Is Wholesaling Real Estate Legal In Maine?

The Pine Tree state is renowned for its natural beauty, highlighted by a heavily forested interior, a picturesque coastline, and spectacular waterways that traverse our most northern and eastern New England state.

Although it is sparsely populated with just over 1.3 million people, there is still lots of potentials to do well if you’re considering wholesaling real estate in Maine.

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

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

An Overview of Maine

To say that Maine is unique in many ways is an understatement. It's relatively small with only 30,862 square miles of land and another 4,523 square miles of water and is among the least populous and least densely populated of all states.

It was a part of the Commonwealth of Massachusetts until 1820 when it seceded and was admitted to the Union under the Missouri Compromise as the nation's 23rd state.

More than 80% of the state’s total landmass is forested, giving Maine the distinction of the most forest cover of any U.S. state.  The northern part of the state is largely rural to the point where no formal political organizations govern certain areas.  For example, the Northwest Aroostook territory is 2,668 square miles and has a population of only 10 people.

In fact, as of 2010, Maine was the most rural state in America, with only 38.7% of the state's population living in urban areas.

However, other parts of the state have stable population centers.  And while these are not relatively large, they do represent places for wholesaling opportunities.

The five largest cities by population in Maine are:

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The Greater Portland metropolitan area is the most densely populated, with 40% of the state's population.

The largest counties by population are Cumberland, York, Penobscot, Kennebec, and Androscoggin.  They are the only counties with more than 100,000 residents in the state.

As you might guess, Maine is a popular tourist destination for sport hunting, skiing, boating, camping, and other outdoor recreation activities. 

The state has an average Gross Domestic Project of more than $52 billion, with an economy also driven by industrial paper, lumber and wood products, leather goods, textiles, electronics, and biotechnology. 

Naval shipbuilding activities are key economic drivers as well, anchored by the Bath Iron Works in Bath and the Portsmouth Naval Shipyard in Kittery.

Maine is also a foodie paradise.  With proximity to cold Northern Atlantic waters, the state is famous for seafood cuisine, especially clams and lobsters.

Like all other states, Maine was impacted by the Covid-19 pandemic but has still maintained a lower unemployment rate than the national average.

In July 2021, the unemployment rate was 4.9%, lower than both the U.S. (5.4%) and New England's average (5.2%). 

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Important Real Estate and Economic Demographics

In June 2021, total exports were up 24.6% in Maine compared to June 2020. Maine's top trade partner was Canada, which accounted for 71.1% of imports and 48.5% of exports.

Total imports to Maine were valued at $525,667,566 while exports totaled $197,098,992.

Maine's median household income is just over $56,000 placing it 32nd in income rank among states.  Since 2009, the personal income growth among residents has averaged just over 3%, with the most significant upticks coming since 2014. 

Wholesalers should view this as a big positive since growth has remained stable and created a higher consumer confidence level over time.

Additionally, total personal income in Maine grew 7.6% in 2020, the sixth highest in the nation.

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Maine has approximately 500 cities, towns, and plantations, but these organized municipalities cover less than half of the state's territory.  The state also has three Indian reservations.  They are Indian Island, Indian Township Reservation, and Pleasant Point Indian Reservation.

The balance of the state has no local government and includes 400 townships and many coastal islands that do not lie inside any municipal boundaries.  The administration, services, and ordinances of these areas are handled by the state and county governments.  Less than 10,000 people populate these areas.

Property tax administration is handled by a local assessor in incorporated cities and towns, while the State Tax Assessor regulates property taxes in the unorganized territories.

Although Maine's population continues to age more rapidly than the nation's population, creating some job shortage concerns, part of this has been offset by a robust in-migration to the state.

According to the Maine Office of the State Economist, 11 counties are expected to gain population in both an initial five-year period and cumulatively from 2018-2028. From 2018-2028, York County is projected to see the greatest population growth, 8.3%, ahead of Waldo, 6.8%. Five counties are projected to decline from 2018-2028, with the largest losses expected in Piscataquis (-6.8%).

Wholesalers will be interested to know that home sale were strong in Maine in 2020.  It appears that out-of-state sales bolstered the state's real estate market through the pandemic.  Data also suggests that many of these purchases may have been second homes.

For example, single-family existing-home sales in February 2021 continued to grow, up 22.8% compared to February 2020.  Also, the median sales price increased 12.9% from a year prior as the market maintained a tight supply and strong demand.

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In July 2021, the median sale price continued to grow rapidly, reaching an all-time high of $315,000 statewide and 23.6% higher than July 2020.

Sagadahoc County had the highest year-over-year growth in sales at 75.9%, while Knox County had the highest increase in sale price at 60.4%.

Here's a look at activity throughout the entire state.

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In the second quarter of 2021, the housing price index (HPI) in Maine, New England, and the U.S. continued to rise at record-beating rates, reaching the highest ever recorded year-over-year growth for the second quarter in a row. 

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Part of this was driven by the pandemic and by falling inventory.  In July 2021, there were 6,536 active listings for single-family homes on Realtor.com. While this remains significantly below normal levels (1,964 fewer than July 2020 and 5,609 fewer than July 2019), some indicators show that inventory is starting to rise again.

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Real Estate Trade Associations and Governing Bodies

The Primary real estate trade association in the state is the Maine Association of Realtors  (MAR).  MAR has 11 committees that guide the Association's efforts on behalf of the membership.

In addition to membership in MAR, members are encouraged to join one or more of the local boards and councils throughout the state.  There are 13 local boards and councils in Maine, typically representing specific geographical areas, and a commercial association that focuses on commercial real estate throughout the entire state.

Some of those include:

• Greater Bangor Association of REALTORS (GBAR)
• Greater Portland Board of REALTORS (GPBR)
• Kennebec Valley Board of REALTORS (KVBR)
• Maine Commercial Association of REALTORS (MCAR)
• Mid-Coast Board of REALTORS (MCBR)
• Mountains to Shore Board of REALTORS (MSBR)

When you join a local board or council in Maine first, you automatically receive membership in MAR and the National Association of REALTORS (NAR). It's known as the 3-way agreement.

As a wholesaler, you also need to understand the role of the Maine Real Estate Commission (MREC).

Real estate transactions in Maine are regulated by Title 33 of the Maine Revised Statutes.

Title 33 is further broken down into 45 chapters that deal with specific elements of Maine real estate law.

The state of Maine Department Professional and Financial Regulation (PFR) administers these state laws and rules through the Maine Real Estate Commission (MREC).

Among other responsibilities, the primary function of the MREC is to oversee and administer Title 32 (Professions and Occupations), Chapter 114, and the Maine Real Estate Brokerage License Act.

In broad terms, the Main Real Estate Brokerage License Act oversees real estate brokerage activities, defined as the following:

Real estate brokerage.  "Real estate brokerage" means a single instance of offering, attempting to conduct or conducting services on behalf of another for compensation, or with the expectation of receiving compensation, calculated to result in the transfer of an interest in real estate. Real estate brokerage includes, but is not limited to, the following activities conducted on behalf of another: 

A. Listing real estate for sale or exchange;

B. Promoting the purchase, sale or exchange of real estate;

C. Procuring of prospects calculated to result in the purchase, sale or exchange of real estate;

D. Advertising or holding oneself out as offering any services described in this subsection;

E. Negotiating the purchase, sale or exchange of real estate;

F. Buying options on real estate or selling real estate options or the real estate under option;

G. Acting as a finder to facilitate the purchase, sale or exchange of real estate; and

H. Buying, selling or exchanging real estate.

If you want to know more, see Title 5, Title 10, and the Office of Professional and Occupational Regulation (OPOR) Rules Chapters 10, 11, and 13 for administrative and departmental provisions applicable to this profession.

Maine Is An Attorney Close State

Maine is one of many states that require an attorney to complete a real estate closing transaction.  Due to the complexities of real estate investing in general, having an attorney close at hand for key legal advice is always a good idea anyway, but in Maine, you don't have a choice. It's the law.

Other states with an attorney close regulation include Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Kansas, Kentucky, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, and West Virginia. 

Is Real Estate Wholesaling Legal In Maine?

Wholesaling is legal and viable in Maine, but you need to make sure you understand rules and regulations governing the sale of real estate before you jump into a wholesaling career.

Typically, you'll look for homes in foreclosure, under market value, or properties that would be attractive to a real estate investor or other types of potential cash buyers.

One of the best places to start your education is by understanding the different types of wholesaling strategies.  The three most commonly used are the assignment of contract, a double closing, and wholetailing.

The most common legal problem wholesalers don't understand is when they attempt to broker a real property deal without a license. Under an assignment of contract deal, a wholesaler can only market the rights to a contract for a piece of real estate they have with the property owner. They cannot market or sell the actual property.

Because the assignment of contract strategy provides the lowest barrier of entry for wholesale deals, this tends to be an issue that comes up quite a bit.  Also, it's essential to understand that using this strategy means collecting an assignment fee when the contract is assigned. You do not collect a commission which only a licensed real estate professional can do.

With a double close and wholetailing, a wholesaler engages in two separate transactions, buying a property outright and then selling the property outright to a third party end buyer, primarily to someone from a pre-screened buyers list, and often on the same day.  While you can make more money this way by buying low and selling high, the drawback is that you'll probably have to come up with an earnest money deposit as an initial down payment.

As you use these strategies, one of the best investments you can make is retaining the services of an experienced real estate attorney. You'll have a resource to help you with wholesale real estate contracts and negotiations and to protect you from potential legal problems that may crop up.

What Are The Wholesaling Laws In Maine?

Title 32, Chapter 114, Subchapter 1: General Provisions defines a brokerage's activities in exchange for compensation.  As a reminder, wholesalers assigning a contract only collect a fee for that assignment and not compensation for any of the following activities:

Title 32, Chapter 114, Subchapter 7 covers real estate brokerage relationships and specifically the duties to sellers and buyers. Some key provisions apply to wholesale real estate transactions in Maine.  Several of these involve obligations that a licensed agent has during a transaction to you as a buyer. Some of the highlight duties to buyers include:

2. Duty to buyer. The duty of a seller agent to a buyer is governed by the following.  

A. A seller agent shall treat all prospective buyers honestly and may not knowingly give false information and shall disclose in a timely manner to a prospective buyer all material defects pertaining to the physical condition of the property of which the seller agent knew or, acting in a reasonable manner, should have known. A seller agent is not liable to a buyer for providing false information to the buyer if the false information was provided to the seller agent by the seller agent's client and the seller agent did not know or, acting reasonably, should not have known that the information was false. A seller agent is not obligated to discover latent defects in the property. [PL 2005, c. 378, §14 (AMD); PL 2005, c. 378, §29 (AFF).]

B. Nothing in this subchapter precludes the obligation of a buyer to inspect the physical condition of the property. A cause of action may not arise on behalf of any person against a seller agent for revealing information in compliance with this subchapter. [PL 2005, c. 378, §14 (AMD); PL 2005, c. 378, §29 (AFF).]

C. A seller agent may provide assistance to the buyer by performing ministerial acts such as preparing offers and conveying those offers to the seller, and providing information and assistance concerning professional services not related to real estate brokerage services. Performing ministerial acts for the buyer may not be construed as violating the seller agent's agreement with the seller or forming a brokerage agreement with the buyer. Performing ministerial acts for the buyer does not make the seller agent a transaction broker for the buyer.

This subchapter also addresses the subject of agency relationship disclosures:

The following subsection clearly states that a license is required to engage in real estate brokerage:

• 13003. License required It is unlawful for any person or entity to engage in real estate brokerage without a current real estate brokerage agency license issued under this chapter or a license authorizing the person to engage in brokerage activity on behalf of a brokerage agency.

Disclosures

Under Title 33, Chapter 7 Conveyance of Real Estate, the seller of a property will provide the purchaser a statement containing the following information:

• Water Supply System
• Insulation
  • Heating System or Heating Source
• Waste Disposal System
• Hazardous Materials
• Known Defects
• Access To Property

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

You do not need a license to wholesale properties in Maine.  However, many real estate wholesalers choose to get a real estate license to better protect and regulate their activities.

Remember, under an assignment of contract, an unlicensed wholesaler can't market or directly sell a property.  They can only market the rights to a contract they have secured with a homeowner.  By law, they can’t collect a commission unless they are licensed.

Licensed real estate agents are regulated by the Maine Real Estate Commission, which interprets various Real Estate Brokerage Act elements.

As mentioned above, Title 32, Chapter 114 of the Real Estate Brokerage License Act is very clear and brief on whether or not a license is required and under what circumstances.

The general qualifications for a license are detailed in Chapter 114, Subchapter 4, which reads:

Specific qualifications are also outlined in Title 32, Chapter 114 as well:

Important Contract Documents

As a wholesaler, when you flip houses there are two key documents you'll use for transactions.  The first is a Maine Residential Real Estate Purchase Agreement when you are entering into a deal with a property owner.

The other is an Assignment of Contract document you will use when executing an assignment of contract strategy.

Download Free Wholesale Real Estate Purchase & Assignment Contracts (PDF) 

You can learn more about the delegation of performance and assignment of rights under Title 11 of the Uniform Commercial Code, Article 2, Part 2: Form, Formation, and Readjustment of Contract.

In part, it reads:

• 2-210. Delegation of performance; assignment of rights

(1). A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach. 

(2). Except as otherwise provided in section 9-1406, unless otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party or increase materially the burden or risk imposed on the buyer or seller by the contract, or impair materially the chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of the assignor's entire obligation can be assigned despite agreement otherwise. 

If you're uncomfortable completing these types of real estate contracts or any of the disclosures, you'd be wise to retain the services of an experienced real estate attorney to help you through the legalities of this type of paperwork.

Final Thoughts

Despite being a smaller state with a relatively small amount of people, Maine also has a lot of opportunity for flippers considering wholesaling in the state.

It is one of the most beautiful states in the country and is home to a thriving tourism industry.  The economy is diverse and stable, along with the value-priced housing stock to make entry into wholesaling much easier than in other locales.

The key to wholesaling in Maine is to be creative and proactive, looking for undervalued properties you can transact for a healthy profit.

*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