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Is Wholesaling Real Estate Legal In Missouri?

Missouri has a robust economy that centers around industry. The state is a leading producer of aerospace and transportation equipment, and it also exports chemicals, food products, machinery, fabricated metal, and electrical equipment. Thanks to a diverse economy, Missouri also has many opportunities for those interested in real estate investing.

With more than 6.1 million residents — 492,000 of them in Kansas City — Missouri is the 18th most populous state in the United States. There are plenty of opportunities to make money by investing in real estate in the Show-Me state, which has 2.8 million housing units, according to the U.S. Census.

Many people become brokers or real estate salespeople in Missouri. However, there are other ways to make money on the MO real estate market, such as becoming an inspector, mortgage broker, real estate attorney, or finding unique ways to invest.

Some people choose to wholesale property for a fast profit without going through the hassle and expense of renovating a property. The question is, how do you know that wholesaling property is legal in Missouri? 

Here is all the information you need to get started wholesaling properties in Missouri.

 

What Do You Need To Know About Wholesaling In Missouri?

Wholesale real estate involves putting distressed homes such as those in foreclosure or in need of large-scale renovations under a purchase contract and assigning the contract to another home buyer.

As a wholesaler, you don't typically spend money fixing up the property. Instead, you immediately hit the market looking for potential buyers. 

It’s incredibly important to note that wholesalers cannot market the property without a real estate license. You can only advertise the purchase contract, which you have a legal interest in. When you find a buyer, you can use an assignment contract to transfer the sales contract, thus the property, over to them.

There are three ways to wholesale real estate, including an assignment of a contract, double closing, or a Buy and Sell agreement, aka wholetailing.  It’s also important to know the applicable laws in Missouri to avoid getting into trouble with this practice. You must follow the state regulations and laws carefully.

In addition to understanding how to conduct a wholesale transaction, it’s important to familiarize yourself with lucrative markets in the state. Knowing the Realtor associations in Missouri can help you make excellent connections.

Here are some of the associations for the state and local markets:

Missouri Real Estate Commision Wholesaling

The state licensing board is another great resource for wholesalers. The Missouri Real Estate Commission (MREC). MREC oversees the regulations, rules, and licensing for real estate in the state. It also carries out real estate license laws.

There are many lucrative real estate markets in Missouri, including the top five markets of Kansas City, St. Louis, Springfield, Columbia, and Independence.

List of municipalities in Missouri.

wholesaling real estate in Missouri

List of top cities in Missouri.

top cities for wholesaling in Missouri

When conducted properly, wholesaling property in Missouri can be profitable and legal.

Many real estate investors look for a discounted property and flip the home after renovating it. With wholesaling, you can save your money for future investments and flip the property by finding a ready and able buyer to assume the contract.

Wholesalers may look for properties in foreclosure or distressed properties where the seller doesn't have the time or money to put into the property. When you assign a sale contract to a new buyer, you sell the property without making any modifications. This is known as selling the property as-is.

Instead of polishing the property as a rehabber would or leasing it out to recoup your down payment, you simply find a new buyer who is willing to pay more than you did for the property. This is especially effective if you obtained the property for less than market value. 

 

Is Wholesaling Real Estate Legal In Missouri?

Wholesaling real estate is legal in Missouri. However, it’s important to fully understand the state laws before closing your first deal.

The following sections detail the laws and information you need to ensure your wholesaling ventures in Missouri are legal and, most importantly, successful.

 

What Are The Wholesaling Laws In Missouri?

It's important to understand and research the legal codes and specific laws that govern real estate in Missouri. The Missouri statutes do not specifically mention wholesaling.

As mentioned previously, it's a legal grey area. However, by studying the rules that do apply to Missouri real estate transactions you can and sure that you aren't violating state laws.

Missouri Revised Statutes, Chapter 339 oversees the sale of real estate in Missouri. Let's take a look at the main sections impacting real estate sales that are important to wholesalers.

wholesaling laws Missouri

Section 339.010-Definition of Salesperson

Section 339.010 defines a real estate salesperson as someone legally entitled to help clients buy and sell residential or commercial real estate. It lays out the requirements for education and testing such as approved real estate schools and how to apply for the state examination.

339.020-Unlawful to Sell Without a License

339.020 states that it’s illegal to conduct acts of real estate without a license. Specifically, “It shall be unlawful for any person, partnership, limited partnership, limited liability company, association, professional corporation, or corporation, foreign or domestic, to act as a real estate broker, real estate broker-salesperson, or real estate salesperson, or to advertise or assume to act as such without a license first procured from the commission.”

339.170-Penalties for Unlawful Real Estate Sales

Selling real estate without a license is considered a Class B misdemeanor in Missouri as stated by section 339.170: ”Any person or corporation, professional corporation, partnership, limited partnership, limited liability company or association knowingly violating any provision of sections 339.010 to 339.180 and sections 339.710 to 339.860 shall be guilty of a class B misdemeanor.”

Although the law doesn't specify the fine, a class B misdemeanor in Missouri carries a penalty of up to $1,000 fine and six months in jail.

Missouri laws limit what non-licensed real estate wholesalers can do as far as real estate transactions go. The broad nature of these laws makes it important to take no chances when it comes to assigning wholesale contracts.

 

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

As discussed, you do not need a Missouri real estate license to engage in wholesale real estate practices in the state. However, without a license, you need to be the principal buyer on the contract.

license to wholesale real estate legally in Missouri

In order to ensure that the process goes smoothly, it's important to have knowledge regarding how homes are bought and sold in Missouri.

For those interested in wholesaling houses, the fastest and easiest way may be to obtain a Missouri real estate license

 

Is Co-Wholesaling Real Estate Legal In Missouri?

Co-wholesaling is legal in Missouri.

Remember that the goal of wholesaling real estate differs vastly from house flipping. Wholesalers aren't looking to improve the property prior to selling it. When you co-wholesale a property it means that you work with another investor to close the wholesale deal.

This can be an ad hoc arrangement that only applies to one sale or you can choose to have an ongoing business relationship with a partner. Working with a partner helps decrease your personal risk when it comes to wholesale investing.

co wholesaling real estate

There are also steps you can take to reduce your risk before you put your signature on a purchase agreement.

These steps include the following:

  • Understand MO real estate laws
  • Use a Joint Venture Agreement
  • Use the appropriate Disclosure documents

 

Is Reverse Wholesaling Real Estate Legal In Missouri?

So, what is reverse wholesaling? In reverse wholesaling, you line up qualified buyers before you look for properties to wholesale. This method lowers your risk of getting stuck with a property you can’t move quickly.

License to Wholesale Real Estate Legally in Missouri

Reverse wholesaling is legal in Missouri. however, it's important to follow the appropriate laws and regulations. As long as you don't cross the line into any gray areas, you shouldn't have a problem completing wholesale transactions in the state.

Reverse wholesaling brings many benefits to the table. For one thing, there's a more reliable exit strategy. Also, you can create relationships with wealthy investors who have cash to purchase distressed properties.

You can also form relationships with hard money lenders or private lenders. This will help you keep your cash flow and financial reserves strong for future deals. Nothing is more frustrating than missing out on a deal because you have your cash tied up in another transaction.

New investors often find real estate wholesaling ideal because they may not have enough money to pay cash for investment properties. In fact, after completing one or two wholesale deals, new investors may find themselves with more opportunities to invest in larger, pricier homes.

 

Missouri Wholesale Real Estate Contracts

If you're working with a real estate agent, they can help you find the appropriate contracts to complete the deal legally. There are two main contracts that are used to complete wholesale transactions in Missouri. They are a purchase and sale agreement & an assignment contract. 

Let's look at samples of each. 

Missouri Realtors Residential Sales Contract includes the offer price and details regarding the sale of the property. It includes the signatures of the buyer and the seller as well as the address of the property and necessary legal clauses. 

Related: Download Free Wholesale Real Estate Contracts Here (PDF)

Missouri residential sale contract wholesaling

Assignment Contracts are generic addendums that assign the right to the purchase contract to the end buyer. It's the equitable interest in the purchase and sale agreement that a wholesaler in Missouri is able to monetize without ever purchasing the property.

Here's one example of a standard assignment contract:

purchase contract Missouri wholesaling

 

Final Thoughts

You can make money quickly by wholesaling property in Missouri, just make sure that you have the knowledge you need to succeed in the market. It's also important to understand state laws and partner with the right cash buyers

Wholesaling real estate in Missouri is arguably the best way for any individual to become fully engaged with the local industry and earn profits while creating massive value for others.

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