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is wholesaling real estate legal maine

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

legal real estate investing strategies real estate markets wholesale real estate May 15, 2024

Investing in real estate wholesaling is appealing because it is characterized by its potential for rapid returns and modest capital requirements. This strategy empowers investors to orchestrate transactions as intermediaries, bridging the gap between property sellers and buyers without direct ownership. However, the legality of wholesaling real estate hinges upon compliance with Maine's specific regulatory framework, mandating a unique understanding of legal statutes, contractual obligations, and licensing hurdles.

As a result, many people are asking the same question: Is wholesaling real estate legal in Maine? This inquiry underscores the importance of comprehending the legal landscape governing real estate wholesaling In Maine. To ensure you work within the confines of Maine real estate laws, we have created this guide to tell you that wholesaling is legal and why and how this exit strategy is possible. In doing so, we'll cover everything you need to know, starting with the following:


*Before we begin our guide on whether wholesaling real estate is legal in Maine, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!


What Is Real Estate Wholesaling?

Real estate wholesaling is a strategy primarily centered around the assignment of contract exit strategy, the most popular form of this investment technique. Essentially, a wholesaler secures a property under contract and then assigns or sells their right to purchase the property to an end buyer rather than actually buying the property themselves. This process leverages the doctrine of equitable conversion, where the equitable title of the home transfers to the wholesaler upon signing the contract, allowing them to transfer this right to another buyer.

While assignment of contract is the common route, there are two additional strategies used in more specific scenarios: double closing and wholetailing. Double closing involves the wholesaler actually closing on the property and then reselling it immediately. Wholetailing, on the other hand, requires the wholesaler to purchase the property and perform minimal improvements before putting it back on the market. Each strategy has unique applications and benefits tailored to different investment opportunities and market conditions.

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

Before diving into wholesaling in Maine, new wholesalers should prioritize learning about the state's real estate laws. These laws govern property transactions and detail what is required for a deal to be legitimate and binding. It's also essential to understand the different wholesaling strategies: contract assignment, double closing, wholetailing, and even learning how to buy foreclosed homes in Maine. Each strategy serves specific situations and market conditions, and knowing when to apply each can significantly impact the success of your ventures.

It also helps to learn the different wholesaling exit strategies and when they may be applied. Contract assignment is often used when a wholesaler wants to avoid actually purchasing a property. Instead, they sell their contract with the seller to an end buyer. Double closing involves the wholesaler temporarily owning the property before selling it to the final buyer. This method can be useful when contract assignments are not feasible or legally complex. Wholetailing is a blend where the wholesaler buys the property, makes minor repairs, and sells it for a higher price. This can be particularly effective in markets where buyers prefer move-in-ready homes but still want a deal.

The current market in Maine provides a favorable environment for wholesaling, according to RedFin. The median sales price has increased by 15.4% year over year, indicating strong capital growth potential. Additionally, the number of homes sold has risen by 4.8%, showing robust demand. Although median days on the market have slightly increased by one day year over year, this still points to a reasonably quick turnover for properties. With three months of existing inventory, there is enough movement in the market to find opportunities but also enough room for strategic acquisitions.

Understanding these dynamics is essential for capitalizing on the wholesaling opportunities in Maine, making now an excellent time to start in this field.

Wholesaling houses in Maine can be a lucrative venture, especially given the current market dynamics. For those wondering, "Is wholesaling real estate legal in Maine?" yes, it is legal, but it's crucial to understand the local regulations and market conditions to operate effectively and within the law. That said, let's take a look at some of the state's most prominent real estate organizations to clarify the wholesaling process.


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Real Estate Trade Associations & Governing Bodies

The Maine Association of Realtors (MAR) is the primary real estate trade association. As a result, it's one of the best sources to help answer the question, "Is wholesaling real estate legal in Maine?"

In addition to the MAR, there are 13 local boards and councils in Maine, typically representing specific geographical areas. Some of those include:

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

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

Title 33 of the Maine Revised Statutes regulates real estate transactions in Maine.

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

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

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, among other responsibilities.

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

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, 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, the 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.

Read Also: The Pros & Cons Of Wholesaling Real Estate: An Investor's Guide

Yes, wholesaling real estate is legal in Maine. This is because wholesalers operate in a specific manner that doesn't require a real estate license. Unlike real estate agents, wholesalers do not directly assist homeowners in buying, selling, or marketing properties. Their role is distinctly different.

Wholesalers focus on acquiring the rights to purchase a property through a contractual agreement with the seller. This contract grants them an equitable interest in the property, which they can legally sell to an end buyer. This process is known as an assignment of contract. Essentially, the wholesaler never takes title to the property but instead transfers their contractual rights to purchase the home to someone else for a fee. This fee is generally the difference between the contract price with the seller and the price the end buyer agrees to pay.

This business model leverages the doctrine of equitable conversion, where the equitable title of the property shifts to the wholesaler once the contract is executed. As long as wholesalers adhere to this structure and comply with any specific contractual and disclosure requirements set by state laws, their operations are legally sound in Maine.

What Are The Wholesaling Laws In Maine?

Title 32, Chapter 114, Subchapter 1: General Provisions defines a brokerage's activities in exchange for compensation. Wholesalers assigning a contract collect a fee for that assignment and not compensation for any of the activities that result in the transfer of an interest in real estate.

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 a licensed agent's obligations during a transaction to you as a buyer. Some of the highlight duties to buyers include:

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

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).]

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).]

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.

§13280 Real Estate Commission rules address 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 states that "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 with 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

Read Also: How To Wholesale Real Estate In Maine: Step-By-Step

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 get a real estate license to better protect and regulate their activities.

Wholesaling real estate in Maine

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.

The Maine Real Estate Commission regulates licensed real estate agents and 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.

Chapter 114, Subchapter 4 details the general qualifications for a license in terms of application, age, residence, high school, reputation, active license, and single license.

Specific qualifications are also outlined in Title 32, Chapter 114, wherein a real estate sales agent is described as a person employed by or on behalf of an agency to perform real estate brokerage services in a training capacity and licensed by the commission as a sales agent.

Important Contract Documents

As a wholesaler, you'll use two key documents for transactions when you flip houses. The first is a Maine Residential Real Estate Purchase Agreement when 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.

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.

Suppose you're uncomfortable completing these types of real estate contracts or any of the disclosures. In that case, 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.

wholesale real estate contract pdf

Final Thoughts

So, is wholesaling real estate legal in Maine? Wholesaling real estate in Maine is unquestionably legal, provided that you adhere to the laws and best practices outlined above. The key to legally engaging in wholesaling in this state lies in properly assigning contracts without stepping into activities that would require a real estate license, such as marketing properties or directly assisting in the buying and selling process. Wholesalers simply secure the rights to a property and pass these rights to an end buyer for a fee, a process fully supported by Maine's legal framework.

Now that you understand the legality of wholesaling real estate in Maine, it's the perfect time to transform this knowledge into action. The current market conditions present a wealth of opportunities for those ready to dive into real estate wholesaling. To get started on the right foot, consider enhancing your skills and knowledge through Real Estate Skills' free training program. This resource can provide you with valuable insights and strategies, setting you up for success in your wholesaling ventures. Take this step today and begin capitalizing on the opportunities that real estate wholesaling has to offer.


*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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