Is Wholesaling Real Estate Legal In New Hampshire?Oct 14, 2021
Although it’s one of the smallest states in the nation at just over 9,300 square miles, like its immediate neighbors Vermont and Maine, New Hampshire is a beautiful and visually striking place nestled in the heart of New England.
If you’re thinking about real estate wholesaling in New Hampshire, we’ve got some important information you’ll want to know.
- What Do You Need To Know About Wholesaling Houses In New Hampshire?
- Is Wholesaling Real Estate Legal In New Hampshire?
- What Are The Wholesaling Laws In New Hampshire?
- Do You Need A License To Wholesale Real Estate In New Hampshire?
- Wholesale Real Estate Contract New Hampshire
- Final Thoughts
What Do You Need To Know About Wholesaling Houses In New Hampshire?
Let’s start with some overview information about New Hampshire.
New Hampshire At A Glance
Just under 1.4 million people call the Granite State home. As one of the original 13 states admitted into the union in 1788, it is steeped in history and economically progressive and healthy in many ways.
Almost 48% of adults are college-educated, and the state is well known as the home of Ivy League school Dartmouth College, founded in Hanover in 1769.
If you know anything about New Hampshire, then you know it's also home to some of the finest skiing anywhere in North America. There are more than 30 ski areas throughout the state. Also, vibrant fall foliage attracts countless visitors from throughout the world to enjoy nature’s most colorful changing of the seasons. This shouldn’t come as much of a surprise since New Hampshire has the highest percentage of state timberland area in the country.
As more evidence that New Hampshire is an outdoor lover’s paradise, the state averages only 14 days of unhealthy air annually compared to the national average of 104 days.
It also boasts of the shortest shoreline of any coastal state in America. Although it’s only 18 miles long, Hampton Beach is a popular summer destination along with a grouping of nine small islands called the Isle of Shoals.
The state is also noteworthy for being home to the first in line voting in presidential primary elections. It has also been home to several prominent people, including the poet Robert Frost, Horace Greeley, astronaut Alan Shepard, actor Adam Sandler, and others.
Key New Hampshire Housing And Demographic Data
Despite its relatively small size, New Hampshire’s Gross Domestic Product is a hefty $88 billion annually. The median income per person is just over $37,000 per year, and the household income it's an impressive $78,000 per year, ranking it among the highest in the country, and favorable for anyone who wants to flip properties.
Another interesting economic indicator is that New Hampshire has a poverty rate of only 7.3%, almost half the national average of 12.3%
In addition to the state government, New Hampshire is organized into a series of counties, cities, and towns. Ten county governments oversee prisons, nursing homes, and other related vital functions. There are only 13 cities in the state, each governed by its own charter. In addition, there are another 221 incorporated towns that provide services by relying on town meetings to guide policy decisions.
Hillsborough County is the most populous by a wide margin, comprising just under one-third of the entire state’s population.
Most of the state’s top municipalities also continued to show modest population gains over the past decade.
Potential wholesalers and real estate investment entities should be mindful that the state legislature favors local control, particularly regarding land use regulations.
It’s also worth noting that New Hampshire has an unusual system for raising revenue. It raises some revenue from sin taxes such as state-operated liquor stores, dog and horse racing, and the state lottery. Most revenues come from a business profits tax, business enterprise tax, license fees, and meals, lodging, and motor fuel taxes.
Due to the lack of a broad-based tax system, the state's local jurisdictions have the 8th-highest property taxes as of a 2019 ranking by the Tax Foundation. However, the state's overall tax burden is relatively low.
Drilling down more specifically to key housing data, Hillsborough County also has the highest number of total housing units, followed by Rockingham County
The state’s median housing value is just over $261,000, but there is a wide variation of units valued in all price ranges.
In addition, single-family units are more than double multi-family units throughout the state.
Of these units, the vast majority are also owner-occupied as well.
New Hampshire Real Estate Associations And Governing Bodies
The primary real estate trade association group in the state is the New Hampshire Association of Realtors (NHAR). The organization has approximately 7,000 members and keeps them abreast of housing in sales data, emerging trends, and the status of proposed new laws that may impact the state’s real estate industry. NHAR also provides support and resources to members so they can serve consumers efficiently and ethically.
As part of their regular updates, NHAR published the following information in July 2021, showing recent state housing trends.
In addition to the statewide Realtor Association, there are also 14 local boards.
- Capital Region Board of REALTORS (CRBR)
- Commercial Investment Board of REALTORS® (NHCIBOR)
- Contoocook Valley Board of REALTORS® (CVBR)
- Granite State South Board of REALTORS® (GSSBR)
- Greater Claremont Board of REALTORS® (GCBOR)
- Greater Manchester Nashua Board of REALTORS® (GMNBR)
- Lakes Region Board of REALTORS® (LRBOR)
- Monadnock Region Board of REALTORS® (MRBR)
- North Country Board of REALTORS® (NCBR)
- Seacoast Board of REALTORS®
- Strafford County Board of REALTORS® (SCBR)
- Sunapee Region Board of REALTORS® (SRBR)
- Upper Valley Board of REALTORS® (UVBOR)
- White Mountain Board of REALTORS®
Under the New Hampshire Office of Professional Licensure and Certification (OPLC), The New Hampshire Real Estate Commission develops and maintains the ethical, professional, and educational standards for the licensure of salespersons and brokers in New Hampshire.
The commission regulates:
- Associate Brokers
- Managing Brokers
- Principal Brokers
- Real Estate Firms
- Real Estate Firm Branches
- Real Estate Trade Names
This government body also safeguards New Hampshire citizens by regulating real estate brokers and salespersons to ensure that they meet and maintain minimum standards that promote public understanding and confidence in the business of real estate brokerage.
New Hampshire Is An Attorney Close State
New Hampshire is one of many states that require an attorney to complete a real estate closing transaction. Due to the complexities of real estate investing in general, having an attorney close at hand is always a good idea anyway, but in New Hampshire, it's the law.
Other states with this type of regulation on the books include Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, and West Virginia.
Is Wholesaling Real Estate Legal In New Hampshire?
Wholesaling real estate is legal in New Hampshire, however, you must go about this type of business within the confines of state law. If you don’t, you could wind up with several potential legal problems.
The first thing you should do is to educate yourself about the different strategies associated with wholesale deals. There are three primary strategies used most of the time. They are the assignment of contract, double closing, and wholetailing.
Of the three, most wholesalers often encounter legal problems using the assignment of contract. Wholesalers need to understand that when they enter into a contractual agreement with a property owner, they can only market the rights to the contract’s ownership, not market the actual property itself. Only a licensed real estate salesperson or broker can publicly advertise a piece of real estate for sale.
Most people first decide to enter wholesaling using the assignment of contract strategy because it provides them with the lowest barrier of entry into this profession. With an assignment of contract, you are not buying or selling a property, so there are usually no costs involved, such as putting down earnest money or paying for repairs, even if the property is in foreclosure or a fixer-upper.
All you were doing is facilitating the transfer of the rights to purchase a piece of real estate through an assignment of contract.
You are not collecting a commission for your efforts. Instead, you are collecting an assignment fee when the contract is transferred to a new buyer. You do not have a role in the sale of the property from the person who owns the property and the person who owns the rights to buy the property as indicated in the contract.
The circumstances are different for a double closing or wholetailing strategy. In both of these scenarios, you are purchasing the property from homeowners and then shortly after flipping the property to end buyers or real estate investors from a cash buyer's list you've already developed, or in the case of wholetailing, on the multiple listing service (MLS).
The upside is that you can generate large profits if you can cut a deal that involves buying a property at a low price and then reselling it at a much higher price. The trade-off is that you often have to come up with funding to facilitate the transactions. Most wholesalers utilize private money lenders, lines of credit, hard money lenders, and transactional funding to capitalize these wholesale deals.
The New Hampshire Real Estate Practice Act defines regulated and prohibited activities regarding real estate transactions in the state.
The New Hampshire Real Estate Commission also has a detailed list of practices, procedural rules, and regulations that real estate wholesalers should also familiarize themselves with.
Let's look at some of the more pertinent Real Estate Practices Act sections that may apply to wholesalers.
What Are The Wholesaling Laws In New Hampshire?
The New Hampshire State Constitution of 1783 is the primary governing legal document of the state, followed by the New Hampshire Revised Statutes Annotated and the New Hampshire Code of Administrative Rules.
Under Title XXX of the New Hampshire Revised Statutes Annotated (RSA), RSA 331a covers real estate transactions and is separated into 35 subchapters, 331a:1 to 331a:35.
RSA 331a is also the main resource of regulations for the New Hampshire Real Estate Commission.
Section 331-A:16-b goes into detail to define who is eligible for commission payments, which is an important consideration for wholesalers. Among several other requirements, the key provision states:
All of the partners, members, officers, or shareholders of any unlicensed business entity, including a partnership, association, limited liability company, limited liability partnership, or corporation, hold a valid and active license issued under this chapter.
Another important part of the Act defines Seller Agent duties. According to Section 331-A:25-b.
In part, this section says:
Perhaps the most important Section is Section 331-A:26, which addresses prohibited conduct. There are 38 parts to this section and whether or not you are a licensed wholesaler, there are several provisions you must understand, many of which involve the prohibition of clearly defined illegal activities.
Section 331-A:34 also defines unlawful practices and the potential for penalties if violations occur. In part, the Section reads:
Whoever, not being licensed or otherwise authorized according to the law of this state, shall advertise oneself as engaging in real estate brokerage activity, or shall engage in real estate brokerage activity, according to this chapter, or in any way hold oneself out as qualified to do so, or call oneself a "real estate salesperson,” "real estate broker,” or "real estate licensee,” or whoever does such acts after receiving notice that such person's license has been suspended or revoked, is engaged in unlawful practice.
Any person who engages in unlawful practice shall be guilty of a class A misdemeanor if a natural person, or guilty of a felony if any other person.
Section 331-A:10 deals specifically with Qualifications for Licensure and will be discussed separately in the section below.
Although it doesn’t directly affect licensed real estate professionals and wholesalers, you should at least be aware that there is also a New Hampshire Real Estate Appraisers Board that regulates appraiser activity in the state. It is governed by RSA 310-B and Rab 100-500.
As part of your due diligence, when you sell a home in New Hampshire, you're bound by certain disclosure obligations. Residential real estate sellers must tell prospective homebuyers certain important information to ensure no deception takes place.
Sellers who make disclosures as part of the purchase agreement will prevent the buyer from suing them after closing if they discover any hidden defects that were previously revealed.
Most states require a detailed written disclosure report to potential buyers that identify several things. However, in New Hampshire, the disclosure laws are relatively limited.
N.H. Rev. Stat. Ann. § 331-A:25-b says that agents have a duty to sellers to act on behalf of all prospective buyers and disclose to them "any material physical, regulatory, mechanical, or on-site environmental condition affecting the subject property of which the licensee [the agent] has actual knowledge."
Disclosures required by New Hampshire law by sellers are found in N.H. Rev. Stat. Ann. § 477:4-d.
It requires that prior to any buyer’s sales offer of sale by the buyer, the seller must disclose, in writing:
- Information about the type of private water supply system, including its location, malfunctions, date of installation, date of most recent water test, and whether there have been problems, such as an unsatisfactory water test or a water test with notations.
- Information about the private sewage disposal system, including its location, malfunctions, the date it was most recently serviced, and the name of the contractor who services the system.
- Information about a home's insulation, including its type and location.
- If no information about the private water system, sewage system, or insulation is available, it must be disclosed in writing. Remember, many homes will not have "private" water or sewer systems; they'll use the public ones, so this disclosure may not be needed.
N.H. Rev. Stat. Ann. § 477:4-a requires sellers to give the buyer certain radon gas, lead paint, and arsenic notices.
An experienced real estate attorney will have detailed knowledge about disclosures and should be able to provide you with legal advice and any forms that you'll need, along with assistance on how to complete those forms properly.
Do You Need A License To Wholesale Real Estate In New Hampshire?
First things first. A license is NOT required to wholesale real estate in New Hampshire.
However, many flippers do indeed decide to get a real estate license. Although real estate agents and those with a broker's license are required to follow a different set of rules, in many cases, they view this as a way of protecting themselves from potential legal pitfalls.
There are several steps you'll need to follow to get a license.
The New Hampshire Real Estate Commission requires all salesperson exam applicants to complete a pre-licensing course before taking a real estate examination. You must take the course from a school or person accredited to teach the pre-licensing course.
Candidates for the salesperson’s examination shall show proof of completion of 40 hours of approved study before the date of examination according to RSA 331-A:10, I(b) and administrative rule Rea 301.03(o) and (p) consisting of the following:
Evidence of beginning and completing 40 hours of accredited pre-licensing education consisting of the following:
(1) New Hampshire accredited pre-licensing course with a minimum of 32 hours of classroom attendance and no more than 8 hours of distance education within 1 year prior to the date of examination; or
(2) A minimum of 32 hours of classroom attendance and no more than 8 hours of distance education within 1 year prior to the examination date consisting of 34 hours of accredited national material completed in another state and a minimum of 6 hours of New Hampshire accredited state material.
New Hampshire Real Estate Examinations are administered by computer at four PSI Test Centers in New Hampshire – Concord, Manchester, Nashua, and Portsmouth. Detailed directions and maps are provided at www.goAMP.com.
The national salesperson portion of the test consists of 100 multiple-choice questions. The New Hampshire state portion of the test has an additional 40 questions you'll need to answer.
To be eligible to apply for a salesperson license, you must pass both the National and State portions of the examination. The passing score for each portion of the examination is a scaled score of 70.
Candidates who pass any portion of the examination but fail to satisfy the education requirement before the examination will be required to retake the exam in its entirety.
Also, pursuant to RSA 331-A:10-a, all applicants for a new salesperson or broker license “shall submit to the New Hampshire Department of Safety, Division of State Police, a notarized criminal record release authorization form, along with the appropriate fee, prior to applying for a real estate license.”
You will need to complete a Salesperson Application after you pass your course.
The fee to take the exam is $155, and it is non-refundable.
Next, you’ll mail your completed application, required forms, and payment to:
Office of Professional Licensure & Certification
7 Eagle Square
Concord, NH 03301
If you already have a license and want to renew it, go to Online Applications for Renewal. Paper renewal applications are not accepted.
Wholesale Real Estate Contract New Hampshire
There are two primary contracts you'll need to be familiar with as a New Hampshire wholesaler.
The first is the Purchase And Sales Agreement, The New Hampshire Association of Realtors makes this standard 5-page fillable purchase and sales agreement available for use and suitable for most real estate transactions.
The second document is a standardized assignment of contract. This is sometimes used as an addendum to the purchase contract. In other cases, a party to the transaction may prefer a more customized and specific form to assign the contract.
A typical assignment contract looks like this.
If you're not experienced or comfortable dealing with real estate investors, cash buyers, or any parts of real estate law, it's always a good idea to seek legal advice from an experienced real estate attorney.
Although it’s a relatively small state, New Hampshire still presents a wealth of opportunities to wholesale properties. A diverse economy, an educated and relatively affluent workforce, and continued stability in the real estate market are attractive reasons to consider flipping homes in the Granite State.
*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