Is Wholesaling Real Estate Legal in Nevada?Apr 13, 2021
If you’re interested in real estate investing, the Silver State could be a potential goldmine of opportunities for you.
Few economies can rival the sustained visitor and tourism vitality of Las Vegas, but Nevada, strategically situated between California, Arizona, Utah, and Colorado, holds promise in all parts of the state.
Many people do exceptionally well as Nevada real estate professionals. Some opt for a traditional career, but others are excited about the possibility and the freedom of wholesaling.
- What Do You Need To Know About Wholesaling In Nevada?
- Is Wholesaling Real Estate Legal In Nevada?
- What Are The Wholesaling Laws In Nevada?
- Do You Need A License To Wholesale Real Estate In Nevada?
- Is Co-Wholesaling Real Estate Legal In Nevada?
- Is Reverse Wholesaling Real Estate Legal In Nevada?
- Nevada Wholesale Contract
- Is Wholesaling Real Estate Legal In Las Vegas?
- Final Thoughts
What Do You Need To Know About Wholesaling In Nevada?
Las Vegas is far and away the largest city in the Silver State is easily the state’s economic hub. Non-stop 24/7 action, casinos, world-class entertainment, and sunshine more than 300 days a year attract more than 56 million visitors annually from around the world.
Source: Nevada Demographics
More than 73% of the state’s population lives in Clark County. There are currently more than 3 million people that call this part of the state home. Much of the local economy is tied to gaming revenue which generates more than $12 billion annually.
Nevada also continues to enjoy a robust economy. Pre-pandemic, it was ranked 8th in the United States according to leading indicators. This healthy standing attracts people looking to migrate to the state in search of more opportunities.
Source: U.S. News
The good news is that market values remain within reach of many potential homeowners. There are scores and scores of potential buyers throughout the state and professional real estate investors looking to build affordable portfolios of rental properties.
Against the promising backdrop, wholesalers must educate themselves on local real estate market conditions. The best way to do this is to tap into various Realtor associations across the state.
The Nevada Association of Realtors (NVAR) provides services to more than 18,000 licensed professionals throughout the state. It is a great place to spend some time to familiarize yourself with real estate conditions better.
There are also several local Realtor groups as well. Depending on where you want to wholesale real estate, these groups are good sources of information as well.
It is also a good idea to visit the website for the Nevada Real Estate Division (NRED). This state agency protects the public by regulating real estate professionals through licensure, registration, education, and enforcement.
Is Wholesaling Real Estate Legal In Nevada?
Yes, you can wholesale real estate legally in Nevada.
There are a couple of critical fundamental things to know.
First, there are several primary strategies people use in wholesaling.
Some wholesalers also effectively use co-wholesaling or reverse wholesaling to achieve outstanding results, discussed in more detail below.
Each of these can produce lucrative returns, but you must make sure you follow established legalities regarding real estate transactions in Nevada. Otherwise, you could wind up in some legal trouble.
Wholesaling is also tied to several ethical considerations.
All wholesalers should enter into every deal with the intention of closing on the deal. If you have no cash buyers lined up, no solid exit strategy, or no intention of closing on the deal for whatever reason, do not take one step toward executing an agreement.
Transparency is just as important. You need to have the capacity to complete a deal by either having access to funds or having funds directly on hand for deals you work on. Line up financing in advance by working with private lenders, hard money lenders, obtaining a line of credit, or through other similar means.
When you have financing in place, submit a current proof of funds letter with your offer.
Finally, make sure you clearly and honestly represent your interest in your deals. When marketing a deal to your buyers’ list, you must state that you have an equitable interest in a purchase contract instead of claiming you're the property owner.
Of course, the terms are different if you’re planning on buying the property and reselling using the Double Close or Wholetail methods.
What Are The Wholesaling Laws In Nevada?
There are no laws on the books in Nevada that specifically address wholesaling, but several laws apply to all real estate transactions. Here are some of the laws pertaining to those engaged in real estate transactions throughout the state.
Chapter 645 of the Nevada Revised Statutes governs all aspects of conduct, behaviors, and laws for Real Estate Brokers and Salespersons. If you engage in real estate wholesaling, you should familiarize yourself with the portions of this chapter that apply to your situation.
This includes the section on Prohibited Acts; Penalties: Enforcement. In part, Section 645.990 reads:
A person who:
(a) Obtains or attempts to obtain a license pursuant to this chapter by means of intentional misrepresentation, deceit, or fraud; or
(b) Sells or attempts to sell in this State any interest in real property by means of intentional misrepresentation, deceit, or fraud, is guilty of a category D felony, and shall be punished as provided in NRS 193.130. In addition to any other penalty, the court shall order the person to pay restitution.
You must also be transparent and truthful in your dealings and disclosures. Fraud occurs when a seller or a wholesaler intentionally distorts a property’s true value. This can lead to criminal charges, including fines and prison.
Some schemes may involve straw purchasers, mortgage brokers, agents, or appraisers in illicit activities. Notaries may also be liable if they agree to forge documents.
Fraud can take many forms, including:
- Mail fraud involves using the mail to send or receive documents related to an unlawful house flipping transaction. This is a Federal level crime.
- Wire fraud occurs when someone uses wire communications to send or receive information related to an illegal property transaction. This is a Federal level crime.
- Bank fraud occurs when someone intentionally defrauds a financial institution, such as when a bank is deceived regarding a property’s actual value. This is a Federal level crime.
- Mortgage fraud also involves lying to a mortgage company about a property’s value. This is a State level crime.
Selling a Property Without a License
Only licensed real estate agents can sell a property they don’t have an interest in and collect a commission.
According to NRS 645.235, the Nevada Real Estate Commission which is overseen by the Nevada Real Estate Division (NRED) can impose an administrative fine against any person who knowingly:
(a) Engages or offers to engage in any activity for which a license, permit, certificate or registration or any type of authorization is required pursuant to this chapter, or any regulation adopted pursuant thereto, if the person does not hold the required license, permit, certificate or registration or has not been given the required authorization; or
(b) Assists or offers to assist another person to commit a violation described in paragraph (a).
If you engage in real estate transactions and assign a contract, you might collect a fee. This amount must be disclosed to all parties as part of the transaction process. When using a double closing or a buy and sell method, the wholesaler is not required to disclose how much profit they are making when they flip a property to a final buyer.
Because some wholesalers decide to get real estate licenses, you may also want to know what the licensing requirements are in Nevada. Note that initial license requirements are changing and will be different as of October 1, 2021, or later.
The Nevada Real Estate Division (NRED) is also a good place to do a lot of due diligence to familiarize yourself with the legal requirements related to real estate licensing and related laws such as disclosures and compliance.
If you have a real estate license, then you must disclose that when you are a party to a real estate transaction.
Do You Need A License To Wholesale Real Estate In Nevada?
The short answer is “No.”
You don’t need a real estate license to wholesale properties in Nevada.
It’s important to note some differences between doing real estate deals as a wholesaler without a license and as a real estate agent with a license.
For example, without a license, you can only market the rights to assign a contract you have for the property if you don’t have a license. Only licensed real estate agents can market an actual property.
In other words, unless you are licensed, you cannot publicly advertise a property for sale that you don't own. As an unlicensed wholesaler, you can only market your equitable interest in the contract for sale, not the property itself.
Only a real estate agent or homeowner can advertise a property. This is a mistake that most amateur wholesalers make.
Another key difference is that when you wholesale a property without a license, you can only collect an assignment fee or earn profits for your efforts. If you have a real estate license, you have the ability to receive commission on a property you have under contract when the deal closes.
One of the perks of being a licensed agent-investor is that you can also collect sales commissions in addition to assignment fees and profits.
Collecting fees and commissions are not an issue with the Double Close or Buy and Sell method.
This is because you are negotiating and completing two separate transactions independent of each other. You’re free to negotiate the best possible prices in your favor to give you the maximum potential profits.
And, unlike an assignment of a contract, you’re not required to disclose the amount of profit you’ll make by flipping the property, creating a higher degree of financial confidentiality.
Deciding to get a Nevada real estate license is a personal choice best driven by your personal goals. If you want to learn more about getting a license, take a look at the Nevada Real Estate Division’s requirements.
Is Co-Wholesaling Real Estate Legal In Nevada?
Yes, co-wholesaling real estate is legal in Nevada. Many people like to work with other like-minded individuals to create co-wholesaling partnerships.
This is a desirable option for real estate wholesalers who are just starting because it allows them to tap into others who may bring additional resources or knowledge to the venture. Often, one partner will work on finding deals such as properties heading into foreclosure, and the other partner will handle various financing aspects.
To protect your interests be sure to vet a potential partner thoroughly. You want someone who is transparent, ethical, and trustworthy. Also, it’s a good idea to memorialize the partnership by executing a co-wholesaling/joint venture agreement, preferably with the help of an experienced real estate attorney.
Do not gloss over crucial legal advice if you need it.
Is Reverse Wholesaling Real Estate Legal In Nevada?
The main difference between reverse wholesaling and traditional wholesaling is the order of the steps you take in each method. With reverse wholesaling, you line up end buyers first and then find properties to put under an assignment contract or execute a Double Close or Buy and Sell strategy.
Reverse wholesaling gives wholesalers a more reliable exit strategy and is more favorable for forming long-term relationships with cash buyers who can assist with real estate investment cash flow. It’s not uncommon for a wholesaler and a buyer to execute several deals over time. Also, building long-term relationships with private money lenders and hard-money lenders streamlines processes, leading to more deals in a shorter timeframe.
As long as wholesalers comply with Nevada real estate laws, there are no specific restrictions on reverse wholesaling activities.
Nevada Wholesale Contract
There are two primary documents you will use as a Nevada wholesaler. They are:
- Nevada Purchase Agreement and Earnest Money Receipt
- Assignment of Contract for the Purchase of Real Estate
A standardized purchase agreement will run several pages and require quite a bit of time to complete. If a Realtor is not involved in the transaction, either party can hire an attorney to complete a real estate contract or draft an alternative sales contract.
The purchase contract solidifies your agreement and secures your right to purchase or sell a property to another party. In general, contracts are assignable by default unless expressly prohibited within the language of the agreement.
An assignment contract transfers the rights and obligations of the buyer (“the assignor”) under a purchase agreement to another party (“the assignee”). Generally, the assignee is a cash buyer who ends up closing on the property and compensates the assignor for procuring the deal.
According to the 2013 Nevada Revised Statutes, NRS 104.2210 dealing with the assignment of contracts, the state law says the following:
1. A party may perform his or her duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his or her original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.
2. Except as otherwise provided in NRS 104.9406, unless otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on the seller or buyer by his or her contract, or impair materially his or her chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor’s due performance of his or her entire obligation can be assigned despite agreement otherwise.
3. Unless the circumstances indicate the contrary a prohibition of assignment of “the contract” is to be construed as barring only the delegation to the assignee of the assignor’s performance.
4. An assignment of “the contract” or of “all my rights under the contract” or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by the assignee to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.
5. The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his or her rights against the assignor demand assurances from the assignee (NRS 104.2609).
Is Wholesaling Real Estate Legal In Las Vegas?
Las Vegas is a dynamic market that is full of opportunities for flippers and wholesalers. Laws apply throughout the state, setting a uniform framework for how real estate transactions must be conducted, including those involving wholesalers.
If you decide to start a wholesaling business in Las Vegas, remember to do your homework when it comes to understanding these laws fully and doing a deep dive on market conditions, trends, pricing, and other factors that influence the Las Vegas market.
Las Vegas, Reno, Carson City, and other smaller communities throughout Nevada offer loads of potential for wholesalers willing to put in the work.
As long as you are ethical, diligent, and transparent when dealing with others, you have the potential to enjoy a gratifying career for many years to come.
*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.