Is Wholesaling Real Estate Legal In Oklahoma?Jun 15, 2021
Strategically located as a jumping-off point for commerce headed throughout the United States, Oklahoma has enjoyed healthy economic growth in recent years.
Due to this growth, the Sooner State offers a wide range of opportunities for people looking to enter the real estate field. Warm weather, wide-open spaces, and affordable prices are a dynamic combination that spells success for agents, brokers, and wholesalers willing to work hard.
If operating a wholesaling business in Oklahoma sounds like an appealing career option for you, here’s what you should know as you weigh your options.
- What Do You Need To Know About Wholesaling In Oklahoma?
- Is Wholesaling Real Estate Legal In Oklahoma?
- What Are The Wholesaling Laws In Oklahoma?
- Do You Need A Real Estate License To Wholesale In Oklahoma?
- Is Co-Wholesaling Real Estate Legal In Oklahoma?
- Is Reverse Wholesaling Real Estate Legal In Oklahoma?
- Oklahoma Wholesale Real Estate Contract
- Final Thoughts
What Do You Need To Know About Wholesaling In Oklahoma?
Although Oklahoma is the 28th most populous state in America with just under 3.8 million people, it ranks 19th inland area with just under 70,000 square miles.
There are nine cities with populations of 50,000 or more, led by Oklahoma City with just over 655,000 residents.
Source: Oklahoma Demographics
The state is also divided into 77 counties, much of which is sweeping farm and ranch properties, and open land.
The Oklahoma Real Estate Commission (OREC) oversees real estate activities in the state. This includes real estate license, application, and exam oversight.
It does not assist consumers with questions about real estate agents and appraisers, attorneys, home inspectors, mortgage companies, or other providers. Also, the Commission doesn’t help tenants regarding disputes with landlords, unless the landlord is a licensed real estate broker. For these types of issues, consumers will need to contact an attorney to represent their interests.
Potential wholesalers may find value in connecting with the Association of Real Estate License Law Officials (ARELLO), an industry organization that supports jurisdictions in the administration and enforcement of real estate laws. Members get access to materials, events, training and certification programs, and by facilitating collaboration related to best practices in real estate regulation.
Another potentially valuable resource is the Oklahoma Abstractors Board. Abstracting is a somewhat unique term to Oklahoma, but every state requires some form of "abstracting" and the final product the "abstract". Other states call it evidence of title, title report, or a title search. The search process, no matter what it's called, is done in every state.
There are several city and regional real estate trade groups in Oklahoma. Each of these are members of the National Association of REALTORS (NAR).
The Oklahoma Association of REALTORS connects real estate professionals across the state with a variety of resources and networking opportunities.
There are several local REALTOR associations as well. These include:
- Oklahoma City Metropolitan Association of Realtors (OKCMAR)
- Greater Tulsa Association of Realtors (GTAR)
- Norman Board of Realtors (NBR)
- Lawton Board of Realtors (LBR)
- Edmond Board of Realtors (EBR)
Oklahoma’s laws regulating real estate are detailed in the 2019 Oklahoma Statutes Title 60.
Licensing requirements are located in Oklahoma Statutes Title 59. Professions and Occupations §59-858-301.
You can also access a complete library of all Oklahoma statutes at the Thompson Reuters online law library.
Is Wholesaling Real Estate Legal In Oklahoma?
Wholesaling in Oklahoma is legal as long as you follow state laws.
This can be a viable way for first-timers to enter into real estate investing because it offers flexibility and low barriers to entry, especially when properties under market value are involved. In many cases, wholesalers will not need to purchase a property, or they can quickly flip a property they buy without putting in large amounts of cash for renovation and repairs.
Some wholesalers can place a property under contract and then market and assign the right to buy the property to a third-party end buyer in what is known as an Assignment of Contract. They can also buy and sell a property in a single day (known as a Double Closing), or take longer to flip the property using the Buy and Sell method which is sometimes referred to as Wholetailing.
Although it’s not required, many wholesalers opt to get an Oklahoma real estate license. This does create a different set of rules that wholesalers must follow. However, there are several benefits to going this route, so it’s something to consider if you want to make that kind of investment in your career.
What Are The Wholesaling Laws In Oklahoma?
There are no laws specifically related to wholesaling on the books in Oklahoma right now, but that could change.
Predatory Real Estate Wholesaler Prohibition Act
At the time this article is being posted, the Predatory Real Estate Wholesaler Prohibition Act (House Bill No. 3104) is on the Oklahoma governor’s desk for approval. If passed, would create changes in how wholesaling is conducted in Oklahoma.
First, Section 858-301 formalizes that “It shall be unlawful for any person to act as a real estate licensee, or to hold himself or herself out as such, unless the person shall have been licensed to do so under the Oklahoma Real Estate License Code.
“However, nothing in this section shall prevent any person... [corporation, etc.] from acquiring real estate for its own use...”
This highlights a key difference between wholesaling real estate and acting as a real estate broker. Wholesalers enter into purchase agreements to acquire real estate on their own behalf, which remains unrestricted. Real estate brokers act on behalf of another party, which requires licensing.
In addition, HB3104 also limits the ability to publicly market for sale and equitable interest in a real property between an owner and prospective purchaser.
However, as a wholesaler, you will still be able to privately discuss the contract with investors on your pre-screened buyers list that you already have a relationship with. Note the language on lines 19 and 20 below. This is the critical provision of the new law.
Also, this law only potentially impacts wholesalers who want to use the assignment of contract method. You can still assign a contract, you just need to be more careful how you market your rights to the contract if this bill is signed into law.
Because double closing and wholetailing each involve two separate transactions, this law does not apply in those circumstances.
In general, it’s also critical to understand the laws that regulate real estate professionals in Oklahoma. Defining the basics is a good place to start.
Real estate laws are covered extensively under Oklahoma Statutes, Title 59 regulating Professions and Occupations.
Here’s a good place to start.
Under Title 59, §858-102, real estate is defined as:
A real estate broker is defined as:
And a broker associate is defined as:
Marketing and Advertising
The rules for advertising real estate for sale in Oklahoma are very clear and are found in Section 605:10-9-4 - Advertising.
Among other things, unless you have a real estate license, you can’t market and advertise any real estate for sale on behalf of a third-party owner. As a wholesaler, you can advertise the right for a potential end buyer to assume ownership of a contract you have in place with the owner under an Assignment of a Contract agreement.
Do not attempt to market a property you do not own if you don’t have a license. Understand the difference between advertising rights and advertising the actual property.
Do You Need A License To Wholesale Real Estate In Oklahoma?
Although a license is not required to wholesale property in Oklahoma, many people who get into wholesaling choose to get their license. This gives them a deeper understanding of real estate laws and can give them greater latitude when it comes to marketing a property vs. only marketing the rights to a contract they want to assign.
Many wholesalers like the fact that getting a license gives them access to the Multiple Listing Service (MLS), and makes it easier to network with other real estate professionals in their local market.
Another difference is that with a real estate license, you can collect a commission. Without a license, you can only collect an assignment fee when you assign a contract.
Source: Van Education Center
The requirements for getting a license are spelled out in Title 59 §858-302. Eligibility for a license as real estate provisional sales associate—Qualifications—Examination.
This statute states a potential licensee must meet the following:
It’s also important to understand that Oklahoma does allow exceptions for licensing. Those exceptions include:
- If real estate is being acquired for personal use
This is an essential, yet common exception to licensing as it allows real estate investors and wholesalers to acquire property for personal use. This exempts wholesalers from licensing requirements when they are acting as a principal buyer and offering to acquire property for their own purposes.
If you decide to become a licensed real estate professional, you’ll be regulated by the Oklahoma Real Estate Commission which can impose fines when statutes are violated.
These fines could be in addition to any criminal penalties or civil actions as provided for by state and federal laws.
Is Co-Wholesaling Real Estate Legal In Oklahoma?
Co-wholesaling is exactly what it sounds like. Under this arrangement, two or more wholesalers join together to work on one or more deals as a team. A co-wholesaling venture can be an ongoing partnership, or the investor team may come together for a one-time deal.
Typically, the partners will bring individual skills or areas of expertise to the partnership. One could be an expert in financing real estate deals, or have deep pockets to facilitate the money part of the deal, and the other partner may be the networking expert or the resource who actively seeks out deals and brings them to the team for consideration.
For a co-wholesaling partnership to work smoothly, it’s best to vet any partner thoroughly before deciding to do deals together. No matter what, you need to protect your interests. Another way to do this is to enter into a formal joint venture agreement.
Also, consider seeking legal advice from a seasoned contracts or real estate attorney who understands the nuances of partnerships and real estate law.
Above all else, remain ethical not only when it comes to complying with Oklahoma real estate laws, but also when it comes to treating your co-wholesaling partner(s) with honesty and transparency.
Is Reverse Wholesaling Real Estate Legal In Oklahoma?
Reverse wholesaling is legal in Oklahoma. It simply involves reversing the order when compared to how a typical wholesale deal is executed. In other words, reverse wholesalers find end buyers first and then work to find properties that fit the end buyer’s goals and objectives.
Many wholesalers prefer reverse wholesaling because it lets them build long-term relationships with cash buyers who are ready to move quickly on deals. These buyers can become private money lenders when the wholesaler decides to cherry-pick the best deals to BRRRR or fix and flip themselves.
In the long-term, this streamlines the lending process and creates a more solid foundation to do more deals as these relationships are strengthened over time.
Oklahoma Real Estate Wholesale Contract
The Oklahoma Real Estate Commission has created a standardized purchase agreement that can be used in real estate transactions. The first page of the 7-page agreement looks like this.
Purchase contracts are legally enforceable documents and wholesalers often work with real estate attorneys to make sure all language is correct, thus avoiding any issues as the deal progresses.
Unless a contract’s language specifically prohibits the assignment in the agreement, it’s assumed the contract is assignable. This does require a separate agreement and it may also be advisable to work with an attorney to draft this document. A typical assignment contract looks like this.
There are also several disclaimers and disclosures that are required in an Oklahoma real estate transaction. The OREC has also created a standardized form that is used to make sure these disclosures have been discussed.
Specific properties may have additional disclosures, but the following will give you a good overview of what the most common disclosures are:
- Residential Property Condition Disclosure of Disclaimer Form
- Lead-Based Paint/Hazards Disclosures
Wholesaling in Oklahoma can be a financially rewarding and satisfying option for those looking to get into the real estate field. A low financial barrier to entry and the ability to creatively match buyers and sellers appeal to many people.
The key is to make sure that you pay attention to state laws, get help with contracts when needed, and consider getting an Oklahoma real estate license to expand your opportunities even more.
*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