Wholesaling real estate is a smart way to get your feet wet in the world of Kansas real estate investing. However, like any new business venture, an entrepreneur or investor must be aware of the investment technique’s benefits, as well as those issues to avoid!
The real estate wholesaling business is simply a technique in which – the real estate wholesaler executes a contract of sale with a seller but then seeks to assign the rights and obligations delineated within this real estate contract to another buyer – an end or cash buyer by executing an assignment of contract. Wholesalers typically find prudent wholesale properties from motivated sellers – those with a strong personal/financial need to sell the property pronto below market value!
The art of real estate wholesaling is often characterized as the actions of a middleman, but one of the best ways for individuals to break into real estate investing in Kansas because it does not require significant funds simply to get started. That said, it does require a cautious and diligent approach.
Real estate wholesalers seek to generate profits by identifying those properties that are priced below market – for whatever reason. The next step is to enter into a legal agreement (a Purchase and Sale Agreement) with the seller and then to assign the rights and obligations of that purchase contract to another interested purchaser for an assignment fee. The revenue is earned through a wholesaling fee associated with the transaction – often calculated as a percentage of the property’s value.
The end buyers in a wholesale transaction are typically investors who do not want to take the time to find discounted properties or to negotiate with a seller. This is simply a preference as end buyers tend to be more focused on rehabbing or rezoning the property in question to generate a profit. Real estate wholesaling generally requires significantly less time and considerably fewer funds – which ultimately reduces the investor’s exposure to risk when compared to flipping. As a result, though, real estate wholesaling generates smaller returns than flipping, which makes sense as the reward is reduced by the reduction in risk.
The first Americans settled in Kansas nearly 200 years ago, in 1827 – the year Fort Leavenworth was built. Kansas reached statehood in 1861. The state’s name is derived from the Kansa Native Americans who lived there along the Kansas River.
The population in the state of Kansas is more than 2.9 million people and ranks 35th among U.S. states, while its area of 82,278 square miles ranks 15th of all states.
The ten largest cities in Kansas are as follows:
Source: Biggest US Cities
And while Kansas City ranks as the third-largest city in Kansas (behind nearby Overland Park), as a metropolitan area – Kansas City is the largest in the state and includes five of the fourteen counties that combine to make up the Kansas and Missouri border (and metro area), an area that is home to more than 2 million residents.
The most prominent real estate trade & professional organizations in the Sunflower State are shown below. Each of these real estate associations is a member of the larger - National Association of REALTORS (NAR) –
The Kansas Association of REALTORS, located in the state’s capital of Topeka (and the state’s 5th largest city), was developed in support of local real estate professionals and the local real estate brokerage market. The KAR offers its members a variety of industry information and relevant tools, including the earning of accredited credentials like CRS or GRI.
The KCRAR was created in 2001 by the merging of two smaller REALTOR associations. The Kansas City Association has evolved to include more than 30 counties and more than 10,500 members. The KCRAR has a professional association with the NAR, the Missouri REALTORS, and the Kansas Association of REALTORS and serves as a regional voice of advocacy and innovative resources for its members.
The RSCK is a member of the NAR and performs as a local affiliate supporting each member’s goal to achieve success. It offers local and regional advocacy efforts with regard to governmental affairs, member services, and professional development tools and opportunities, plus credentialing and distance learning coursework, among others.
Located in the southeastern portion of Kansas, the SEKAR serves the real estate professionals working in the greater Crawford County area. The SEKAR was developed to facilitate the advancement of real estate professionalism and the preservation of Kansas real property rights.
The FHAR is a nonprofit real estate trade organization with more than 500 members. FHAR advocates for the local community and its consumers by enabling members to work professionally and ethically within the real estate market of Clay, Dickinson, Geary, Marshall, Pottawatomie, Riley, Washington, and Wabaunsee Counties.
Established in the mid-1920s as the Lawrence Real Estate Board, the Lawrence Board of REALTORS now serves more than 500 members that include real estate licensees and other real estate business-related partners in the greater Lawrence, Kansas area.
The state agency in Kansas that is responsible for administering/monitoring the licensing and activity of each licensed agent is the Kansas Real Estate Commission – the KREC.
The KREC offers the following services:
The KREC issues real estate licenses for a two-year period, with expiration, dates expiring on a staggered monthly basis using the alphabet to sort these staggered dates.
The MAREI is a chapter of the National REIA association, a professional organization dedicated to helping support real estate investors reaching for their financial objectives and independence. The NREIA is 40,000 members strong with more than 100 chapters across the country.
Yes. Wholesaling real estate in Kansas is legal if real estate wholesalers carefully navigate real estate transactions without a misstep that violates the legal boundaries set for by the state’s lawmakers.
But it is noted, the legality of real estate wholesaling is often a lively debate, with those arguing against – theorizing the act of real estate wholesaling ultimately creates a transaction that requires a Kansas real estate license. Yet, this argument holds little in legal weight as real estate wholesalers are not selling the property itself, but rather their legal rights (as dictated through the Doctrine of Equitable Conversion) as a party to a legally enforceable contract.
From this perspective, real wholesaling is widely considered legal - but it is essential to emphasize the following - real estate wholesalers must remain well-versed in regulations and laws within their local market and make sure their business choices and activities remain within Kansas’ legal boundaries before making a move.
A real estate wholesale deal requires a wholesaler to enter into a purchase agreement with the property’s seller/owner because it is the contract of sale - this legal document - that creates the real estate wholesaler’s legal right (along with delineated obligations) to sell/market/assign the subject property as defined by the terms outlined in the contract.
The purchase agreement is typically known in legal terms as a bilateral contract – with both parties to the contract required to fully execute the contract’s terms. Most contracts by default are assignable, that is unless the contract states explicitly otherwise within the contract’s language or provisions.
Remember, a real estate wholesaler has the legal right – as the legitimate buyer in an executed contract - to sell the right to purchase this property denoted in the contract to other interested home buyers, but it does not mean that the wholesaler is selling/marketing the property.
A real estate wholesaler can only sell one thing legally aside from a property they own outright – the rights/obligations delineated in a fully-executed contract to purchase.
The real estate law governing the behaviors and actions of a licensed real estate broker or salesperson (for a variety of different types of real estate) in Kansas can be found in KSA Chapter 58, Articles 30, Sections 34 through 77 as well as KSA Supp 58-3078 through 3085 – collectively known as the Real Estate Brokers and Salespersons’ License Act.
The most important thing to consider is that a real estate wholesaler must NOT perform any actions that would require a real estate license according to Kansas State Statutes Chapter 58 – Article 30. More specifically, a real estate wholesaler must avoid the actions of a real estate licensee as defined by KSA § 58-3035 (f) (1-10):
Further, KSA 58-3036 notes that unless otherwise exempted, a real estate license is required for these activities
Source: KSA § 58-3036
The entrepreneurial spirit is alive & well for Kansas real estate wholesalers. Successful wholesalers, in particular, take the time required to understand how to navigate a real estate wholesale deal with actions that never violate the letter of the law as defined by Kansas legislators.
Real estate investors in Kansas may wholesale real estate if their actions and behaviors do not fall within those behaviors that require a license in the Sunflower State. As noted above, a real estate wholesaler must not represent themselves in any way that states that they are active in the real estate business of exchanging, buying, leasing, or selling real property for compensation. (KSA § 58-3035 (k) (10)- Definitions).
One of the more common real estate wholesaler missteps is to market the property for the contract they have a legal right to buy. THIS IS ILLEGAL ACCORDING TO KANSAS STATE LAW. In fact, with regard to advertising, other than a property owner, –
Additionally, KSA § 58-3037 (a-k) allows these individuals & situations to proceed without the required license:
Important Recommendations for Real Estate Wholesalers in Kansas
A real estate wholesaler can market their rights and obligations under a real estate contract – which is VERY different than marketing the property.
Real estate wholesaling is often a great entry point for those just getting started in Kansas real estate investing. This is because, as a real estate strategy, it requires little (and at times, no) capital. However, wholesale real estate must be done with the investor’s eyes wide-open – which means a commitment to the appropriate due diligence required to vet out investment opportunities professionally and completely. However, from an entrepreneurial perspective, real estate wholesaling offers limitless earning potential.
Many real estate wholesalers work in teams, which is also referred to as co-wholesaling, with one partner finding the property and the other bringing a cash buyer. In other words, a co-wholesaling relationship can be a one-time or long-term collaboration (denoted by rules established in a joint venture agreement, etc.) among investors with the same investment goal – to turn a profit through real estate wholesaling.
There are several techniques to structure the end stages of a real estate wholesale deal. The most popular ways to close a real estate wholesale include:
Real estate wholesalers firmly established in this career are forever building/refining a wholesale buyers list of cash buyers. The more potential buyers a wholesaler works with, the greater the chance of completing the wholesale deal.
And while a real estate license is not required in Kansas, it may be worthwhile considering obtaining a license as this will open up access to resources, contacts, and networking events.
Reverse wholesaling is when the steps to accomplish a real estate wholesale deal are reversed from their more typical order.
In reverse wholesaling, the wholesale professional first has/finds a buyer. Some believe that having a cash buyer is more than half the battle to finish the deal. The next step in the wholesaling process is to locate the property that is being sold by one of the many hurried or distressed homeowners – in need of a quick close and quick cash.
Reverse wholesaling is often the preferred choice for real estate wholesaling professionals because they build and maintain a curated buyers list (often chock full of private money lenders) – as they search for well-priced properties from motivated sellers. In other words, reverse wholesaling allows wholesalers to hunt for specific properties requested by serious investors.
To wholesale real estate in Kansas, there are two legal forms that are primarily used to accomplish this task. The Kansas wholesale contract and an assignment contract, each of which is discussed and shown below.
A contract is a legally enforceable instrument that defines the terms of the real estate deal. It includes standard language like:
A real estate contract is assignable – by default - unless the agreement’s language prohibits the use of an assignment within the agreement.
An assignment contract is a legal document that transfers the contractual rights, obligations, and responsibilities of a buyer named in a contract (known as the assignor) to another buyer (known as the assignee). The assignee acts, more times than not, as a cash buyer who compensates the wholesaler for the work involved in finding or modifying the property.
An assignment delineates the following information:
Remember - You cannot assign a contract if the contract’s language expressly prohibits doing so.
In addition, in Kansas, a title company, licensed agent, lender, lawyer or escrow firm can perform closings, however, the title searcher must be a licensed abstractor. And, much of the land transferred in Kansas can be traced back to Indian origins, which may require approval before the Indian commission.
Real estate investing – be it wholesaling, flipping, or holding long-term investment properties for passive income, continues to be one of the professions that offer entrepreneurial-types and business-venture capitalists’ limitless income – if they operate within the legal boundaries established by Kansas state officials. In addition to some amazing opportunities for wealth, real estate wholesaling offers on-the-job educational benefits for real estate investors although it can feel a little bit like trial by fire, at times.
As you begin your real estate wholesale career, keep these essential aspects in mind as you navigate the wholesale landscape:
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