is wholesaling real estate legal in mississippi

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

contracts legal real estate investing strategies wholesale real estate wholesaling real estate May 03, 2024

Wholesaling real estate in Mississippi offers exciting prospects for quick profits and minimal investment, stirring excitement among entrepreneurs and investors alike. Yet, many are left on the sidelines, grappling with uncertainty and the critical question: "Is wholesaling real estate legal in Mississippi?"

In our comprehensive exploration, unpack the legal framework and discover if you can enter this lucrative venture without legal hurdles. We'll explore everything you need to know about the legalities of wholesaling properties in Mississippi, starting with the following:

*Before we begin our guide on whether wholesaling real estate is legal in Mississippi, 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 technique in which investors sign a purchase agreement (including an earnest money deposit) as the buyer. However, instead of following through with the purchase, the wholesaler finds another party (often called the end buyer) to purchase the real property (rental property or otherwise) for a higher price. The difference in the original purchase price and the subsequent price is typically what wholesalers earn as a profit for acting as an intermediary.

Wholesale houses purchased by real estate wholesalers tend to be below market value and offered by motivated sellers and those facing financial distress and uncertainty, such as those created by a pending foreclosure.

The principle of equitable conversion in real estate involves treating property as belonging to the buyer as soon as a contract for its sale is executed, even though the buyer has not yet formally taken possession or title. This legal concept is crucial in real estate wholesaling, where the wholesaler enters into a contract to purchase a property and then assigns or sells this contract to an end buyer.

Under equitable conversion, the wholesaler is seen as having an interest in the property (through the contract) that can be legally transferred to the buyer. Thus, the wholesaling process is facilitated without requiring the wholesaler to purchase and take title to the property first. This principle helps manage the risks and rights associated with the property during the period between contract execution and the final closing.

Because real estate investors may work several of these transactions at once, they are referred to as 'wholesalers.'

Real estate wholesaling is similar to the fix-and-flip strategy. Still, it is often preferred because there is less need for substantial capital, with the deal typically closing significantly faster than house flipping. Real estate wholesalers can profit without taking title to the property, mitigating potential risks and unknowns when renovating. Note, however, that there are instances where the real estate wholesaler may take title to the property—only briefly if they are exiting the wholesale deal using a wholetailing or double closing strategy.

For new investors, real estate wholesaling is an intelligent way to meet other real estate professionals. The practice lends itself to networking even while negotiating your first deal, which is an important step to establishing a cash buyers list. Wholesaling real estate in Mississippi is legal, but it is critical to understand the relevant laws and local customs for the market in which you intend to work.

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

Mississippi was the 20th state admitted to the union in 1817. It is located along the Gulf Coast in the southern U.S. region, with a climate that is considered subtropical. In addition to its coastal plain, the state is also a part of the Mississippi Delta. As the 36th most populous state, Mississippi’s population, as stated by Word Population, is 2,940,452.

With nearly 3 million people, the state relies heavily on existing housing agencies to regulate the real estate market. The Mississippi Real Estate Commission (MREC) is the state agency that administers and enforces real estate license provisions. MREC’s mission is to ensure that the state's real estate transactions and activities are completed ethically and professionally. As a result, the MREC is an excellent source for anyone looking to answer the question, "Is wholesaling real estate legal in Mississippi?"

Those looking for specific licensing laws, however, should reference the Miss. Code Ann. Title 73 – Professions & Vocations Chapter 35 – Real Estate Brokers.

In addition to the MREC, aspiring wholesalers may inquire with the state's most influential housing organizations. Most of these professional trade organizations are National Association of Realtors (NAR) members. That said, here's a list of organizations wholesalers in Mississippi should look into when asking, "Is wholesaling real estate in Mississippi legal?":

  • Mississippi Association of Realtors (MAR): The MAR was developed to unite real estate professionals with industry advocates. It offers the Mississippi real estate community a dedicated source of information, professional development, and advocacy throughout the state.
  • Central Mississippi Realtors (CMR): Established in the mid-1920s, the CMR serves nearly 2,000 real estate professionals across ten counties in central Mississippi. CMR is recognized to be Mississippi’s largest professional organization dedicated to real estate and its professionals.
  • Hattiesburg Area Association of Realtors (HAAR): The Hattiesburg Area Association of REALTORS seeks to serve the members of the real estate profession in the greater Hattiesburg Area. HAAR aims to improve the quality of life throughout its membership area.
  • Northeast Mississippi Board of Realtors (NEMBR): The NEMBR represents and provides leadership to the real estate community in the northeastern state. It encourages community involvement, promotes the highest ethical standards, and advocates for private property rights.
  • Gulf Coast Association of Realtors (GCAR): Additionally, Mississippi is known as an "Attorney Closing State;" this means that a lawyer in good standing with the Mississippi Bar must perform any real estate closing, which may add to a wholesaler’s closing costs, but offers the necessary due diligence by a licensed legal professional.

In addition to these organizations, real estate wholesalers can depend on the expertise of a licensed lawyer when attempting to answer the question, "Is wholesaling real estate legal in Mississippi?" If for nothing else, an attorney is required by state law to complete a real estate deal. Wholesalers will find it helpful to establish professional relationships with those within (and on the fringe of) the real estate market; this helps to ensure the wholesaler stays within the legal boundaries set forth by Mississippi real estate law.

It is legal to wholesale properties in Mississippi if the investor's actions remain within the legal limits set forth by Mississippi’s lawmakers and do not violate any relevant Mississippi legal statute. In particular, it's important to note that wholesalers who don't have a real estate license can't take any actions that require a license. As a result, wholesalers are merely acquiring and selling their right to buy the property, not the property itself.

Nonetheless, the concept can't shake the question, "Is wholesaling real estate legal in Mississippi?" Those who argue against the exit strategy's legality assert real estate wholesaling creates a real estate transaction in which the wholesaler behaves like a real estate agent or broker and, thus, needs a license.

The reality is that the wholesaler—as a party to a legally enforceable contract—is trying to sell their legal rights as the buyer in an executed purchase contract, not the property itself (refer to the Doctrine of Equitable Conversion for a clear explanation of the process).

From this perspective, real estate wholesaling is considered a legitimate investment strategy. That said, real estate wholesalers must abide by state laws; there are certain things they can't do. Most notably, wholesalers can't market or sell the property; they can only market their right to buy it. Further, business activities cannot violate Mississippi law, and the wholesaler's actions cannot rise to the level that requires a real estate license.

A real estate wholesale deal mandates that the real estate investor legally commit to purchase (through executing a legally enforceable agreement) with a property’s seller/owner. The contract of sale (or purchase agreement) is the legal instrument that creates the wholesaler’s legal right to sell/market/assign the subject contract as delineated by the contract’s terms and provisions.

The purchase agreement is a bilateral contract, meaning both contract parties must perform each requirement. Most purchase agreements are assignable by default. However, a provision in the contract can be added to make an assignment conditioned on the owner’s approval or even prohibited by the language in the written agreement.

Pro Tip: A real estate wholesaler must market their ‘right to buy’ the property and cannot market the property itself. This is because that action would violate license law & require a real estate license in Mississippi.

What Are The Wholesaling Laws In Mississippi?

No laws on Mississippi’s books specifically address wholesaling as a real estate investment strategy.

However, the previously discussed Title 73 Chapter 35 state legislation sets forth the rules for real estate activities. The first provision notes unlawful behaviors without a real estate license.

According to § 73-35-3, a real estate broker is defined as all persons, partnerships, associations or corporations who list, sell, purchase, exchange, rent, lease, manage or auction any real estate or the improvements thereon for a fee or who negotiate or attempt to negotiate any such activity intended to result in a real estate transaction.

Further, the the term "real estate" is defined to include leaseholds as well as any and every interest or estate in land.

Perhaps the most relevant of real estate licensing considerations, according to Section 73-35-3(3), details when a real estate license is required:

"One (1) act in consideration of or with the expectation or intention of, or upon the promise of, receiving compensation, by fee, commission or otherwise, in the performance of any act or activity contained in subsection (1) of this section, shall constitute such person, partnership, association or corporation a real estate broker and make him, them or it subject to the provisions and requirements of this chapter."

It is illegal for real estate wholesalers to perform or act for another—for a fee—as that would rise to the definition of the actions that require a real estate license in Mississippi. It is, however, legal for a real estate wholesaler to represent themselves as a party looking to sell an asset, which are those rights created by the execution of a legally enforceable purchase agreement.

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

No, a real estate investor in Mississippi wholesaling an investment property will not need a real estate license if the wholesaler's actions fall outside the boundaries that require a Mississippi real estate license. In other words, it is legal to wholesale real estate in Mississippi without a license, but that doesn't mean you can't get one.

Additionally, it is essential to note that Miss. Code Ann. Title 73 – Professions & Vocations Chapter 35 does not apply in these instances to attorneys at law, any person holding in good faith a duly executed power of attorney from the owner, authorizing the final consummation and execution for the sale, purchase, leasing or exchange of real estate, public officers while performing their duties, and anyone dealing exclusively in oil and gas leases and mineral rights. (Section 73-35-3(8))

(Section 73-35-3(8))It is noted that the following individuals are exempt from licensing requirements denoted in Miss. Code Ann. Title 73 – Professions & Vocations Chapter 35 – Real Estate Brokers Section-(7) – essentially, noting that any bona fide homeowner is exempt from these licensing requirements:

"Exempt from the licensing requirements of this chapter shall be any person, partnership, association or corporation, who, as a bona fide owner, shall perform any aforesaid act with reference to property owned by them, or to the regular employees thereof who are on a stated salary, where such acts are performed in the regular course of business."

Investors who wholesale real estate may opt to become licensed by the state of Mississippi, although it is not a requirement to wholesale legally. The Mississippi Real Estate Commission (MREC) is the state agency responsible for administering and enforcing real estate license provisions in Mississippi.

Note this recent legal update as stated by MREC—effective July 1st of 2021 (originally House Bill 1263) by the Mississippi legislature, Mississippi Occupational Licensing Boards shall issue a license to an applicant who establishes residence in this state if the applicant holds a current license in good standing from another state, has been licensed by the other state for at least one year, and satisfies conditions.

Mississippi is the second state in the U.S. to pass legislation that is viewed as a pro-growth economic policy. Arizona passed a law providing for universal recognition of occupational licenses a few years ago.

In addition, the state’s licensing boards will be required to issue a professional license for any individual who has worked for at least three years – if that particular state had no licensing requirements while the individual was employed.

Read Also: How To Become A Real Estate Agent In Mississippi (5 Steps)

*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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Mississippi Real Estate Wholesale Contract

Real estate contracts are legally enforceable documents that delineate the real estate transaction’s terms and are the most important documents in a real estate wholesale transaction.

The contract of sale (a.k.a., the purchase agreement) sets forth the provisions that dictate the guidelines for an individual or company seeking to purchase real property from another owner. A purchase agreement includes relevant information detailing the responsibilities, rights, and rules of the real estate deal.

In Mississippi, the purchase and sale agreement is used when presenting an offer to purchase. The agreement can be modified (or countered by a party to the contract)—up and until both parties sign the legal document. When fully executed, the agreement becomes legally binding.

At the very least, a contract should include the following information:

  • The purchase price
  • The credit terms
  • The property’s legal description
  • Date of Possession
  • Warranties of title
  • Property tax payment provisions, to name a few.

Here is a copy of the first page (of six pages) of the Mississippi REALTORS Contract For The Sale and Purchase of Real Estate.

A real estate assignment contract is a legal document that transfers both the rights & the obligations of a purchaser (aka - the assignor) under one contract of sale to another buyer (aka - the assignee). Here is a copy of the contract from Judicial Title.

The assignee is often a cash buyer who closes the deal and then compensates the assignor/wholesaler for managing the real estate deal together. Mississippi real estate law is silent regarding the details of contract assignments.

Generally speaking, a contract is assignable – by default- unless the contract's language expressly prohibits its use or requires the seller's approval. However, many agreements may include disclaimers and other relevant information.

According to Mississippi Code Title 75 – Regulation of Trade, Commerce & Investments, § 75-2-210 (2) details the legality of a contract assignment.

wholesale real estate contract pdf

Final Thoughts

As our exploration reveals, the answer to "Is wholesaling real estate legal in Mississippi?" is yes, contingent on adhering strictly to the outlined real estate laws. Understanding and following these legal guidelines ensures that your wholesaling activities are both profitable and compliant. Embrace the opportunities wholesaling offers in Mississippi, backed by the security of lawful practice.

Remember, a well-crafted contract of sale by an experienced attorney is not only a Mississippi state requirement but the best prudent way to mitigate potential legal issues. For additional information, there are many online websites and podcasts dedicated to real estate wholesaling education.

*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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