.
Regardless of what method you use, you must be sure to follow established state laws and legalities regarding real estate deals in the state.
There are also ethical considerations as well.
- Transparency in wholesaling properties is essential. Wholesalers must have the necessary capacity to complete a deal. Capacity is defined as having either access to or having funds directly available to complete any real estate investing deal they are offering on. You can line up financing in advance by working with private lenders, hard money lenders, obtaining a line of credit, or through other similar means. With financing in place, a wholesaler should have a current proof of funds letter ready to submit with their offer.
- Wholesalers should go into every contract with the intention of closing on the deal. For instance, if they have no cash buyers lined up, no exit strategy, and have no intention of closing on the deal, they should not get into the contract.
- Do not misrepresent your interest in your deals. When marketing your wholesale deal to real estate investors on your buyers’ list, you must state that you have an equitable interest in a purchase contract instead of claiming you're the property owner, unless you’re planning on buying the property and reselling using the Double Close or Wholetail methods.
Now, let’s take a closer look at some of Georgia’s real estate laws and regulations.
What Are The Wholesaling Laws In Georgia?
There are no specific laws that prohibit wholesaling real estate in Georgia. However, since wholesalers are entering into real estate transactions, there are important laws that apply to wholesalers, the same way that they apply to anyone involved in a real estate transaction.
Attorneys Must Oversee All Closings
One law that is unique to Georgia is that a licensed real estate attorney must close all real estate transactions. In other states, the title company handles the closing and escrow. Usually, only one attorney is involved in the transaction. The attorney represents either the buyer’s lender if the purchase was lender-funded, or the buyer if the transaction is a cash purchase.
If you’re buying a house and have gotten a loan for the purchase, the attorney who conducts the closing does not represent either you or the seller. Instead, the closing attorney represents the lender. This means that only the lender’s interests are represented by the closing attorney.
The Real Property Section of the State Bar of Georgia has created a Residential Real Estate Closing Procedure Handbook that details all elements of this law.
Commissions, Fees, and Profits
In the state of Georgia, according to Title 43, Chapter 40, Rule 520-1-.10 Handling Real Estate Transactions, “Licensed real estate agents receive payment or receipt of a commission, fee, rebate or thing of value to a licensee based upon pre-established terms set forth in a brokerage agreement, a brokerage engagement agreement, management agreement or other written agreement.”
If you engage in real estate transactions and assign a contract, you will collect an assignment fee. This amount must be disclosed to all parties as part of the transaction process.
However, when using a Double Close or a Buy and Sell method, the wholesaler is not required to disclose how much profit they are making when they flip a property to a final buyer.
The Georgia Real Estate License Law
This may not affect you directly as a wholesaler, but you should be aware of the Georgia Real Estate License Law. The Georgia General Assembly created this statute in 1926 to govern the activities of real estate professionals. It has been amended several times since it was first enacted.
This law protects the public from intentional or unintentional harm that could arise in their relationships with real estate brokers. The law established a three-member Georgia Real Estate Commission to regulate licensees.
Seller’s and Buyer’s Disclosures
In Double Closing or Wholetailing methods, you must legally disclose information about the property’s condition. If you don’t provide the appropriate information, you could be sued for fraud, misrepresentation, or omission.
Also, if you’re assigning a contract, you must disclose that you are doing this as a case of full transparency.
Some of the more common disclosures include:
Do You Need A Real Estate License To Wholesale In Georgia?
A license is not required to wholesale properties in Georgia.
However, if you don’t have a license, you must apply a different set of rules to complete wholesale transactions.
For example, without a license, real estate wholesalers can only market the rights to assign a contract you have for the property. You can’t market the property itself.
Also, without a license, when you assign a contract you collect a fee for your services. If you have a real estate license and you represented a principal in the deal, you will receive a commission when the property closes.
Collecting fees and commissions are not an issue with the Double Close or Buy and Sell method. This is because you are negotiating and completing two separate transactions independent of each other. As such, you can negotiate the best possible prices when you buy and sell the property.
Unlike with an assignment of a contract, you’re not required to disclose the amount of profit you’ll make by flipping the property. Many wholesalers like this degree of privacy.
You can learn more about what it takes to get a Georgia real estate license here.
Is Co-Wholesaling Real Estate Legal In Georgia?
Co-wholesaling is the process of partnering with another person to wholesale properties. Many people, especially those just starting out, like the idea of working with partners so they can tap into added expertise, financial resources, or to increase the number of wholesale deals they want to do.
Partners often bring different skills to deals. Often, this means that one partner will take the lead on finding deals, and the other partner will provide cash flow or financial buying power.
Also, either partner may provide expertise in real estate investment practices, real estate law, contracts, rehabbing, REO properties, or other areas to facilitate transactions.
If you do decide to co-wholesale, make sure you work with someone who is ethical, transparent, and trustworthy. To further protect your interests and prevent disagreements, make sure you execute a co-wholesaling/joint venture agreement when you join forces.
Is Reverse Wholesaling Real Estate Legal In Georgia?
Reverse wholesaling is similar to traditional wholesaling. The main difference is that you structure deals in reverse order of the steps, lining up end buyers first and then finding investment properties to put under an assignment contract or executing a Double Close or Buy and Sell strategy.
Many wholesalers like reverse wholesaling because it gives them a more reliable exit strategy and they can form long-term relationships with cash buyers. Often, reverse wholesaling can lead to completing more than one deal with the same buyer. Aligning with private and hard money lenders also creates a more streamlined process over time.
As long as wholesalers comply with Georgia real estate laws, there are no specific restrictions placed on reverse wholesaling activities.
Georgia Wholesale Contract
There are two primary legal documents you will use as a Georgia wholesaler. They are:
Unless a purchase agreement specifically prohibits it, the assignment of a contract to a new buyer can be executed without a seller’s written permission since all contracts are assignable by default.
A standardized purchase and sale agreement has been approved by the Georgia Association of Realtors and is widely used.
The Georgia Realtors Purchase and Sale Agreement states in Section B Paragraph 4.e. :
4.e. Entire Agreement, Modification and Assignment: This Agreement constitutes the sole and entire agreement between all of the parties, supersedes all of their prior written and verbal agreements and shall be binding upon the parties and their successors, heirs and permitted assigns. No representation, promise or inducement not included in this Agreement shall be binding upon any party hereto. This Agreement may not be amended or waived except upon the written agreement of Buyer and Seller. Any agreement to terminate this Agreement or any other subsequent agreement of the Parties relating to the Property must be in writing and signed by the Parties. This Agreement may not be assigned by Buyer except with the written approval of Seller which may be withheld for any reason or no reason. Any assignee shall fulfill all the terms and conditions of this Agreement.
It is clearly written that the standard Georgia wholesale contract may not be assigned without the consent of all parties. Fortunately, there is a supplementary form called "Georgia Realtors Assignment of Purchase and Sale Agreement Rights" that formalizes the required approval from all parties.
When completed, this assignment addendum effectively transfers rights and obligations under the purchase contract from the assignor to a designated assignee. Since assignments are common practice in real estate transactions, there is a Realtor-approved form to complete this part of the transaction.
If you're unsure how to strategically manage this situation, talk to a real estate broker about editing or removing this language from the contract, or use a different contract altogether.
If no Realtor is involved in a transaction, one or both of the parties may hire a lawyer to negotiate and draft a sales contract instead of using the standardized Realtor forms.
Tips For Wholesaling Real Estate In Georgia
As a wholesaler engaged in a Double Close or Wholetailing deal, part of the process will involve executing various contingency clauses.
Contingency clauses are conditions or actions that must be met for a real estate contract to become a binding legal document. They are put in place to protect both parties in a real estate transaction. The most common contingencies include:
Other contingencies you may see:
- Appraisal contingency
- Financing contingency
- Inspection/Due Diligence contingency
- Clear Title contingency
- Homeowners Insurance contingency
When a contingency isn’t met, either party can consider the purchase contract null and void.
Regarding advertising and marketing properties, only licensed realtors can market and advertise a property they do not own. An unlicensed wholesaler can only market that they have the rights to assign a property under contract.
Georgia Real Estate Commission (GREC) Advertising Rules 520-1.09 as of July 2016 define who can advertise and by how advertising real estate can be conducted. Some wholesalers get into trouble with the part of the law, so it’s well worth your time to understand this statute.
As part of this statute, Realtors must disclose they hold a license:
“Regardless of whether the licensee's license is affiliated with a firm or on inactive status, any advertisement must include either (a) the legend "seller, buyer, landlord, tenant (select the appropriate name) holds a real estate license" or (b) the legend "Georgia Real Estate License # (insert licensee's six-digit number; for example, 000001)." "Georgia Real Estate License" may be abbreviated to "GA R. E. Lic.."
Is Wholesaling Real Estate Legal In Atlanta?
There are no specific laws or statutes that restrict wholesaling in Atlanta. Real estate laws, with few exceptions, are applied at a statewide level.
Because it is such a large metro area, Atlanta may have the most opportunities (and probably the most competition) if you want to get into wholesaling.
Source: Atlanta Agent Magazine
No matter where you decide to try wholesaling, the keys are to do your homework and stay positive and persistent in your efforts.
Georgia is a fertile state for potential wholesalers who are willing to do their homework and make dedicated efforts to find deals below market value.
The state’s housing market remains robust and affordable with a large population that places a premium on homeownership.
Applying the tools and knowledge available to you will give you the advantages you need to do well in this potentially lucrative field.
*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.