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Is Wholesaling Real Estate Legal In New Mexico?

New Mexico is appropriately nicknamed The Land of Enchantment. It's a state filled with rugged and scenic beauty, intertwined in a multi-cultural mosaic through the fusion of Spanish American, Native American, and Anglo-American influences.

Many people are drawn to the state for various reasons, making a compelling case for those who are considering a career in real estate wholesaling in New Mexico.

                      

What Do You Need To Know About Wholesaling Houses In New Mexico?

An Introduction To New Mexico

At more than 121,000 square miles, New Mexico ranks fifth among all states in total land area.  About 2.1 million people call New Mexico home, with about 40% of all residents concentrated in Albuquerque and the surrounding Bernalillo County. Santa Fe, the state's capital, was founded in 1610 and is the oldest continuously used seat of government in North America.

In 1821, Mexico won independence from Spain and established the Mexican Empire in the New Mexico territory.  However, the United States invaded New Mexico in 1846, and New Mexico was ceded to the U.S. in 1848 as part of the Treaty of Guadalupe Hidalgo.  New Mexico didn't achieve statehood until much later when it became the 47th state in 1912.

New Mexico owes part of its historical legacy to cattle drives across its sweeping plains, clashes between pioneers and Native Americans, and a distinctly frontier flavor reflected in its art and culture.

The state is a land of extreme contrasts.  Some parts are dotted with pine forests, meadows, and abundant wildlife, while others are so arid that even cacti struggle to survive.  Temperatures are extreme and can range up to 120 degrees to as low as -50 degrees in some parts of the state. 

Most of these climate extremes are due to elevation.  The average elevation ranges from 5,000 to 8,000 feet in the northwest part of the state, and more than 80% of the state is higher than 4,000 feet above sea level.

Two of the more famous geographic attractions in New Mexico are Carlsbad Caverns and White Sands National Monument.

This blending of cultural and geographic extremes has made New Mexico a favorite destination for artists and creative types for many decades.  Taos, Santa Fe, and Albuquerque have vibrant cultural arts communities.

Key Demographics, Housing, and Economic Data

Albuquerque is far away and the state's largest and most densely populated urban area.  While it has experienced modest growth over the past decade, Rio Rancho and Hobbs has led the way with double-digit growth.

wholesaling real estate in New Mexico

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About 80% of the state's population is of European or Hispanic descent.  The interesting thing about New Mexico's population is that about 10% is Native American.  There is a large Navajo reservation in northwestern New Mexico.  Utes, Pueblo, and Mescalero Apaches live on about 2 million acres of land grants scattered throughout the state.

New Mexico is a relatively poor state.  The median per capita income is $26,531, and the median household income is a tick below $52,000, placing it far below the U.S. national average. 

Almost 1 in 5 New Mexicans live in poverty. However, close to 37% of the population is college-educated.

New Mexico real estate median per capita

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Due to the low average individual income and high unemployment rates, New Mexico's state government receives more federal funding than any other state.

The federal government is the state's biggest employee and maintains several military and research institutions, including three strategic Air Force bases.  This falls in line with the fact that the federal government protects more than one-third of New Mexico's land, and agencies such as the National Park Service maintain a sizable presence in the state.  In fact, government spending accounts for nearly one-quarter of the state's economy.

New Mexico is also known as a leader in the high-technology industries due in part to nuclear weapons and energy research at the Los Alamos National Laboratory and the Sandia National Laboratories in Albuquerque.

Tourism is a significant employer serving 30 million visitors each year.  Overall, about half of the state's economy is based on the service sector.

The oil and gas industries are also large employers. The Permian Basin has more than 25,000 oil wells, including two of the 100 largest oil fields in the nation.  Exporting raw materials is a critical component of the state's economy.

Gold, silver, and copper excavation are also significant parts of the state's mining efforts.  In addition, New Mexico produces more than 80% of U.S. potash and is the country's leading producer of natural glass called perlite.

According to recent U.S. Census statistics, there are close to 1 million housing units in the state with a median value of just over $170,000

New Mexico real estate investing

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The vast majority of New Mexico homes are priced under $479,000, making entry into the market for wholesalers more attractive than in other places in the United States.

New Mexico wholesaling houses

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According to Neighborhood Scout, the top 10 highest appreciating New Mexico cities since 2000 are:

  1. Roy
  2. Chama
  3. Lovington
  4. Loving
  5. Thoreau
  6. Carlsbad
  7. Hobbs
  8. Tatum
  9. Jal
  10. Eunice

Overall, real estate in New Mexico has been on a healthy upswing for the past several months and years.

New Mexico real estate investment

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New Mexico real estate market

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A couple of other vital pieces of information to know about New Mexico housing are the ages and types of homes in the state.

New Mexico investment property

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The New Mexico Association of Realtors also recently published an outstanding summary of housing sale activity throughout the state and one that potential wholesalers should find extremely interesting.

New Mexico real estate activity

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Important Trade Organizations and Government Agencies

The New Mexico Association of Realtors (NMAR) is the largest real estate trade association in New Mexico. It has more than 7000 members involved in all aspects of residential and commercial real estate and serves as a public policy advocate for its members and consumers.

There are 16 local member boards throughout the state as well.  NMAR is the liaison between these local boards And the National Association of Realtors (NAR).  When you join a local board, membership automatically extends to the state board and the national board as well.

Some of the key local boards include:

Go here for a complete list of New Mexico local member boards and associations.

Under the direction of the New Mexico Regulation & Licensing Department, the New Mexico Real Estate Commission exists to protect the public and enhance the professional competence of real estate brokers.  It is responsible for enforcing New Mexico's Real Estate License Law and the Real Estate Commission Rules.

New Mexico real estate commission wholesaling

The Commission accomplishes this by issuing and renewing real estate licenses, establishing, and enforcing education requirements, investigating and adjudicating complaints, and educating consumers about real estate licensing laws in New Mexico.

                      

Is Wholesaling Real Estate Legal In New Mexico?

Yes, but we can't stress this enough…you must follow state laws, or you could wind up in some big legal trouble.

For example, effective July 1, 2011, it is a fourth-degree felony punishable by a $5,000 fine and up to 18 months' imprisonment to practice real estate without a license.

However, you do not need a real estate license to buy, sell, rent, or lease your own property.

When wholesalers enter into a purchase agreement with a property owner, the ownership is redefined under the legal principle of Equitable Conversion. The law gives wholesalers equitable title in the property once an enforceable contract of sale is executed, thus conveying a beneficial interest in the property before a sale is closed.

If you want to engage in real estate investing by structuring wholesaling deals, you must do your homework on what's appropriate and what is not.  A good place to start is with the three primary strategies wholesalers use.  They are the assignment of contract, double closing, and wholetailing.

One of the most misunderstood parts of wholesaling with the assignment of contract strategy is that you can only market the contract rights to a piece of real estate after securing an agreement with the current owner.  You CANNOT market or attempt to execute a purchase agreement on the home itself unless you have a real estate license.

Since most wholesalers use the assignment of contract as an initial way to break into a wholesaling career, this is the most common misstep that wholesalers make starting out. 

It's essential to understand that you are not conducting a real estate investment transaction on the property itself using this method.

You're entering into a contractual agreement with the homeowner to market the rights to the contract to a real estate investor. When the contract is assigned, you collect an assignment fee. Only licensed real estate professionals can collect a commission when they complete a sale.

The upside to using an assignment of contract strategy is that it requires little or no capital resources to complete a deal, making it attractive for wholesaling newcomers.

With a double closing and wholetailing, a wholesaler engages in two separate transactions. Often, these transactions take place the same day, although in some cases the escrow period may take a bit longer.  However, to facilitate the deal, a wholesaler may have to come up with an earnest money deposit and a lender's down payment. 

Essentially, you are buying the property outright and flipping your property almost immediately to an end buyer for the biggest profit you can secure. 

The key to using these two methods is that you can't publicly advertise the property for sale unless you have a real estate license.  You must use a private buyer's list you've created or find people interested in investment properties and cash buyers through other similar means.

That's why some people who wholesale properties see value in getting a real estate license, which we'll discuss in greater detail below.

                      

What Are The Wholesaling Laws In New Mexico?

There do not appear to be any laws specifically related to wholesale deals in New Mexico.  However, there are several parts of the New Mexico Real Estate License Law that you should understand.

wholesaling laws New Mexico

Unlicensed Activity

Chapter 61, article 29-1, addresses acting in the capacity of a broker without a license.  Specifically, it states:

Prohibition.  It is unlawful for a person to engage in the business or act in the capacity of real estate associate broker or qualifying broker within New Mexico without a license issued by the Commission. A person who engages in the business or acts in the capacity of an associate broker or a qualifying broker in New Mexico, except as otherwise provided in Section 61-29-2 NMSA 1978, with or without a New Mexico real estate broker's license, has thereby submitted to the jurisdiction of the state and to the administrative jurisdiction of the Commission and is subject to all penalties and remedies available for a violation of any provision of Chapter 61, Article 29 NMSA 1978.

61-29-9 states the specific qualifications for a license, which are discussed in a limited manner in the section below.

61-29-10.1 details brokerage relationships and the need for full disclosure.  This section states:

For all regulated real estate transactions first executed on or after January 1, 2000, no agency relationship between a buyer, seller, landlord or tenant, and a brokerage shall exist unless the buyer, seller, landlord or tenant, and the brokerage agree, in writing, to the agency relationship. No type of agency relationship may be assumed by a buyer, seller, landlord, tenant or licensee, or created orally or by implication.

A brokerage may provide real estate services to a client pursuant to an express written agreement that does not create an agency relationship, and no agency duties will be imposed on the brokerage.

A brokerage may provide real estate services to a customer without entering into an express written agreement and without creating an agency relationship, and no agency duties will be imposed on the brokerage.

The Commission shall promulgate rules governing the rights of clients or customers and the rights, responsibilities, and duties of a brokerage in those brokerage relationships that are subject to the jurisdiction of the Commission.

Further, 61-29-10.2 defines a licensee's disclosure duties:

Prior to the time a licensee generates or presents any written document that has the potential to become an express written agreement, the licensee shall give a prospective buyer, seller, landlord, or tenant a list of the licensee's duties that are in accordance with requirements established by the Commission.

Licensees shall perform all duties that are established for licensees by the Commission.

Another key provision that wholesalers must understand is 61-29-17.2 regarding Unlicensed activity; civil penalty; administrative costs

The Commission may impose a civil penalty on any person who is found, through a court or administrative proceeding, to have acted in violation of Chapter 61, Article 29 NMSA 1978 in an amount not to exceed one thousand dollars ($1,000) for each violation or, if the Commission can so determine, in the amount of the total commissions received by the person for the unlicensed activity. The Commission may assess administrative costs for any investigation and administrative or other proceedings against any such person.

Advertising

Wholesalers must also be aware of 16-61-32.8. Advertisements.  Keep in mind that only licensed real estate professionals can publicly advertise a property for sale.  The specifics of how a property can be advertised are as follows.

New Mexico legality

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Although it doesn't directly impact wholesalers in most cases, it's not a bad idea to also be aware of the New Mexico Uniform Owner Resident Relations Act (N.M.- UORRA) of 2019.

New Mexico real estate professionals who engage in property management should have some degree of knowledge about this law that provides essential rights to customers and denotes responsibilities of residential landlords and their agents in the state. It is the judicial standard used by the courts to determine the outcome of claims.

Disclosures

The New Mexico Real Estate Disclosure Act mandates that anyone engaged in real estate transactions is subject to several disclosures they must provide to buyers as part of the transaction. 

Sellers are required to complete a standardized disclosure form when conveying real property.  Here’s an example of the Realtors Association of New Mexico Seller’s Property Disclosure - residential form.

Also, be aware that you must adhere to the New Mexico Real Estate Disclosure Act and Federal laws as part of the disclosure process. 

For example, for homes built before 1978, you must abide by the Residential Lead-Based Paint Hazard Reduction Act of 1992, also referred to as Title X.

                      

Do You Need A License To Wholesale Real Estate In New Mexico?

You don't need a license, but many wholesalers find value in becoming licensed real estate agents to protect their interests better. It's important to understand that there are different rules governing licensed and unlicensed real estate practitioners in New Mexico.

License To Wholesale Real Estate Legally in New Mexico

You need to spend some time familiarizing yourself with these differences.  Many wholesalers also find it valuable to retain the services of an experienced real estate attorney to assist with the legalities of real estate contracts, deal negotiations, and to have as a resource for a variety of questions that may come up in the course of doing business.

The New Mexico Real Estate Commission oversees licensing in the state.  It issues two types of licenses; an associate broker's license and a qualifying broker's license.

The associate's license is the equivalent of a salesperson's license, so let's take a closer look at what the requirements are.

  • You must be at least 18 years old, a legal U.S. citizen or lawfully admitted alien, and have a high school diploma or equivalent.
  • Complete 90 hours of New Mexico Real Estate Commission-approved real estate courses. These classes include Real Estate Law (30 hours), Real Estate Principles and Practice (30 hours), and Broker Basics (30 hours).
  • Applicants with current broker's licenses in other states can apply for a waiver of the Real Estate Principles and Practice and Real Estate Law courses and the national portion of the real estate broker's examination by submitting a written request. The 30-hour Broker Basics course cannot be waived.
  • Take the New Mexico Associate Broker Licensing Exam and pass both portions with at least a 75% score. The fee to take the exam is $95.
  • If you pass, you will need to be fingerprinted and obtain Errors and Omissions Insurance. All persons applying for a license must submit proof they have completed a live fingerprint scan. Fingerprinting must be completed no earlier than 21 days before submitting documents to apply for a license. A Fingerprint Source List for New Mexico residents on the Commission's website.
  • Apply for Your Associate Broker License. You have six months to apply after passing the exam. Otherwise, you'll have to retake it.  A non-refundable license application fee of $270 is payable when you submit your application.

                      

Final Thoughts

Although New Mexico has some economic challenges, many people find it desirable to live or own a second home.  Tourism and a stable economy fueled by desirable weather in many parts of the state have attracted many buyers over the past several years.

Wholesalers should be able to find plenty of real estate deals based on low median sale prices, a steady inventory of foreclosure properties, a healthy infusion of government spending, and other key variables that continue to propel New Mexico's real estate market.

Making sure to stay within the legal bounds of state laws of New Mexico in wholesaling the right way and seeking proper training can give them the edge of setting themselves up for success in the industry.

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