Real estate wholesalers employ an investment strategy in which they enter a purchase contract as a buyer but then seek to find another buyer – an end buyer to which they can then assign their rights (known as equitable interest) provided under the original contract with the use of an assignment of contract. Because successful real estate investors who use this strategy may have several properties working simultaneously, they are referred to as 'wholesalers.'
Real estate wholesaling differs from the more well-known real estate investment strategy of house-flipping. The difference lies in the fact that many real estate wholesalers can turn a profit without ever taking title to the property, which effectively reduces potential risks (and significant liabilities) created by the tasks required to fix up a property – even if the renovations are somewhat insignificant.
Often real estate wholesaling professionals will enter a contract that is assignable (as defined by the contract's written terms) and then pursue a strategy that includes either rezoning or adding other value-added enhancements. With an increased value, this newly rezoned property can then be assigned to a new end buyer and sold for a profit.
In addition, a real estate wholesale deal can generate profits without the need to lay out any significant cash (other than the earnest money deposit). For new investors, the art of real estate wholesaling is a smart way to meet network with new and experienced real estate investors as they negotiate their first deal and to ultimately establish a cash buyers list.
But to wholesale properties legally in Ohio, it is important to understand the local customs, the laws, and the nuances of the real estate markets across the state. These are clarified in the narrative that follows:
The state of Ohio became the 17th state in 1803. Ohio's nickname as the Buckeye State is an ode to the buckeye trees in Ohio. The population in Ohio is about 11,700,000.
Source: Macro Trends
The five Ohio cities with the highest populations include:
Source: Ohio Demographics
The following list represents the largest trade and/or professional organizations in the state of Ohio for real estate professionals. Each of these real estate-related associations is a member organization of the National Association of REALTORS (NAR) –
Founded in 1910, the Ohio Association of REALTORS now holds the distinction of being the largest professional trade organization in Ohio, with more than 35,000 members strong. The OAR was established around the same time that the NAR introduced its Code of Ethics. The Ohio Association of REALTORS offers more than 100 educational programs and lobbies for much real estate-related legislation on many state and federal fronts.
● The Columbus REALTORS (CR)
The Columbus REALTORS association was founded in 1908 and now serves approximately 8,000 real estate professionals in the greater Columbus area. The Columbus REALTORS offers a variety of professional development and resources for real estate licensee members. Additionally, this professional organization offers designations, networking events, and continuing education options, to name a few.
The CABR was established and incorporated in the 19th Century – in 1890. The Cincinnati REALTORS Board seeks to advocate and be a voice in promoting the interests of professional REALTORS and shaping the local real estate industry. The CABR is also a resource for those who wish to relocate to the greater Cincinnati vicinity.
The ACAR is a professional organization that was founded in 1912 and merged with the Cleveland area Boards about 100 years later. The Akron Cleveland Association of REALTORS serves the Akron area real estate industry by providing government advocacy, professional standards, and efficiency of operational systems for members.
The Northwest Ohio REALTORS Association was formed when two local real estate boards merged in 2019. The NWO has more than 1,750 members that serve the real estate needs in the greater Toledo metro area that includes the counties of Mercer, Fulton, Henry, Hancock, Lucas, Wood, and Williams, among others.
DIvision of Real Estate and Professional Licensing
The ODREPL - the Ohio Division of Real Estate and Professional Licensing is contained within the state's Department of Commerce. This agency is responsible for administering and maintaining real estate licenses as well as each real estate brokerage, for more than 45,000 professionals across the Buckeye state.
The Division of Real Estate & Professional Licensing carries out the rules enacted by the Ohio Real Estate Commission. Among its responsibilities are:
The Ohio Real Estate Commission (OREC)
The OREC – the Ohio Real Estate Commission's powers & duties are delineated in Ohio Revised Code 4735.03. The Real Estate Commission is responsible for a variety of real estate-related activities that include the creation of ethics, the management of real estate education/research, the update of licensees regarding changes to Ohio/federal law, and the management of the real estate recovery fund (Ohio Revised Code 4735.12), among others.
The qualified answer is yes.
However, the final determinant is contingent upon the specific language in the purchase agreement or contract of sale. The primary goal of a real estate wholesaler is to avoid any actions that have been defined as those of a real estate broker or salesperson – a real estate professional for which a license is required.
A real estate wholesaler must determine if the contract of sale explicitly prohibits an assignment – BEFORE signing the legally enforceable document. A purchase agreement that allows for an assignment of the contract's rights and obligations - may be assigned to another or end buyer without the expressed consent of the seller.
However, it is essential to note that any assignment of contract that materially changes the delineated responsibilities of any party to the contract will effectively invalidate the assignment. (UCC § 2-210 (2) – Assignment of Rights)
In Ohio, the bottom line is that real estate wholesalers must avoid, at every step, the following:
A real estate wholesaler in Ohio must remember that they are selling their rights (and obligations) as delineated by the legal contract of sale they have executed, not the real property. It is illegal for Ohio real estate wholesalers to act for another individual – for compensation, rather than acting for themselves, as a seller of a viable asset – their legal interest in the purchase agreement.
Ohio rules regarding real estate are very clear. Real estate can only be marketed/advertised for sale with the expressed knowledge and consent of the property owner. According to Ohio Law & Administrative rules Section 4735.16 (5), a real estate licensee who advertises in a manner that is not according to Ohio Law will find their advertisement acts as prima-facie evidence (sufficient to establish fact until disproved) according to Ohio Law 4735.18 (A, 17,21).
More specifically, the real estate wholesaler may find they have violated license law in Ohio if:
The sanctions for noncompliance are delineated in Section 4735.181:
There are no specific rules or laws on the books in Ohio that reference wholesaling specifically. The reality is that real estate wholesalers who wish to operate legally in Ohio state must simply avoid acting in any manner that would be required for a real estate broker to be licensed.
In Ohio, a real estate broker is defined as follows:
Section 4735.01(H) denotes that any one – person, or any other acceptable business entity (i.e., LLC, LLP, or Corporation, among others) – who for some form of compensation, acts (or offers to act) in any action that is within Ohio's defined real estate broker – is for all intents and purposes under this chapter acting in a manner that is defined as a real estate broker or salesperson.
In Ohio, a real estate salesperson is defined as any individual that is associated with a licensed Ohio real estate broker to act in a transaction – for compensation or otherwise. (Section 4735.01(B))
For the purposes of this Ohio law, the definition of real estate includes the following:
However, it is as important to understand what actions do NOT require a li a real estate license in Ohio if a real estate wholesaler is to remain the legal limits set forth by Ohio law:
Ohio law (Section 4735.02) denotes when a license is required, as follows:
The legality of wholesaling in Ohio is a function of avoiding the following. Ohio law states that an individual may only LEGALLY advertise real property for sale under two specific conditions:
The qualifications for earning a real estate broker's license in Ohio are delineated in Ohio Law & Administrative Rules Section 4735.07. The qualifications for earning a real estate salesperson's license in Ohio are found in Section 4735.09.
Other than these two above-noted instances, it is ILLEGAL to market a property for sale in the state of Ohio, which is why Ohio real estate wholesalers must market their rights to an executed contract, not the property itself – to remain within Ohio's legal boundaries.
Real estate wholesaling is legal in Ohio – explicitly without needing a real estate license if the wholesaler follows these suggestions:
Note: there is an essential difference between marketing/selling the rights/obligations of the contract compared to the marketing/selling of real property.
However, it is illegal in the state of Ohio:
It is helpful for Ohio real estate wholesalers to become knowledgeable about the state's laws, but the state has no formal requirements for real estate wholesalers other than choosing to avoid violating Ohio license law.
Many investors who wish to succeed in Ohio as real estate wholesalers find that it is prudent to earn their real estate license as this improves their understanding of Ohio's laws and opens access to many important resources.
Co-wholesaling is a type of real estate investment strategy where a real estate wholesaler teams up with another to finish a real estate investment transaction – together, as a team.
Co-wholesaling resembles wholesaling and is also legally permitted if real estate wholesalers remain within the legal boundaries set forth by Ohio law. As noted above, Ohio real estate wholesalers must vigilantly avoid acting in a manner that can be perceived as someone required to hold a real estate license in Ohio.
To ensure a real estate wholesaler stays within Ohio's legal requirements, it is important to:
Reverse wholesaling is also a legitimate and legal real estate investment strategy if the contract allows for assignments, and they work together to stay within the legal limits established by Ohio lawmakers.
The fundamental difference between reverse wholesaling & traditional wholesaling is that, as its name implies, reverse wholesaling simply reverses the order in which the transaction's steps are accomplished. So, a reverse wholesaler first finds the final end buyer and then seeks to find a property that will meet the end buyer's bottom-line requirements.
There are a few viable exit strategies for reverse real estate wholesalers. They are as follows:
The reverse wholesaling strategy generates a variety of benefits for Ohio real estate wholesalers, as follows:
A contract of sale is a legal document that delineates the purchase or sale's term, depending on the party who is signing. A contract legally defines each party's right to buy/sell real property to another individual. A contract of sale is a complex document that requires specific information that includes -
Source: Judicial Title
From a general perspective, a contract of sale is considered assignable, that is, unless the purchase agreement's language specifically prohibits the use of an assignment or requires the approval of the seller.
An assignment of contract is another legal document that has the power to transfer the rights & the obligations of a purchaser (who is also called the assignor) under a purchase agreement to another buyer (who is also called the assignee). Very often, the final buyer is a cash buyer who then compensates the real estate wholesaler for their work in managing the real estate transaction.
Ohio law is silent about working with assignments of contracts in real estate.
Real estate investing has the potential of being quite lucrative, but there are no guarantees. Therefore, to achieve success, a real estate wholesaler must understand the local laws and how a real estate assignment of contract works.
Investors must remain transparent when wholesaling real estate if they are to stay with the legal confines of Ohio law. A well-written contract of sale is the first step to meeting this investment objective.
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