is wholesaling real estate legal in nebraska

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

legal real estate investing strategies wholesale real estate wholesaling real estate May 02, 2024

Is wholesaling real estate legal in Nebraska? This question is crucial for investors looking to navigate the complex terrain of real estate investment within specific legal frameworks. In Nebraska, understanding the legality of real estate wholesaling is vital to responsibly tapping into the state's lucrative investment opportunities. This article serves as a comprehensive guide for 2024, unraveling the intricacies of Nebraska's legal landscape concerning real estate wholesaling. Here, we aim to equip investors with the essential knowledge and insights to pursue profitable ventures while adhering to the law, starting with the following:

*Before we begin our guide on whether wholesaling real estate is legal in Nebraska, 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 has become a wildly popular real estate investment technique, primarily because it fits hand-in-hand with the current real estate market cycle. As noted by FRED (Federal Reserve Economic Data), median home sales prices in the United States are well off their highs but still sit around $417,700. For some perspective, median home sale prices are nearly 30% higher than they were just four years ago.

The pandemic and the resulting shortage of homes inventoried for sale have made wholesaling in Nebraska more attractive. Wholesaling real estate as an investment strategy is also wildly popular with new investors for these reasons:

  • The capital and cash flow requirements are minimal
  • Wholesales are considered short-term in nature
  • It allows investors to learn the wholesale strategy and real estate market from the inside out

Acting as an intermediary, the real estate wholesaler also meets a need created by highly motivated sellers who have no other exit strategy. However, like every other investment strategy, there are benefits to reap and potholes to avoid, which is one of the primary reasons most people ask, "Is wholesaling real estate legal in Nebraska?"

What Is Real Estate Wholesaling?

Real estate wholesaling is a technique for investing in which an investor signs a purchase contract as a buyer, but before the closing or change of possession, the wholesaler sells the bundle of rights to another buyer—often called an end buyer. Wholesale properties are often sold to other investors from the investor’s potential cash buyers list.

The right to purchase the property is awarded to the buyer by the principle of equitable conversion. The sale and transfer of equitable rights to a new buyer is accomplished using an "assignment of contract".

Real estate wholesalers can generate profits in three steps:

  • Find a property marketed below market value, typically because the seller needs to sell.
  • Enter into a purchase agreement with the seller to secure the right to buy the home.
  • Assign the agreement to purchase to another buyer. Typically, an end buyer is an investor specializing in rehabbing properties or someone who doesn’t want to (or can't) find a property themselves.

Between the time the first contract has been executed and the closing, the ownership of the property is temporarily redefined with dual ownership, as follows:

  • The current owner/seller has possession and use and possession of the subject property
  • Home buyers are granted the contractual right to own the subject property, providing they meet the purchase and sale contract terms.

In other words, during this time, the property has two owners, with the equitable ownership awarded to the buyer and the legal ownership remaining with the seller/buyer until the contract’s terms are met.

Are you ready to learn the answer to the question, "Is wholesaling real estate legal in Nebraska?"

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

Wholesaling houses in Nebraska requires a foundational understanding of several key aspects. First, familiarize yourself with the specific real estate laws and regulations governing Nebraska to ensure compliance and avoid legal pitfalls. Additionally, it's crucial to understand different exit strategies available for wholesalers, such as assigning contracts or double closings, which can impact your profitability and operational dynamics. Market conditions also play a significant role; knowing the local real estate market trends and economic factors is essential.

One of the best resources for comprehensive and reliable information is the state's professional trade organizations, which are National Association of Realtors (NAR) members. These groups provide valuable insights and up-to-date knowledge crucial for successful wholesaling:

  • The Nebraska Realtors Association (NRA): The NRA comprises local chapters throughout the state, divided as Western Region, Central Region, Eastern Region, Omaha Region, and Lincoln Region.
  • The Omaha Area Board of Realtors (OABOR): Headquartered in Omaha, the OABOR is the primary advocate for real estate ownership (and property ownership) in and around the greater Omaha area. The OABOR offers supportive and resource functions to real estate professionals in metro Omaha. Members align with its core values of trust, integrity, knowledge, and honesty.
  • The Realtors Association of Lincoln (RAL): Founded in the 1920s, the RAL seeks to support and enhance the careers of real estate professionals and advocate for property ownership in the greater Lincoln area. Members of the RAL ascribe to the Code of Ethics set forth by the National Association of REALTORS.
  • The Grand Island Board of Realtors (GIBOR): Located in Grand Island, the GIBOR is a professional organization that supports real estate professionals with advocacy efforts and resources. Members must maintain professional and ethical standards to serve the Grand Island community better.
  • The Lincoln County Board of Realtors (LCBOR): Established in the 1940s, the LCBOR seeks to promote the real estate profession and homeownership in the greater Lincoln Country vicinity. Located in North Platte, the LCBOR offers resources, education, and networking opportunities, among other things.

*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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The Nebraska Real Estate Commission (NREC)

State lawmakers developed the Nebraska Real Estate Commission (NREC) to regulate (and license) real estate salespersons and brokers in Nebraska. If you want to learn how to become a real estate agent in Nebraska, the NREC is your best source. Consequently, the NREC's expertise can also help you answer the question, "Is wholesaling real estate legal in Nebraska?" The laws that govern the NREC are primarily available in the Nebraska Real Estate License Act (Sections 81-885 to 81-885.56) and the commission’s guidelines.

Nebraska’s agency law and relevant regulations are available in Chapter 76, article 24 of the Nebraska Statutes, and Title 301 of the Nebraska Administrative Code.

Real estate for this statute is defined as the means and includes condominiums and leaseholds, as well as any other interest or estate in land, whether corporeal, freehold, or nonfreehold, and whether the real estate is situated in this state or elsewhere.

Nebraska state law is quite clear about its requirement for a real estate license, as stated in 81-885.02, for Broker, associate broker, real estate salesperson; license required; exemption. It states that after September 2, 1973, it shall be unlawful for any person, directly or indirectly, to engage in or conduct, or to advertise or hold himself or herself out as engaging or conducting the business, or acting in the capacity, of a real estate broker, associate broker, or real estate salesperson within this state without first obtaining a license as such broker, associate broker, or salesperson, as provided in the Nebraska Real Estate License Act, unless he or she is exempted from obtaining a license under section 81-885.04.

Nebraska’s Real Estate Commission issues these two types of real estate agent licenses:

A Real Estate Salesperson means any person, other than an associate broker, who is employed by a broker to participate in any activity described in subdivision (2) of this section which states that a real estate broker means any person who, for any form of compensation of consideration or with the intent or expectation of receiving the same from another, negotiates or attempts to negotiate, the listing, sale, purchase, exchange, rent, lease, or option for any real estate or improvements thereon, or assists in procuring prospects or holds himself or herself out as a referral agent for the purpose of securing prospects for the listing, sale, purchase, exchange, renting, leasing, or optioning of any real estate or collects rents or attempts to collect rents, gives a broker's price opinion, or comparative market analysis, or holds himself or herself out as engaged in any of the foregoing.

A Nebraska real estate broker can be an Associate Broker if he is a person who has a broker's license and who is employed by another broker to participate in any activity described in subdivision (2) of this section;Or a Designated Broker means an individual holding a broker's license who has full authority to conduct the real estate activities of a real estate business.

Nonresident Broker’s License

According to 81-885.17, nonresident brokers are those who actively engage in the real estate business, maintain a place of business in their resident regulatory jurisdiction, and have been duly licensed in that regulatory jurisdiction to conduct such business. At the discretion of the commission, a nonresident broker's license may be issued.

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

Yes, wholesaling real estate in Nebraska is legal, but only if the real estate wholesaler’s actions remain within the limits set forth by Nebraska’s license and real estate law. In particular, unlicensed wholesalers can't take any actions that require a real estate license, like helping homeowners buy, sell, or market properties.

The wholesaler must remember that they can only sell the asset they own (the right to purchase the subject property), which is starkly different from marketing/selling real estate. The latter requires a Nebraska real estate license, whereas the former does not. That is worth repeating: wholesalers can only market their right to buy the home; they can't market the property itself.

The language in a real estate contract is, by default, typically assignable. But note that a seller or their representative may revise the contract’s language and either disallow assignments or, at the very least, require the seller’s written consent.

With due diligence and careful execution, wholesaling real estate in Nebraska is legal and often profitable.

What Are The Wholesaling Laws In Nebraska?

There are no specific Nebraska laws regarding real estate wholesaling. However, the state clearly requires a real estate license to be a broker, associate broker, or salesperson. Therefore, the most obvious laws to pay attention to are those that dictate what a licensed agent can and can't do. The activities that require a Nebraska real estate license are also noted under 81-885.01.

However, NS 81-885.03 states that the potential penalties for violating the Nebraska Real Estate License Act could be a fine not to exceed one thousand dollars for each day that any action is performed without the appropriate license following the issuance of the order or the amount of all money earned as commissioned by the violator, whichever is greater.

In addition, in accordance with NRS 76-2,122, Nebraska requires real estate closing agents to be licensed by one or more regulatory entities, although they are not required to be licensed attorneys - they shall be licensed or regulated by one or more regulating entities or employed by a person or entity regulated by one of more regulating entities unless employing such person to act as a real estate closing agent is otherwise prohibited by statute, rule, or regulation.

However, these real estate deals are exempt from the above mandate transactions with political subdivision, lease or rental transactions, and real estate transactions in which the closing occurs within one business day following another real estate closing in which one party is principal to both transactions.

Note that Item C (above) references the processes that define a ‘double close’ exit strategy. However, its language appears to ensure that the monies dependent on one transaction can/do not impact a future transaction.

Read Also: How To Wholesale Real Estate in Nebraska: Step-By-Step

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

No, real estate wholesalers in Nebraska do not need a real estate license if their actions in completing wholesale deals do not violate Nebraska license law. In other words, you don't need a license to wholesale real estate, as long as you don't take any actions that require a license, as defined by state law. The following suggestions will help real estate wholesalers steer clear of legality issues in the Cornhusker State:

  • Actions and intentions should be transparent
  • Choose to act with integrity
  • Manage the seller’s or homeowners expectations to allow them to make educated decisions
  • Don’t market/sell the contracted property
  • Do market/sell your equitable right to purchase real property

Wholesaling real estate in Nebraska

Wholesale Real Estate Contract Nebraska

Real estate contracts define the terms of real estate transactions. If prepared and executed correctly, a purchase contract is legally enforceable, where each party may sue for damages for the failed performance of the other party to the contract.

A contract of sale includes, in part, the following information:

Assignment Contract

An assignment contract is a legal document that allows a contracted purchaser to transfer the rights awarded by the contract (and the Principle of Equitable Conversion) to another buyer, usually a cash buyer. The wholesaler is the Assignor, and the new end buyer is the Assignee. Nebraska law is silent regarding explicit guidelines for using an assignment contract.

Double Closing In Nebraska

The most direct way to avoid violating Nebraska’s license law is to choose to exit the transaction using the double-close exit strategy. A double closing, as one would guess, is made up of two closings, which may occur back-to-back or within the next business day.

In the first closing, the wholesaler is the contracted purchaser. However, the wholesaler becomes the seller in the second transaction. The price differential between the two contracts defines the wholesaler’s gross revenue (the assignment fee).

However, the additional protection offered by the Double Close Exit Strategy has a price because there are two sets of closing costs. Most agree that these additional expenses are worth the protection price, considering the significance of the consequences.

wholesale real estate contract pdf

Final Thoughts

Is wholesaling real estate legal in Nebraska? Yes, wholesaling is legal in Nebraska for all the reasons we discussed above. A wholesaler is simply an intermediary operating in a free and open economy. Instead of selling lemonade, cars, or clothing, the real estate wholesaler sells their marketable equitable title to another interested buyer.

Now that you know wholesaling is legal in Nebraska, it’s the perfect time to learn how to effectively wholesale and unlock your true potential in the real estate industry. Real Estate Skills offers a free training program designed to equip you with the necessary tools and knowledge to get started on the right foot. This training can serve as your stepping stone to success in the dynamic world of real estate wholesaling.

*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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