Before considering wholesaling as a form of real estate investing in Indiana, you need to know if it is legal so you don't get on the wrong side of the law.
In this article, we'll answer the question: Is Wholesaling Real Estate Legal in Indiana?
As the 17th most populous state in the U.S, Indiana presents many opportunities for wholesale real estate investments. In 2019, approximately 36,722 new residents moved to the state, bringing its total population to 6.73 million. Projections also show that by 2050, the state will have recorded a 10% increase in population, translating to about 660,000 new residents.
In 2011, the CEO Magazine named Indiana as the 6th best place to do business in the United States and the best place for business in the Midwest. Indiana is also home to several Fortune 500 companies generating about $142.5 billion in revenue.
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 from local realtor associations, as this is the best way to understand how Indiana's real estate market works.
The Indiana Association of Realtors (IAR) is the largest association of real estate professionals in the state. You can find first-hand information about Indiana's real estate landscape on its official website. According to its March 2021 real estate market report,
Apart from this state-wide association, you can connect with smaller realtor groups like:
You should also check out the official page of the Indiana Real Estate Commission to get familiar with the laws governing real estate operations in the state.
Wholesaling real estate is legal in Indiana, but you need to 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:
Within the provisions of 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 advertise the property online as “Selling a Property I Own.” Always try to find cash buyers first, so you don't have to put up adverts on online platforms.
There's a big 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 tied to wholesaling real estate in Indiana. For instance, you should only take up an agreement when you know you can close the deal and you have an exit strategy.
Transparency on your part is crucial. You need to sort out financing ahead of time through private lenders, a line of credit, hard money lenders, or your personal funds. Once you've done this, you can present a proof of funds letter with your offer.
Source: Million Arches
In Indiana, there are no specific laws for or against wholesaling real estate. 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.
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.
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;
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.
If you want to apply for a real estate broker license in Indiana, it's best to get familiar with the state's licensing requirements ahead of time. You can check out the official website of the Indiana Real Estate Commission to find more information about this.
Source: Virtual Realty Group
Typically, you do not need a real estate license to wholesale properties in Indiana. 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 need to have a contract to purchase property before you can wholesale a specific form of real estate including rental property and investment property. A licensed realtor is the only one 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 the better deals and earn higher fees or profit from each transaction.
If you want to sell real estate properties in Indiana, you need to become a licensed real estate agent. You can obtain a realtor license from the Indiana Real Estate Commission once you fulfill the requirements.
There are no laws against co-wholesaling in Indiana, but you have to do it the right way. Co-wholesaling happens when you partner with another real estate investor to close a wholesale deal. This can be on a one-time or ongoing basis, depending on your agreement.
There are many reasons you should 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 buyers 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 drawing 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.
Reverse wholesaling is essentially the same thing as wholesaling; the difference is some of the steps here are completed in reverse. In reverse wholesaling, you find the end buyers first before securing equitable interest in a property. Since you already know the properties buyers want, you have a more reliable exit strategy, and you can close more deals faster.
Reverse wholesaling helps you to forge long-term relationships with both 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.
There are two main contracts you need to wholesale real estate in Indiana. These are:
Source: Speedy Template
A real estate purchase document legally binds all the parties involved in a wholesaling contract; that is, 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 of the parties plus the terms and conditions for the transaction.
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 prevent the assignment of the contract explicitly, 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, IC 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 proved.
If the seller's written approval is needed for the assignment contract, the assignment addendum to 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 with drafting and completing these documents.
Wholesaling houses in Indiana is a viable investment option for everyone. Once you are familiar with the laws and operate within them, you wouldn't have any issues with the state's regulators.
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