is wholesaling real estate legal in massachusetts

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

contracts legal real estate investing strategies wholesale real estate wholesaling real estate May 10, 2024

Investing in real estate wholesaling holds inherent appeal due to its potential for rapid returns and minimal capital outlay. This strategy enables investors to serve as intermediaries between sellers and buyers, leveraging their expertise to facilitate transactions without needing property ownership. However, the legality of wholesaling real estate is contingent upon adherence to state-specific regulations, necessitating a nuanced comprehension of Massachusetts' legal statutes, contract requirements, and licensing protocols.

Against the backdrop of this dynamic landscape, prospective investors often pose the question: "Is wholesaling real estate legal in Massachusetts?" This inquiry underscores the significance of understanding the regulatory framework governing real estate wholesaling, as adherence to state laws is essential for navigating the market effectively.

*Before we begin our guide on whether wholesaling real estate is legal in Massachusetts, 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 an investment technique that has recently become quite popular for several reasons:

  • Real estate investing using a wholesale strategy requires little capital requirements, except for the amount required for an earnest money deposit.
  • Real estate wholesaling is a profitable investment technique in which one acts as an intermediary. It is especially profitable in a rapidly appreciating market.
  • Real estate wholesaling allows new investors to gain practical experience, which includes building referral relationships with lenders and curating a buyers list of cash buyers.

With its rise in popularity, opponents have voiced concern, contending that real estate wholesalers are violating license law by performing actions that rise to a level that requires a Massachusetts real estate license.

This is simply not true. Wholesaling principles are present throughout a competitive marketplace, even in the local lemonade stand run by the neighbor’s kid. Wholesaling real estate uses a principle in which one invests for value with the primary intention of selling for a profit.

More specifically, real estate wholesaling does not require a license if the wholesaler sells their interests (their equitable right to buy), as determined by the details written in the real estate contract.

A real estate wholesaler, like a flipper, enters into a purchase agreement or real estate contract – typically for an owner-occupied or rental property priced below market. The reduced price for the property usually results from highly motivated sellers who need to move quickly or have financial challenges to overcome and need to raise cash fast.

The contract of sale legally redefines the subject property’s ownership based on the Principle of Equitable Conversion (or Equitable Interest or Equitable Title), which references how financial interests in real property are determined.

In today’s real estate market, wholesale opportunities can usually be found online (re: Redfin or Zillow, Craigslist, MLS), liquidating an estate, foreclosure, bankruptcy, or divorce, among others.

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

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What Do You Need To Know About Wholesaling Properties In Massachusetts?

Aspiring real estate investors in Massachusetts venturing into wholesaling need to start with a thorough understanding of the local laws that govern real estate transactions. Knowing the legal framework is crucial to ensure your investments are both compliant and effective. Additionally, identifying which properties and situations are best for certain exit strategies, such as contract assignments, double closings, or wholetailing, is essential to maximize efficiency and profitability.

Understanding the local market dynamics is equally vital. According to RealtyTrac, the real estate market has seen 75,377 properties sold recently, with median home values currently standing at around $588,041. Meanwhile, the median value for residential home transactions over the last year was approximately $512,356. The state also has a significant number of distressed properties, with 3,771 in foreclosure, 169 bank-owned properties, and 685 headed for auction. These figures indicate a robust market with varied investment opportunities, including potential bargains in the foreclosure and auction segments.

For those wondering "Is wholesaling real estate legal in Massachusetts?" rest assured that it is, provided you adhere strictly to state laws. For deeper insights and ongoing support, aspiring investors should connect with Massachusetts's Realtor organizations. These bodies offer invaluable resources and guidance to help you navigate the complexities of the Massachusetts real estate market and seize the opportunities it presents.

Real Estate Trade Organizations In Massachusetts

These are the state's larger trade and professional organizations dedicated to the real estate profession, and each brokerage and individual works in real estate. Each of these associations is a member of the National Association of Realtors (NAR):

  • The Massachusetts Association of Realtors (MAR): Established in 1924, the MAR is the leading advocate and voice for real estate in the Bay State. It is committed to supporting a law that protects property owners and real estate professionals in Massachusetts.
  • The Greater Boston Association of Realtors (GBAR): Among the largest real estate associations in New England (and the United States), the GBAR has more than 10,000 members from real estate and affiliated industries. It provides resources, education, and advocacy to serve both professionals and consumers in the Bay State.
  • The South Shore Realtors (SSR): The SSR is Massachusetts's second-largest trade association dedicated to real estate. With more than 3,000 members, the association serves two dozen downs throughout the state’s south shore area. The SSR seeks to support real estate professionals in achieving success ethically.
  • The North Shore Realtors (NSR): Established in 1923, the NSR serves real estate professionals & property ownership issues along Massachusetts’ north shore. Members include licensees and affiliate industry members in appraising, mortgage brokers, and home inspectors, among others.
  • The Realtor Association of Pioneer Valley (RAPV): Founded in 1915, the RAPV is the voice for Pioneer Valley real estate professionals and property owners in and around the greater Springfield, Massachusetts, vicinity in the western portion of the state. The RAPV has more than 1,800 members who serve three counties (Hampshire, Franklin, and Hampden), which include 68 towns/cities.

The Massachusetts Board of Real Estate Brokers and Salespersons administers the state's licensing laws. Applications for real estate licenses can be started online on the Division of Occupational Licensure’s website. The Division of Occupational Licensure (DOL) regulates and manages more than 150 trades and nearly 600,000 professionals in the state.

The Real Estate Board in Massachusetts issues two types of licensees for each real estate agent. These include a licensed real estate broker and a licensed real estate salesperson.

Note that according to the Code of Massachusetts Regulations (CMR) Title 254, Section 2 (13) – Massachusetts offers reciprocity to any state with similar license law requirements.

Massachusetts Is An Attorney-Close State

The actions involved in closing a real estate transaction in the state—one involved in the transfer of property—are considered the practice of law in Massachusetts. As a result, settlements or closings of real estate transactions that include a lender must be performed by a Massachusetts-licensed attorney. This requirement helps keep legality issues to a minimum, even in terms of hard money lending.

Success Story: How Joe Went From Driving Uber To Wholesaling Houses In Massachusetts!

Wholesaling real estate is legal in Massachusetts. This investment strategy is permissible as long as unlicensed wholesalers strictly follow the laws that govern real estate transactions and avoid engaging in activities that would require a real estate license. The legality hinges on the nature of wholesaling, where individuals are not brokering real estate deals in the traditional sense; instead, they act as intermediaries.

Wholesalers in Massachusetts legally operate by acquiring the rights to purchase a home and then selling these rights to an end buyer for a fee. This process, often referred to as selling the contract, does not involve taking possession of the property or performing the duties of a real estate agent, such as listing the property or representing the buyer or seller in negotiations. Thus, as long as wholesalers adhere to the legal framework and avoid crossing into activities reserved for licensed professionals, they can wholesale properties without a real estate license.

What Are The Wholesaling Laws In Massachusetts?

The concept of 'wholesaling' is not explicitly addressed in Massachusetts real estate law. Depending on who you ask, the concept often has more than one definition. The laws that govern the activities of real estate brokers and salespeople in Massachusetts can be found in the Code of Massachusetts Regulations Title 254.

To wholesale properties in Massachusetts, one must avoid acting – by way of actions requiring that of a licensed agent or fall within one of these categories to be exempt from license law requirements (MGL 87QQ):

  • Buyers/Sellers as principals in a transaction. More specifically, persons who do not need a real estate license are those people doing real estate transactions for themselves (not helping others), including the sales of multiple developments or renting in large complexes (residential or commercial).
  • Those individuals who are negotiating loans collateralized by real property.
  • Property managers performing duties under contract with a property’s owner.
  • Licensed Auctioneers.
  • Administering securities for the benefit of a trust.
  • Anyone working as a public official.
  • An attorney-in-fact.
  • An attorney performing regular duties.
  • A conservator, executor, receiver, or guardian.
  • A court-ordered sale of real estate.
  • The actions of a trustee within a trust.
  • A lender/insurer acting in the capacity of a fiduciary.

More specifically, Massachusetts legislation related to real estate is organized as follows:

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

No, a real estate wholesaler does not need a license if their actions do not rise to the level that requires a real estate license in Massachusetts.

Wholesaling real estate in Massachusetts

In Massachusetts, anyone who engages (or holds themselves out as engages) in the following for a fee or other valuable consideration, must be licensed by the Massachusetts Real Estate Board to practice legally --

  • Selling real estate
  • Renting or leasing real estate
  • Negotiating for real estate
  • Advertising for the sale of real estate

Remember that it is your right to purchase a home (rather than the home itself) that is offered for sale in a wholesale transaction.

To legally wholesale properties in Massachusetts, a real estate wholesaler must avoid acting in a manner that would require a Massachusetts real estate license.

Read Also: How To Become A Real Estate Agent: The Ultimate Guide

Best Wholesale Contract For Massachusetts

The Greater Boston Real Estate Board or Massachusetts Association of Realtors Standard Purchase and Sale Agreement is typically used for Massachusetts real estate transactions.

This purchase agreement is a legal contract between the buyer & the seller. It defines the transaction’s terms and essentially controls the real property’s purchase and sale. It also, through an assignment of the contract, allows each party to buy/sell their equitable rights to someone else unless expressly prohibited. A purchase agreement includes, in part:

  • The legal description of the subject property.
  • The earnest money deposit is given at contract.
  • The personal items included, which may include appliances or indoor or outdoor furniture.
  • The financial terms required for the sale to conclude.

wholesale real estate contract pdf

How To Wholesale In Massachusetts?

Conceptually, real estate wholesaling is simple – real estate wholesalers look for great real estate deals, often priced below market value. If the deal makes sense, they make a legitimate offer and sign a legally enforceable purchase contract that creates certain rights. These rights – known as equitable rights, can be sold (through the legal process of assignment) to another buyer, usually another real estate investor, for a higher price. The difference between the two first and the second sale price is referred to as the earned assignment fee.

A successful real estate wholesaler must have a strong understanding of what defines an attractive real estate deal. With this knowledge (typically gained through the school of hard knocks), the path to a profitable wholesale real estate investment deal becomes easier to negotiate. Fortunately, wholesaling is a process that can be broken down into a series of steps that can generate a consistent and strong income for wholesalers at the top of their game.

In addition to selling one’s equitable rights (by way of an assignment), a real estate wholesaler can execute a Double Closing. The double closing is a bit more complicated (and costly) than a wholesale deal that closes with the use of an assignment of contract. This is because there are two closings – in which the wholesaler is the buyer in the first and the seller in the subsequent sale, and therefore, two sets of closing fees.

Real estate wholesalers provide a viable exit strategy for homeowners with distressed properties. It offers a hard-to-find option that offers a quicker exit route (and thus, a faster solution to their most pressing problem) when compared with a traditional sale. A real estate wholesaler, while staying within the legal limits in Massachusetts, meets a largely unmet need in the real estate marketplace – homeowners who need to sell quickly.

But remember, you must be the buyer in the contract, and you can only market your rights to purchase a property – not the property itself. Herein lies the crux of the matter. This is perhaps the most important concept to understand when learning how to wholesale in Massachusetts. A license is required to sell a property. A license is not required to sell your rights inherent in an executed contract, provided the contract is enforceable.

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

Final Thoughts

So, is wholesaling real estate legal in Massachusetts?—yes, it certainly is. Wholesaling remains a viable and legal practice in Massachusetts as long as unlicensed wholesalers strictly adhere to state laws governing real estate transactions and steer clear of activities that would typically require a real estate license; this includes avoiding acting as a real estate agent or broker without proper licensing.

Now that you know wholesaling is legal in Massachusetts, it's an opportune moment to capitalize on the state's numerous real estate opportunities. We recommend enrolling in Real Estate Skill's free training program to enhance your understanding of the market and refine your investment strategies. This training can give you the tools and knowledge necessary to navigate the wholesaling landscape successfully and make the most of your real estate ventures in Massachusetts.

*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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