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

When exploring the promising world of real estate wholesaling in Minnesota, many wonder about its legality and potential for profit. "Is wholesaling real estate legal in Minnesota?" is a question on the minds of many aspiring and seasoned investors alike; this detailed guide aims to shed light on the legal landscape surrounding wholesaling in the state, providing expert insights on the following:

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

*Before we begin our guide on the legalities of wholesaling real estate in Minnesota, 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!

Real estate wholesaling is an investment strategy that has become popular in the current real estate marketplace. Yet, in spite of its popularity, many aspiring investors are still asking an important question: Is wholesaling real estate legal in Minnesota? Of course, wholesaling real estate deals is certainly not a new investment technique but a strategy that aligns with the current market and shows great appreciation. The national average appreciation rate in the United States is about 3.6%, which is slower than the average appreciation rate in the last few years but is expected to pick up again once interest rates drop.

With an underlying market experiencing rapid appreciation, real estate wholesaling in Minnesota offers impressive benefits that include:

• Wholesale real estate in Minnesota is a viable entrance into investing, with minimal capital requirements and risk compared to fic-and-flip strategies. However, a wholesale transaction typically requires an earnest money deposit as an act of good faith.
• An intelligent way to familiarize yourself with the real estate industry while working towards a profitable objective.
• An opportunity to build a professional network of lenders, plus a viable buyers list.
• Wholesaling in Minnesota is one of the quickest and safest ways to realize profits in the local housing market.

Despite its benefits, wholesale real estate in Minnesota has its doubters. Those opposed to real estate wholesaling assert that the wholesaler violates license law by ‘selling a property without a license,’ forcing many people to ask a familiar question: Is wholesaling real estate legal in Minnesota? However, a wholesaler can stay within the legal limits of Minnesota real estate laws by selling the one thing they have a legal right to market—their equitable title or interest in the property—awarded when the buyer and seller sign a legally enforceable real estate contract or purchase agreement.

A real estate wholesaler follows a simple strategy of acting as a middleman. As an investor, a real estate wholesaler is awarded the equitable title when signing a contract of sale. Simultaneously, the seller (or property owner) maintains legal title to ensure the buyer obtains the funds defined in the purchase agreement.

Real estate wholesalers (and flippers) search for wholesale deals priced below market value, usually because the seller is highly motivated to unload the property or has hit the financial skids. Wholesaling is a viable strategy for all types of investment properties, from owner-occupied to rental properties.

In the modern real estate market, many online sites help locate available wholesale properties in Minnesota, real estate deals, and market metrics. Sites like Redfin, Zillow, and Craigslist are great starting points, but you may need to consider researching estate liquidations, foreclosure auctions, bankruptcies, or divorce.

Read Also: Wholesale Real Estate Contract: Template & FREE PDF Download

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

The state of Minnesota is located along the United States’ northern border with Canada. In 1858, it became the 32nd state in the union. Minnesota’s name is derived from the Dakota Native American Indian Tribe’s word for the Minnesota River, which translates to sky-tinted water.

The state’s population exceeds 5.7 million, making it the 21st most populated state. The state capital is Saint Paul, part of Minnesota's largest metropolitan area, known as the Twin Cities. This metro area also includes parts of Wisconsin.

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

Real Estate Trade Organizations in Minnesota

The following organizations are the largest professional organizations in Minnesota dedicated to the real estate profession—including every brokerage and real estate agent working in Minnesota’s real estate market. Each of these real estate professional associations is a member of the National Association of Realtors (NAR):

• The Minnesota Realtors (MR): Established in 1919, the MR is recognized as one of Minnesota’s oldest professional organizations. With over 20,000 members, the MR is a prominent advocate for Minnesota homeowners and industry professionals.
• The Saint Paul Area Association of Realtors (SPAAR): With dual offices in Saint Paul and Coon Rapids, the SPAAR is a professional organization that serves property owners and real estate professionals in the greater Twin Cities area. Benefits include networking, continuing education, legal support, and conferences in support of members.
• The Minneapolis Area Association of Realtors (MAR): Established in the 1880s, the MAR is the birthplace of the moniker REALTOR. It was founded to offer real estate professionals and property owners the resources and leadership to maintain sustainable communities.
• The Lake Superior Area Realtors (LSAR): Founded in 2017 due to a merger of two local real estate professional organizations, the LSAR offers its members MLS services, networking opportunities, education, and conferences. LSAR seeks to be the Voice for Minnesota Real Estate.
• The Realtor Association of Southern Minnesota (RASM): Developed in the 1940s and situated in North Mankato, the RASM is a professional real estate organization that serves a ten-county area of Southern Minnesota. The RASM has more than 300 members and another several hundred subscribers.

*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!

The Minnesota Commerce Department

The Minnesota Commerce Department (MCD) is the state agency tasked with managing real estate activities and issuing real estate licenses in Minnesota pursuant to Chapter 82.81—Subdivision 1. As a result, the MCD is a great source to check out when asking, "Is wholesaling real estate legal in Minnesota?"

According to the Office of the Revisor of Statutes in Minnesota, real estate is defined as follows:

"Subd. 18. Real Estate. For purposes of this chapter, "real estate" shall also include a manufactured home when such manufactured home is affixed to land. Manufactured home means any factory built structure or structures equipped with the necessary service connections and made so as to be readily movable as a unit or units and designed to be used as a dwelling unit or units."

To be perfectly clear, when acting for another (i.e., buyer or seller), a license is required:

"Subdivision 1. License required. No person shall act as a real estate broker or real estate salesperson unless licensed as provided in this section."

The MCD issues real estate licenses in Minnesota. The first is a real estate salesperson’s license, as stated in Subd. 20 for Real Estate Salesperson: "Real estate salesperson" means one who acts on behalf of a real estate broker in performing any act authorized by this chapter to be performed by the broker.

A real estate broker, as defined in sub 19, is "any person who counsels, advises, or offers suggestions to the seller or a representative of the seller with regard to the marketing, offer, sale, or lease of the real estate, whether prior to or subsequent to the publication of the advertisement."

It is essential to understand who does not need a license in Minnesota for a wholesale real estate transaction, such as a licensed practicing attorney, any custodian, or an employee of the owner or manager of a residential building who leases residential units.

License Reciprocity In Minnesota

According to Minnesota Statute 82.64, these are conditions under which reciprocity is available to out-of-state real estate licensees and professionals.

The requirements of sections 82.59, subdivision 8, and 82.61 may be waived for individuals of other jurisdictions, provided: "(1) a written reciprocal licensing agreement is in effect between the commissioner and the licensing officials of the jurisdiction, (2) the individual is licensed in good standing in that jurisdiction, and (3) the licensing requirements of that jurisdiction are substantially similar to the provisions of this chapter."

Additional Licensing Options In Minnesota

The Minnesota Commerce Department is also responsible for issuing licenses to individuals performing real estate closings (See Chapter 82.641 – Real Estate Closing Agent Licensing).

Is Wholesaling Real Estate Legal In Minnesota?

Yes, wholesaling real estate in Minnesota is legal, with the caveat that wholesalers must not engage in activities that require a real estate license. The contract of sale or purchase agreement is at the heart of this practice. This document is pivotal because it provides the purchaser the right to market, sell, or assign their equitable interest in the property according to the terms laid out in the contract itself.

It's common for real estate contracts to be assignable by default, facilitating the transfer of interest between parties. Nonetheless, these contracts often undergo adjustments to reflect the unique aspects of each deal, which may include clauses requiring the seller's explicit consent for assignment.

Wholesalers in Minnesota must be clear on one crucial point: they are permitted to market and sell their equitable interest in a property, not the property itself. This fine distinction emphasizes wholesalers' need to concentrate on their legal rights under the contract rather than attempting to sell the real property outright.

Considering the legal intricacies involved in real estate wholesaling, seeking the expertise of a licensed real estate attorney in Minnesota is strongly recommended. Such professionals can offer crucial guidance and ensure adherence to all relevant laws and regulations. Furthermore, it's worth noting that Minnesota's legal framework expressly forbids real estate licensees from dissuading anyone from utilizing the services of a real estate attorney, underlining the significance of legal advice in these transactions.

Read Also: How to Wholesale Real Estate In Minnesota: Step-By-Step(2024)

What Are The Wholesaling Laws In Minnesota?

There are no specific laws in Minnesota related to wholesaling real estate.

Chapter 82—Real Estate Brokers and Salespersons is the Minnesota statute that sets forth the real estate laws for licensing and activities.

The key to successfully wholesaling in Minnesota is for wholesalers to proactively be mindful of the legality issues by avoiding the actions requiring a Minnesota real estate license. These actions include those defined by Minnesota Statute 82.55.

Statute MN 82.83 provides the consequential penalties for violating the Minnesota real estate laws mentioned above. According to the statute, "Any person who violates any provision of this chapter, or any rule or order of the commissioner, shall be guilty of a gross misdemeanor."

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

No, in Minnesota, real estate wholesalers are not required to be licensed if their actions avoid violating the license laws in the state. To remain within the legal limits, consider these helpful suggestions:

• A real estate wholesaler should always be transparent, disclosing their ultimate intentions. The most direct way to do this is through a smartly worded real estate contract.
• Manage the expectations of the contract’s parties.
• A real estate wholesaler should act with integrity.
• Offer a disclaimer when appropriate or required.
• Don’t market or sell the real property attached to your equitable interest. However, as defined by the purchase agreement's terms, you may market/sell your right to purchase real property.

Is wholesaling real estate legal in Minnesota if you don't have a real estate license? In a word, yes. It is entirely possible to wholesale real estate in Minnesota, but there are still laws to remain mindful of. As a result, it's always in everyone's best interest to consult a legal professional well-versed in Minnesota real estate law.

Wholesale Real Estate Contract In Minnesota

Do you need a real estate license to wholesale in Minnesota. No, but you do need to utilize the right contracts. A real estate contract is the legal instrument that defines the terms of the transaction and the property rights of the seller and the buyer. A contract of sale is a complex document. In Minnesota, this 12-page (without appendices) document includes a tremendous amount of information, as follows -

• The property’s legal description
• The property’s mailing address.
• Notice of the earnest money.
• Any personal items of the seller that may be included as a part of the sale.
• The financing terms.
• Relevant contingency dates, among others.

Wholesalers new to this strategy or unfamiliar with Minnesota’s license and real estate law are encouraged to consult with a qualified, licensed real estate attorney to obtain the necessary legal advice.

The Assignment Contract

An assignment of contract is the legal instrument that permits a buyer to transfer their equitable interest to another buyer (often a cash buyer).

It is essential to note that not every purchase contract is assignable, so be sure the real estate contract you sign permits the use of assignments.

Assignability is the legal mechanism by which a wholesaler can sell their equitable interest or right to buy the subject property - to another buyer. The difference between the sales prices of these two wholesaling deals determines the assignment fee or the wholesaler’s generated revenue.

Minnesota Real Estate Wholesaling Exit Strategies

Real estate wholesalers have several options with regard to exiting the wholesale transaction.

• The Buy & Sell Strategy
• The Buy & Assign Strategy
• The Double Closing Strategy – in a double closing, the wholesaler purchases and sells the property on the same day. However, note that this exit strategy may be more costly due to the double closing costs generated by two closings.
• Wholetailing

Final Thoughts

Is wholesaling real estate legal in Minnesota? Yes, wholesaling real estate in Minnesota is legal if investors abide by the rules, laws, and regulations set forth by Minnesota. As a result, wholesaling real estate in Minnesota shouldn't be overlooked by aspiring investors. Wholesale properties can be quite profitable if the investor has gone through proper training, is mindful of Minnesota state law, and chooses not to act in ways that may be construed to require a license.

*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