is wholesaling real estate legal in indiana

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

real estate investing strategies real estate markets wholesale real estate Apr 19, 2024

Are you considering jumping into the world of real estate wholesaling in Indiana? Before you do, clarifying the legalities to ensure your investments align with the law is crucial. This article delves into the pressing question: "Is wholesaling real estate legal in Indiana?" We'll explore the legal framework surrounding wholesaling in the state, providing you with the essential information to navigate this investment strategy without legal pitfalls. In doing so, we'll cover the following:

*Before we begin our guide on whether wholesaling in Indiana is legal, 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 In Indiana?

As the 17th most populous state in the U.S., Indiana presents many opportunities for wholesale real estate investments. According to the U.S. Census Bureau, “The state had a net inflow of nearly 22,500 residents last year, which is the third consecutive year this measure topped the 20,000-residents mark. For context, we estimate the state had an average net in-migration of 9,100 people per year last decade.”

Indiana is growing fast, and so is the prospect of wholesaling real estate. In fact, the population growth has many aspiring investors asking a similar question: Is wholesaling real estate in Indiana legal?

Of course, before wholesaling real estate in Indiana, you need to gather a lot of information about the market conditions, legality, and real estate demand and supply in the communities you plan to narrow down to. You should start your search with local Realtor associations, as this is the best way to understand how Indiana's real estate market works.

The Indiana Association of Realtors (I.A.R.) is the state's largest association of real estate professionals. You can find first-hand information about Indiana's real estate landscape on its official website. According to the I.A.R.'s latest real estate market report:

  1. There are 7,751 new listings in Indiana
  2. Inventory is up 9.0% year over year.
  3. Sales are down 8.0% year over year
  4. Homes only last an average of 18 days on the market
  5. There are only 1.6 months of available inventory
  6. Prices are up 6.0% year over year

Apart from this state-wide association, you can connect with smaller Realtor groups like:

  1. Greater Northwest Indiana Association of Realtors (GNIAR)
  2. Mibor Realtor Association (MIBOR)
  3. Mid-Eastern Indiana Association of Realtors (MEIAR)

You should also check out the official page of the Indiana Real Estate Commission to get familiar with the laws governing real estate licenses in the state.

Read Also: What Is Wholesale Real Estate? The Ultimate Guide For Investors

Wholesaling real estate is legal in Indiana, but you must know what the law requires. You can wholesale mobile homes, condos, undeveloped land, and the like as long as you comply with the legal requirements. Before starting a wholesaling business, you need to understand the basic options you have, which are:

  1. Assignment of Contract
  2. Double Closing
  3. Buying-&-Selling

Under Indiana real estate laws, you can only market the rights to assign a contract for a property as a wholesaler; this means you cannot directly market the property for sale. Always try to find cash buyers first so that you know who to market your right to buy the property to. That's important to remember; investors aren't buying the property when attempting to assign a contract. As a result, the property isn't the investor's to market. However, thanks to the wholesale contract, investors can market their right to buy the property to an end buyer.

That's the difference between charging a commission for real estate brokerage and collecting a fee for assigning a real estate contract to an interested party. As a real estate wholesaler, you're doing the latter. If you get confused at any point, feel free to seek legal advice from a real estate attorney.

Apart from ensuring you are on the right side of the law, you also need to understand several ethical considerations related to wholesaling real estate in Indiana. For instance, you should only enter into an agreement when you know you can close the deal and have an exit strategy.

Transparency is crucial. You need to arrange financing ahead of time through private lenders, a line of credit, hard money lenders, or your personal lender. Once you've done this, you can present a proof of funds letter with your offer.

What Are The Wholesaling Laws In Indiana?

There are no specific laws for or against wholesaling real estate in Indiana. However, all wholesaling transactions must comply with the state's local real estate regulations. As a new investor, here are some of the laws about those engaged in real estate transactions in Indiana.

ARTICLE 34.1. of the 2019 Indiana Code

Under the Definitions and General Provisions for Real Estate Brokers and Salespersons, "Broker" means a person who:

  • "(A) for consideration, sells, buys, trades, exchanges, options, leases, rents, manages, lists, or appraises real estate or negotiates or offers to perform any of those acts; and"
  • "(B) is acting in association with and under the auspices of a managing broker and broker company."

Transactions Without License; Prohibition; Exemption

According to Section 2, Article 34.1 of the 2020 Indiana Code:

"No person shall, for consideration, sell, buy, trade, exchange, option, lease, rent, manage, list, or appraise real estate or negotiate or offer to perform any of those acts in Indiana or with respect to real estate situated in Indiana, without a license."

However, there are a few exceptions to this article, including:

  • "(5) rental of residential apartment units by an individual employed or supervised by a licensed broker;"
  • "(8) acts performed by a person in relation to real estate owned by that person unless that person is licensed under this article, in which case the article does apply to that person;"
  • "(9) acts performed by a regular, full-time, salaried employee of a person in relation to real estate owned or leased by that person unless the employee is licensed under this article, in which case the article does apply to that person;"

Disclosure Form

A seller (wholesaler) must present a disclosure form to the buyer before accepting an offer. According to the 2011 Indiana Code TITLE 32. PROPERTY ARTICLE 21:

"An owner must complete and sign a disclosure form and submit the form to a prospective buyer before an offer for the sale of the residential real estate is accepted."

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

You do not need a real estate license to wholesale properties in Indiana. However, as a real estate wholesaler, you cannot market a property; you can only sell your equitable interest in the property in question; this means you must have a contract to purchase property before you can wholesale a subject property. Only a licensed Realtor is permitted by law to advertise properties for sale and earn a commission when the deal closes.

Another thing to note is you only get an assignment fee or profits from wholesaling a property. You cannot collect a sales commission, or you'd be breaching the law. A valid option for real estate wholesalers in Indiana is buying and selling the property as two independent transactions; this can be complex, but essentially, it allows you to negotiate for better deals and earn higher fees or profit from each transaction.

You must become a licensed real estate agent to sell real estate properties in Indiana. Once you fulfill the requirements, you can obtain a Realtor license from the Indiana Real Estate Commission.

Is Co-Wholesaling Real Estate Legal In Indiana?

There are no laws against co-wholesaling in Indiana, but you must do it correctly. Co-wholesaling happens when you partner with another real estate investor to close a wholesale deal; depending on your agreement, this can be on a one-time or ongoing basis.

There are many reasons to consider co-wholesaling, especially if you're new to the business. Besides helping you close more deals and providing viable buyer leads, partnering with an experienced wholesaler builds your expertise. Your partner can provide all the funds needed to close real estate deals while you focus on finding properties that have great market value, curating buyer lists, handling contracts, and rehabbing.

You can co-wholesale different real estate forms, including townhomes, condos, raw land, apartment buildings, and commercial real estate like offices and warehouses. As long as you comply with Indiana's local real estate laws, you can spread your dragnet as wide as possible.

Once you find a wholesaler you're ready to work with; the next step is to draw up a joint venture agreement for the partnership before brokering the first deal. The joint venture agreement provides legal protection for all the parties in the arrangement, and a real estate attorney should review it.

co-wholesaling real estate in Indiana

Is Reverse Wholesaling Real Estate Legal In Indiana?

Reverse wholesaling is essentially the same thing; the difference is that some of the steps here are completed in reverse. In reverse wholesaling, you find the end buyers before securing equitable interest in a property. Since you already know the properties buyers want, you have a more reliable exit strategy and can close more deals faster.

Reverse wholesaling helps you forge long-term relationships with buyers and private lenders. It's not uncommon for reverse wholesalers to close multiple deals with the same buyer. There are no regulations against reverse wholesaling in Indiana, but you must comply with the local real estate laws.

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

Indiana Wholesale Real Estate Contract

There are two central contracts you need to wholesale real estate in Indiana. These are:

  1. Purchase Agreement (Improved Property)
  2. Assignment of Contract For Purchase of Real Estate

Here's an example of the purchase agreement:

Indiana purchase agreement for wholesaling

A real estate purchase document legally binds all the parties involved in a wholesaling contract: the buyer and the seller(s). It includes all the information about the transaction, including the buyer and seller details, a description of the property, its closing costs, the title insurance, and the closing and possession dates. More importantly, it states the responsibilities of each party plus the transaction's terms and conditions.

Once both parties review and sign the agreement, it validates the transaction and secures one's right to wholesale a property to another party. If the purchase agreement doesn't explicitly prevent the contract's assignment, then the contract is assignable by default; this means it can happen without the seller’s written permission.

The Indiana Purchase Agreement validates this point in Section 5, Additional Provisions;

This Agreement shall be construed under and in accordance with the laws of the State of Indiana and is binding upon the parties’ respective heirs, executors, administrators, legal representatives, successors, and assigns.

According to Section 2, I.C. 32-21-1, of the 2015 Indiana Code Article 21, dealing with agreements of contract;

The consideration that is the basis of a promise, contract, or agreement described in section 1 of this chapter does not need to be in writing but may be provided.

If the seller's written approval is needed for the assignment contract, the assignment addendum to the purchase agreement can formalize the requisite approvals for all parties in the transaction. At this stage of the real estate wholesale transaction, it's best to consult with a real estate attorney or realtor to help draft and complete these documents.

wholesale real estate contract pdf

Final Thoughts

Is wholesaling real estate legal in Indiana? As we conclude our exploration of real estate wholesaling in the Hoosier state, it's clear that, yes, wholesaling real estate is legal in Indiana. For those looking to enter this investment field, understanding and adhering to state regulations is crucial for successful and lawful operations. Wholesaling can be profitable when executed correctly within the legal guidelines, offering a viable pathway for those ambitious enough to navigate its complexities. As always, prospective wholesalers should consult legal experts to ensure full compliance and maximize their investment potential.

*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

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