Is Wholesaling Real Estate Legal In Idaho?

Located in the heart of the Pacific Northwest, Idaho is a state full of natural beauty. Wildlife, abundant lakes and streams, sweeping mountain landscapes, and vast areas of protected wilderness and recreation areas make the Gem State a desirable place to live and raise a family. 

Although only about 1.8 million people make their homes in Idaho, there are still plenty of opportunities to wholesale real estate.  Flipping houses is legal in Idaho as long as a wholesaler complies with Idaho real estate laws. 

That's why, if you're considering flipping properties in Idaho, you must understand state real estate laws as well as having a good understanding of resources and an overview of the real estate market.

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

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

It's always good to start with a basic understanding of trends and key statistics if you're planning on doing wholesale deals in Idaho.

An Idaho Overview

Idaho has a total surface area of 83,570 square miles, making it the 14th largest state by area in the country. However, a lot of the state isn't suitable for permanent settlement because of the Rocky Mountains and other natural water and geologic features. In fact, Idaho has more than 3,100 miles of rivers, the most of any state in the United States.

Although Idaho's population has grown by 14% since 2010, it is still one of the most sparsely populated states, with an average of slightly over 20 people for every square mile of land.  As of 2019, there were approximately 750,000 housing units throughout the state with a median value of owner-occupied housing units of $212,300.

The 10 largest cities in Idaho are:

Source

According to the US Census Bureau, Idaho has enjoyed a healthy population growth for the past several decades.

Source

Idaho Governing Bodies

In 1947, Idaho's legislature established the Idaho Real Estate Commission (IREC).  Under Chapter 20, Title 54, Idaho Code, this self-governing agency was authorized to administer the Real Estate License Law regulating real estate brokerage.  It is composed of five Governor-appointed Commissioners and one "at large" public member.

Contact information for the Commission is as follows:

Real Estate Commission

575 E Parkcenter Blvd. Suite 180 Boise, ID 83706

(208) 334-3285; (208) 334-2050

Monday - Friday 8:00am - 5:00pm MST (except holidays)

The Commission issues licenses to real estate brokers and sales associates, develops and oversees education programs and licensing exams, investigates complaints, and takes disciplinary actions for license law violations.

The primary real estate trade association in the state is Idaho Realtors (IR). More than 90% of active Idaho real estate licensees belong to this group.

The IREC and the IR sometimes have competing interests but the two groups also often work together to develop consensus on licensing issues. 

Contact information for Idaho Realtors is as follows

10116 W. Overland Rd.

Boise, ID 83709

Local: (208) 342-3585

Toll-Free: (800) 621-7553

Idaho Realtors is comprised of 16 local boards and associations. Some parts of the state do not have any representation, as noted below. 

Source

A few of the largest boards and associations in Idaho are:

• Boise Regional Realtors (BRR)
• Couer D’Alene Association of Realtors (CAR)
• Greater Pocatello Association of Realtors (GPAR)
• Sun Valley Board of Realtors (SVBR)
• Greater Idaho Falls Association of Realtors (GIFAR)

Is Wholesaling Real Estate Legal In Idaho?

You can wholesale properties in Idaho, but there are some essential things you need to know first.

You don't need a license to wholesale real estate, and because of this, the actions you can take differ quite a bit from someone who is licensed in the state.  However, your goal remains the same, and that's to assign your rights to purchase a property within the confines of the law or to complete two separate transactions in a short timeframe.

There are three popular methods of wholesaling you can pursue with working with motivated sellers and real estate investors.  They are assignment of contract, double closing, and wholetailing, also sometimes known as buy and sell.  In all cases, you can’t market a property you don’t own.  So, with an assignment of contract, you can only market your contractual interest in the property, and not the property itself.  When you act as the middleman and assign the contract, you'll collect an assignment fee.

However with a double closing and a buy and sell strategy, once you execute a purchase contract with a homeowner and close on the property as a separate deal, you can market it directly to new investors.  Because the time frame is longer, in wholetailing, you can list it on the multiple listing service (MLS) and/or advertise it after you own the property.  Also, in some cases, buyers may want improvements made before the transaction is completed, creating a short delay.

Most states, including Idaho, don't have specific laws that address wholesaling. This creates grey areas where wholesalers sometimes engage in activities that crossover legal lines.

To better protect themselves, some wholesalers get real estate licenses.  This gives them more freedom to market properties instead of just marketing rights to a contract or running up against other limitations related to marketing a property without a license.

IREC is the governing body for real estate education and licensing.  It issues and renews licenses for Idaho real estate salespersons and brokers and develops and reviews curriculum for licensing education.

The agency also investigates alleged license violations, monitors compliance, provides training assistance, and oversees the timeshare and land registrations required under the Idaho Subdivided Lands Disposition Act (Chapter 18, Title 55, Idaho Code).

What Are The Wholesaling Laws In Idaho?

There are no specific state laws pertaining to wholesaling real estate in Idaho.  However, Title 54 of the Idaho Statutes covers professions, vocations, and businesses, including the formation and rules that govern the Idaho Real Estate Commission.

The IREC has created a series of 25 Guidelines and other supporting documentation that govern real estate transactions in Idaho.  The vast majority of these apply to licensed salespeople and brokers.

Here's a closer look at some of the more important ones you should know about.

Guideline 2

Brokering Idaho property requires an Idaho real estate license.  Brokers and salespeople must hold an active Idaho real estate license to engage in any form of real estate brokering activities.

Idaho law prohibits any person from engaging in any act of a real estate broker without an active Idaho real estate license under Idaho Code 54-2002. This is true even if the broker, salesperson, or their clients do not reside in or personally enter Idaho.

Legal language specifically states that a "real estate broker" is defined to include "any person who, directly or indirectly, while acting for another for compensation or promise or expectation thereof, sells, lists, buys, or negotiates, or offers to sell, list, buy or negotiate the purchase, sale, option or exchange of real estate," and also includes "any person who represents to the public" that he is engaging in any of these acts.

This also includes "any person who directly or indirectly engages in, directs, or takes any part in the procuring of prospects, or in the negotiating or closing of any transaction which does or is calculated to result in any of the acts above set forth." The Commission interprets procuring prospects to include any marketing or advertising designed to attract the attention of buyers or sellers.

In other words, under Idaho Code, any person who "sells, lists, buys, or negotiates" the purchase or sale of real property in Idaho is engaging in acts requiring an Idaho real estate license.

According to the guidelines, any person who engages in any defined real estate broker act but who does not hold an active Idaho license is guilty of unlicensed practice, regardless of any contractual arrangement with an Idaho-licensed brokerage.

Guideline 5

Disclosure of transaction fees.  In some instances, a brokerage must disclose that it is receiving a transaction fee.  This is covered under Idaho Code Section 54-2054.

The provision requires that when a brokerage is receiving "compensation" "from more than one party" (e.g., when the brokerage is receiving compensation from both the buyer and the seller), the brokerage must make a "full disclosure in writing to all parties."

Although unlicensed flippers are not regulated the same way that licensed real estate people are, in the interest of full disclosure, wholesalers should consider revealing the amount of the fee they're getting in an assignment of contract situation. Wholesalers receive no fees (they receive profits instead) in a double close or a buy and sell strategy, so this does not apply in those situations.

Guideline 10

Paying finder's fees.  A licensee is not permitted to pay or reward an unlicensed person for the referral of customers. Paying or offering to pay a "finder's fee" or referral fee to an unlicensed person is considered fee-splitting.

Also, any person who engages in publicly "procuring of prospects" is required to hold an active real estate license; an unlicensed person who engages in this activity violates the law's licensing requirement

When this happens, both parties may violate the License Law: the licensee for fee-splitting; and the unlicensed person for unlicensed practice.

Guideline 13

Advertising rules and regulations.  This Guideline discusses the advertising requirements applicable to licensees on an overview level but does not cover trade association codes, franchise requirements, Federal regulations, or the Idaho Consumer Protection Act provisions governing advertising. It is limited to the Idaho Real Estate License Law.

Idaho Statutes Section 54-2053 on advertising states:

54-2053.  ADVERTISING

(1) Only licensees who are actively licensed in Idaho may be named by an Idaho broker in any type of advertising of Idaho real property, may advertise Idaho property in Idaho or may have a sign placed on Idaho property.

(2)  All advertising of listed property shall clearly and conspicuously contain the broker’s licensed business name. A new business name shall not be used or shown in advertising unless and until a proper notice of change in the business name has been approved by the commission.

(3)  All advertising by licensed branch offices shall clearly and conspicuously contain the broker’s licensed business name.

(4)  No advertising shall provide any information to the public or to prospective customers or clients that is misleading in nature. Information is misleading if, when taken as a whole, there is a distinct probability that such information will deceive the persons whom it is intended to influence.

Many wholesalers get into trouble because they are not clear about limitations regarding marketing and advertising properties. Again, wholesalers can only advertise the rights to assign a contract to an end buyer. Wholesalers can also only develop private sources of potential cash buyers in a simultaneous or back-to-back closing situation.

It can't be stressed enough that a wholesaler must be careful about how to approach advertising or marketing a property without a real estate license.

Designated brokers have additional responsibilities as far as advertising is concerned. Idaho Code 54-2038 prohibits brokers from allowing "any person who is not properly licensed to represent that broker as a sales associate or otherwise, in any real estate business activities requiring a real estate license."

This means that a broker may not advertise licensees until they are officially licensed at the brokerage.

Guideline 24

Personal Real Estate Business.  Section 54-2055 of the Idaho Code states all active real estate agents are required to conduct their personal real estate transactions through the broker with whom they are licensed.  This will have an impact on wholesalers who conduct personal real estate business when they are also licensed.

In addition, licensed wholesalers must also disclose their agent or broker status when acting as a principal in any transactions. 

54-2055.  LICENSEES DEALING WITH THEIR OWN PROPERTY

(1) Any actively licensed Idaho broker, sales associate, or legal business entity shall comply with this entire chapter when that licensee is buying, selling or otherwise acquiring or disposing of the licensee’s own interest in real property in a regulated real estate transaction.

(2)  A licensee shall disclose in writing to any buyer or seller no later than at the time of presentation of the purchase and sale agreement that the licensee holds an active Idaho real estate license, if the licensee directly, indirectly, or through a third party, sells or purchases an interest in real property for personal use or any other purpose; or acquires or intends to acquire any interest in real property or any option to purchase real property.

(3)  Each actively licensed person buying or selling real property or any interest therein, in a regulated real estate transaction, must conduct the transaction through the broker with whom he is licensed, whether or not the property is listed.

Guideline 25

Short Sales and Related Deal Structures.  This Guideline has extensive information about short sales, working with unlicensed intermediaries, for sale by owner (FSBO) situations, options, and more clearly define what is and isn't allowed when structuring deals and marketing properties.

You can read this and all other Guidelines in their entirety in the IREC Idaho Real Estate License Laws and Rules (updated July 2020).

Do You Need A License To Wholesale Real Estate In Idaho?

No.  You can conduct wholesaling activities without a license in Idaho. The key is to understand the difference between what is allowed when you have a license and when you do not. 

For added flexibility and protection, many Idaho wholesalers choose to get a real estate license. It's often a good idea to retain an experienced real estate attorney who can provide you with legal advice on purchase agreements and wholesale contracts.

The Idaho Real Estate Commission (IREC) oversees and issues licenses for sales associates and brokers, develops and oversees education programs and licensing exams, investigates complaints, and takes disciplinary actions for violations of the license law.

Getting an Idaho real estate license involves several requirements:

• Have a high school diploma or equivalent
• Be 18 years of age
• Take 90 hours of pre-license education classes
• Pass state and national portions of the salesperson licensing exam
• Go through fingerprinting and a background check
• Register with IREC
• Apply for a license through IREC
• Obtain Errors & Omissions insurance
• Provide proof of legal residence in the United States

For detailed information on obtaining an Idaho real estate license visit the Idaho Real Estate Commission licensing page.

Final Thoughts

Wholesaling real estate is a flexible and dynamic way to break into real estate investing. You can enjoy the freedom and creativity wholesaling offers that will reward you for your hard work.

One of the best parts of wholesaling is that you can get started with little or no initial capital outlay, or you won't have to tie up any significant existing assets for an extended period when putting together real estate deals.

With an enviable lifestyle and a steady upward growth in population, Idaho remains an attractive place to start or grow a wholesale real estate investment career.  The key is to educate yourself about real estate laws to avoid any legal setbacks.