is wholesaling real estate legal in montana

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

real estate investing strategies real estate markets (states) wholesale real estate Apr 25, 2024

Navigating the world of real estate wholesaling in Montana can offer a pathway to lucrative opportunities. However, uncertainty about its legality poses a significant barrier for many aspiring investors. Most of these people ask themselves one important question: Is wholesaling real estate legal in Montana?

This article aims to dispel doubts and clarify the legalities surrounding wholesaling in the state. By addressing this crucial question, we seek to empower aspiring wholesalers with the knowledge needed to forge ahead confidently, paving the way for a successful career in the industry. Along the way, we'll cover everything there is to know about wholesaling properties in Montana, starting with the following:

*Before we begin our guide on whether wholesaling real estate is legal in Montana, 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!

Wholesaling real estate is currently one of the most popular real estate exit strategies, and along with its sister strategy, the fix-and-flip, it has reached the upper echelon of profit-generating strategies. Wholesaling has increased exponentially in popularity, which begs the question: What is real estate wholesaling?

Real estate wholesaling is simply a type of real estate investing strategy in which an investor executes a legal contract to purchase an investment property—a single–family, rental, or multi–unit property—but chooses to assign their right to purchase the property to another end buyer before closing on the first purchase contract.

The difference between the two sale prices is known as the gross profit. Wholesale properties are often sold to other potential buyers from a curated cash buyers list.

A fully executed real estate contract awards the purchaser/wholesaler a bundle of rights to purchase the property through the Principle of Equitable Interest or the Principle of Equitable Conversion. A contract assignment makes the sale and transfer of these awarded equitable rights to a new buyer possible. That's an important distinction: wholesalers are not attempting to buy properties; they merely acquire the right to buy a home and assign that right to a new buyer for a fee.

Wholesaling real estate has likely experienced this recent rise in popularity due to a surprising and dramatic confluence of events:

  • A global pandemic that modified the demands & priorities of home dwellers and purchasers in a modern, digital marketplace.
  • A historically low interest rate environment was created to combat the alarming economic, political, and healthcare consequences predicted by experts. Even though rates have risen, however, wholesaling remains popular.
  • An unrelenting real estate market met with an undersupply of homes, elevating prices at historic rates.

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

The foremost consideration when wholesaling houses in Montana is to ask the question this entire guide is framed around: Is wholesaling real estate legal in Montana? For starters, investors need to understand the legal landscape of wholesaling properties in Montana.

While wholesaling real estate is legal in Montana, investors must adhere to state laws and regulations governing real estate transactions; this includes compliance with disclosure requirements and fair dealing practices to maintain ethical standards. Most notably, however, unlicensed investors must avoid performing tasks requiring a license.

Additionally, staying informed about market sentiment and trends can help investors identify lucrative opportunities and navigate potential challenges effectively. Strategic networking and marketing tactics tailored to the local market can enhance success in wholesaling ventures.

Moreover, maintaining transparency and professionalism in all transactions is crucial for building trust and credibility within the real estate community. By staying abreast of legal requirements, market dynamics, and strategic approaches, investors can position themselves for success in wholesaling houses in Montana.

Last but certainly not least, it's a good idea to turn to Montana's trade and professional organizations dedicated to the real estate market when seeking answers to the question, "Is wholesaling real estate legal in Montana?"

Each of these professional organizations is worth looking into and is a member of the National Association of Realtors (NAR):

  • The Montana Association of Realtors (MAR): The MAR is Montana's voice for all things real estate. It represents real estate agents, brokerages, and other related real estate professionals across Montana. Headquartered in Helena, the MAR represents more than 5,250 professional members.
  • The Gallatin Association of Realtors (GAR): Located in Bozeman, the GAR is one of this southwest county's largest professional organizations. Its more than 1,500 members represent various real estate subspecialties. The GAR is a member of the Big Sky Country Multiple Listing Service (MLS).
  • The Billings Association of Realtors (BAR): The BAR represents real estate licensees and professionals in the state's largest city. It offers its professional members political advocacy, professional development, networking opportunities, and member services.
  • The Northwest Montana Association of REALTORS (NMAR): The NWMAR offers its members and community a variety of real estate-related support and educational resources. The Northwest Montana Association of REALTORS has more than 1,200 professional members.
  • The Missoula Organization of Realtors (MOR): Headquartered in Missoula, the MOR was established about 75 years ago to represent property owners and professional realtors working in and around Missoula. The Organization offers education, training, advocacy, and community events to improve homeownership.
  • The Helena Association of Realtors (HAR): Chartered over two decades ago, the Helena Association of REALTORS and its more than 500 members and affiliates have served the capital region's homeowners and real estate community. The Helena Association of REALTORS is the voice for all real estate in Montana.
  • The Great Falls Association of Realtors (GFAR): The GFAR, located in Great Falls, MT, was established as the first real estate board in the state in 1910. It was then known as the Real Estate Exchange of Great Falls. The GFAR serves a seven-county area in north and central Montana and has more than 300 members.

The Montana Board Of Realty Regulation (BRR)

The Montana Department of Labor and Industry houses the state's agency that performs as the state’s real estate commission: the Montana Board of Realty Regulation. Its authority is found in these Montana Statutes:

The following definitions (MCA 37-51-102) apply to Montana's real estate statutes:

A Real Estate Broker (MCA 37-51-102 (4)): A Broker includes an individual who negotiates or attempts to negotiate the listing, sale, purchase, rental, exchange, or lease of real estate or of the improvements on real estate or collects rents or attempts to collect rents; employed by or on behalf of the owner or lessor of real estate to conduct the sale, leasing, subleasing, or other disposition of real estate for consideration; engages in the business of charging an advance fee or contracting for collection of a fee in connection with a contract; or makes the advertising, sale, lease, or other real estate information available by public display to potential buyers;

Negotiations (MCA 37-51-102 (15)): are defined as efforts to act as an intermediary between parties to a real estate transaction; facilitating and participating in contract discussions; completing forms for offers, counteroffers, addendums, and other writings; and presenting offers and counteroffers.

A Supervising Broker (MCA 37-51-102 (25)): means a licensed broker with whom a licensed salesperson is associated, directly, indirectly, regularly, or occasionally, to sell, purchase, or negotiate for the sale, purchase, exchange, or renting of real estate.

A Salesperson (MCA 37-51-102 (20)): includes an individual who for a salary, commission, or compensation of any kind is associated, either directly, indirectly, regularly, or occasionally, with a real estate broker to sell, purchase, or negotiate for the sale, purchase, exchange, or renting of real estate.

Note that the following individuals do not need a real estate license in Montana as stated in (MCA 37-51-103): any person who is acting under a power of attorney from the owner who has roles such as receivers, trustees, administrators, executors, or auctioneers appointed by legal authorities; public officials carrying out their official duties; property managers licensed under specific provisions; and the like.

Montana Real Estate License Reciprocity

The state of Montana offers this guidance to nonresidents who wish to obtain a license if the board determines that there is no reason to deny the license under the state laws governing the profession and occupation.

However, according to MCA 37-51-306 – nonresident transactions must consent to a legal process by providing irrevocable written consent.

In addition, Montana real estate licensees can obtain a license through agreed-upon reciprocity with the following states:

Montana is not an attorney-close state, but buyers and sellers are encouraged to seek legal advice from a Montana-licensed real estate attorney when needed to avoid legal issues.

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

Yes, wholesaling real estate is legal in Montana. However, it's crucial to abide by state laws and regulations to ensure compliance. Wholesalers must refrain from actions requiring a real estate license if they are unlicensed. Notably, wholesalers in Montana are not purchasing properties; instead, they market and sell their right to buy, as governed by the Principle of Equitable Conversion. This distinction is vital, as it delineates between selling equitable rights, which doesn't necessitate a license, and selling real property, which does. Adherence to legal parameters, careful contract language, and cautious practices can make wholesaling in Montana both legal and profitable.

Read Also: How To Wholesale Real Estate In Montana: Step-By-Step (2024)

What Are The Wholesaling Laws In Montana?

License law in Montana is quite clear. According to MCA 37-51-301, "it is unlawful for a person to supervise a licensed salesperson or to act in the capacity of a supervising broker unless the person has a valid and active Montana broker's license and supervising broker endorsement."

In Montana, under (MCA 37-51-102 (4)) you are considered a broker or salesperson if you are employed by or on behalf of the owner or lessor of real estate to conduct the sale, leasing, subleasing, or other disposition of real estate.

The penalties and consequences for violating Montana Code Annotated Title 37, Chapter 51-323 are a fine of no less than $100 or more than $500, imprisonment for a term not exceeding 90 days, or both.

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

No, real estate wholesalers operating in Montana will not require a real estate license if they do not violate Montana's real estate or license law. The following suggestions will help wholesalers mitigate the potential risks:

  • Keep intentions/actions transparent.
  • Act with integrity and complete due diligence.
  • Pay close attention to cash flow requirements.
  • Manage expectations appropriately.

Do not, under any circumstances, market or sell the contracted property if you don't have a license; you can only market your equitable right to buy the property; this may seem like a difference without a distinction (to quote legal scholars), but in fact, selling the property and selling equitable title are two completely different transactions.

Wholesaling real estate in Montana

Wholesale Real Estate Contract Montana

Real estate contracts delineate the transaction's terms. They are legally enforceable if one or both parties default on the contract's agreed terms. Most include timeframes upon which each party must complete their obligations.

A contract of sale includes tremendous amounts of information:

  • The subject property's legal description
  • The earnest money
  • Personal items that are included in the sale
  • The real estate transaction's financial terms and obligations

An Assignment Of Contract

The legal document known as an assignment contract allows a contracted purchaser to transfer the rights awarded by the contract (through the Principle of Equitable Conversion) to another buyer. When using an Assignment of Sale, the wholesaler is the Assignor, with the new buyer considered the Assignee. Montana State law is silent regarding guidelines for using this legal document.

wholesale real estate contract pdf

The Double Close Strategy To Exit Montana Wholesale Deals

The double-close exit strategy offers wholesalers the most direct way to avoid violating Montana law. If you want to ensure you do not violate any Montana law as a wholesaler, the double close offers the safest path to completion without obtaining a real estate license.

As its moniker suggests, a double closing is defined by two closings. Most investors try to schedule them back-to-back, although there are times when the closings may occur on different days.

In the first closing, the wholesaler is the contracted purchaser, who becomes the seller in the subsequent transaction. The price that differs between the two contracts is the gross revenue, which is often called the assignment fee.

To be clear, the double close exit strategy is not always free because it requires additional closing fees, with most investors understanding that the extra expense is the cost of protection against significant consequences.

Final Thoughts

Is wholesaling real estate legal in Montana? Wholesaling real estate in Montana is indeed legal, provided investors adhere to state laws and regulations. It's crucial for wholesalers to refrain from acting as licensed agents when they lack proper licensure and to conduct their activities within the bounds of the law. Remember, wholesalers in Montana are not purchasing properties outright but rather transferring their right to buy.

Now that you're aware of the legality of wholesaling in Montana, it's time to dive deeper into the intricacies of the practice. Equip yourself with the knowledge and skills needed to excel in Montana's real estate market by leveraging resources and expertise offered by platforms like Real Estate Skills's Ultimate Investor Program. Embark on your journey to success with confidence and competence.

*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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