Is Wholesaling Real Estate Legal In Oregon?

Real estate wholesaling is a strategy that is often a preferred investment strategy – especially for new investors because it provides a viable, legal investment technique that only mandates the provision of an earnest money deposit – which is relatively insignificant for real estate.

In addition to the appealing cash flow requirements of wholesaling, its recent popularity can be attributed to tremendous appreciation realized since the beginning of the COVID-19 pandemic, as real estate wholesaling aligns well with real estate prices heading north.

Wholesaling and flipping are sister-investment strategies as both searches for real property that has been priced below market value. Generally, because motivated sellers are facing a treacherous financial path, like foreclosure.  In each of these investment strategies, the investor is acting as a middleman.

The primary difference between the two is that the wholesaler assigns the property for a profit (often called the assignment fee) without having the need to spend a lot of money on rehabbing the subject property. 

But is it legal to wholesale real estate in Oregon? The short answer is yes – a wholesaling deal in Oregon is legal if the transaction does not violate state or local laws. 

Real estate wholesalers acquire the rights to buy a home – when they sign a legally enforceable purchase contract with the seller of the property. These acquired rights are known in the legal realm as equitable title or equitable interest.

Equitable title awards the contracted buyer the right to sell or assign these contractual rights to other potential buyers, often known as an end buyer. This legal instrument that is used to accomplish this objective is known as an assignment of contract.

This is accomplished under the Doctrine of Equitable Conversion -

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The wholesaling business is also a great way for newer investors to learn the machinations of the market while building a network of lenders and a buyers list of cash buyers, with little risk of losing significant capital.

The modern digital real estate market offers many online sources that can help wholesalers locate the right investment property – be it an owner-occupied or rental property. For example, sites like Redfin or Zillow, Craigslist are great starting points, but you may need to consider researching estate liquidations, foreclosure auctions, bankruptcies, divorce, or foreclose.

• What Do You Need To Know About Wholesaling Houses In Oregon?
• Is Wholesaling Real Estate Legal In Oregon?
• What Are The Wholesaling Laws In Oregon?
• Do You Need A License To Wholesale Real Estate In Oregon?
• Final Thoughts

What Do You Need To Know About Wholesaling Houses In Oregon?

The state of Oregon, aka, the Beaver State, is located in the Pacific Northwest region of the U.S. Oregon was the 33^rd state to enter the Union in 1859. The total area for the state is 98,381 square miles, which makes Oregon the 9^th largest state and about twice the size of the state of New York.

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Much of Oregon’s northern border with Washington State is defined by the Columbia River, with Idaho, Nevada, California, and the Pacific Ocean completing the remaining state borders.

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The population of Oregon in 2021, is as follows –

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The five largest Oregon cities include –

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The city of Portland is home to a major port in Willamette Valley, formed at the meeting of the Columbia and Willamette rivers. The greater Portland metro area is home, with a population that nears 2.5 million (or approximately 47% of the state’s population), includes three of the largest cities in the state.

The state capital in Salem, is ranked 3^rd in terms of population.

These are the larger trade and professional organizations in the state dedicated to the real estate profession. Each of these associations is a member of the National Association of REALTORS (NAR) –

• The Oregon REALTORS (OR)

Founded in the 1930s to organize Oregon’s real estate market and professionals, the Oregon REALTORS offers its members a variety of benefits including legal resources, continuing education, networking opportunities, professional development, and industry advocacy.

• The Willamette Association of REALTORS (WOAR)

The WOAR was formed in the late 1990s when two local real estate boards. The Willamette Association of REALTORS serves more than 600 real estate professionals and homeowners in Benton County and Linn County.

• The Rogue Valley Association of REALTORS (RVAR)

Established in the mid-1920s, the RVAR is a professional organization in Oregon with nearly 1,000 members in Jackson County. RVAR seeks to be a leading advocate and industry voice in Southern Oregon.

• The Klamath County Association of REALTORS (KCAR)

The Klamath County Association of REALTORS operates as a nonprofit organization that serves the professionals engaged in Klamath County’s real estate market. Members are offered professional development opportunities and supportive/educational services, among others.

• The Central Oregon Association of REALTORS (COAR)

The COAR is the professional organization that seeks to be the voice of Jefferson, Crook, Harney, and Deschutes counties in Oregon. With more than 400 members, the COAR seeks to build better, sustainable communities while proactively advocating for property rights.

The Oregon Real Estate Agency (OREA) is responsible for monitoring and managing the real estate activities and licenses in the state. The authorization for OREA is found in ORS Chapter 863. This state agency issues two types of real estate sales licenses. ORS Chapter 696.020 (2) notes -

The Oregon Real Estate Agency and state law notes that real property is defined as follows –

This state agency issues two types of real estate sales licenses – a real estate broker (or real estate licensee) and a principal real estate broker, who is responsible for managing the brokerage and licensees. These licenses are renewed every two years, with specific requirements. Each defined below –

Real estate activities in Oregon are defined in OR 696.020- 17 (a-n) as follows –

(17) “Professional real estate activity” means any of the following actions, when engaged in for another and for compensation or with the intention or in the expectation or upon the promise of receiving or collecting compensation, by any person who:

(a) Sells, exchanges, purchases, rents or leases real estate;

(b) Offers to sell, exchange, purchase, rent or lease real estate;

(c) Negotiates, offers, attempts or agrees to negotiate the sale, exchange, purchase, rental or leasing of real estate;

(d) Lists, offers, attempts or agrees to list real estate for sale;

(e) Offers, attempts or agrees to perform or provide a competitive market analysis or letter opinion, to represent a taxpayer under ORS 305.239 (Qualifications of persons representing taxpayer) or 309.100 (Petitions for reduction of property value) or to give an opinion in any administrative or judicial proceeding regarding the value of real estate for taxation, except when the activity is performed by a state certified appraiser or state licensed appraiser;

(f) Auctions, offers, attempts or agrees to auction real estate;

(g) Buys, sells, offers to buy or sell or otherwise deals in options on real estate;

(h) Engages in management of rental real estate;

(i) Purports to be engaged in the business of buying, selling, exchanging, renting or leasing real estate;

(j) Assists or directs in the procuring of prospects, calculated to result in the sale, exchange, leasing or rental of real estate;

(k) Assists or directs in the negotiation or closing of any transaction calculated or intended to result in the sale, exchange, leasing or rental of real estate;

(L) Except as otherwise provided in ORS 696.030 (Exemptions) (12), advises, counsels, consults or analyzes in connection with real estate values, sales or dispositions, including dispositions through eminent domain procedures;

(m) Advises, counsels, consults or analyzes in connection with the acquisition or sale of real estate by an entity if the purpose of the entity is investment in real estate; or

(n) Performs real estate marketing activity as described in ORS 696.600 (Definitions for ORS 696.392, 696.600 to 696.785 and 696.995).

Exceptions to Oregon License Law

Oregon license law offers 29 exceptions to this law. These are found in ORS 696.030 – Exemptions. Among the many exceptions to Oregon license law is this relevant provision (#17 in ORS 696.030 – Exemptions) – which notes that a non-licensed person may transfer/acquire an interest in real estate that is owned or to be owned –

Oregon Real Estate Licensing Reciprocity

The established rules are as follows -

In addition, the state of Oregon has active reciprocal licensing agreements with five jurisdictions, as follows

• Alabama
• Alberta
• Georgia
• Nebraska
• South Dakota

Further, the Oregon Real Estate Agency will potentially issue a temporary license for real estate activities to a spouse or domestic partner of a US military member who is a licensed real estate agent.

Is Wholesaling Real Estate Legal In Oregon?

Yes, wholesaling real estate in Oregon is legal if the wholesaler’s actions do not cross the legal boundaries set forth by Oregon state law.  

To avoid illegally wholesaling in Oregon, it is essential for real estate wholesalers to understand which actions require a real estate broker's license. Staying within Oregon license and state law makes wholesaling real estate legal and profitable.

The key to wholesaling in Oregon is to manage the transaction in a way that DOES NOT require a real estate license issued by the state.

The real estate contract (aka the purchase agreement) is the legal instrument that awards the buyer (of an executed contract) the legal right to sell and ultimately assign their equitable interest to another buyer or also called cash buyer – pursuant to the terms delineated in the contract. 

It is noted that most contracts of sale are, by default, assignable. However, a purchase agreement may be revised or modified to fit the wholesale deal’s specifics. This may include a contract provision that requires the seller’s written approval prior to assigning.

As a reminder - wholesaling real estate in Oregon requires that the investor exclusively sell their equitable interest in the contract – they cannot sell real property.

Real Estate Skills Tip: Attorneys are NOT a requirement for real estate closings in Oregon, but legal advice is recommended.

Although it is not customary or mandatory to hire a real estate attorney to help with a real estate closing, given the significance of the potential consequences of a real estate transaction, choosing to have an experienced attorney is a prudent decision. Having an attorney by your side is definitely smart.

What Are The Wholesaling Laws In Oregon?

There are no specific real estate laws in Oregon related to wholesaling real estate. The Oregon real estate statute that sets forth the relevant laws for licensing and activities is set forth by ORS 696 – Real Estate and Escrow Activities. 

In fact, ORS 696.030 – Exemptions notes the following individual is exempt from real estate license law –

(17) A nonlicensed individual transferring or acquiring an interest in real estate owned or to be owned by the nonlicensed individual.

The key to wholesaling real estate in Oregon is for investors and wholesalers to avoid legality issues by avoiding the actions that would require the individual to hold an Oregon real estate license.

As a reminder, the following are the defined actions of an individual requiring a license in Oregon.

Real estate activities in Oregon are defined in ORS 696.010- 17 (a-n) as follows –

The key to remaining compliant as a real estate wholesaler in Oregon is to avoid selling/marketing/negotiating/assisting in the sale of real estate.

As a wholesaler, you must sell the only legally permitted asset – YOUR EQUITABLE INTEREST AWARDED BY THE EXECUTED CONTRACT.

Consequences for Violating Oregon License Law

Pursuant to ORS 696.995, these are the civil penalties for violation ­­license law, among others –

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ORS 696.990 (1 – 10)­ denotes the Grounds for Discipline, which may result in the suspension or revocation of a real estate license. The most relevant legal provisions are as follows –

Do You Need A License To Wholesale Real Estate In Oregon?

No.

Real estate wholesalers in Oregon are not required to hold a real estate license if they avoid selling real property and market the only asset they are legally allowed to sell. This would be the equitable interest awarded as the purchaser in the real estate contract.

Those new to real estate wholesaling would benefit from following these proven strategies and suggestions if they are to steer clear of unlawful actions.

• Real estate deals should be conducted with transparency, which means that it would behoove the real estate wholesaler to disclose their wholesaling intentions. A finely worded purchase agreement is the most straightforward way to remain transparent throughout the wholesale deal.
• A wholesaler, like any successful salesperson, must appropriately manage the expectations of the seller.
• A real estate wholesaler’s actions should be managed with veracity and honor.
• A real estate wholesaler should provide disclaimers if required.
• A real estate wholesaler CANNOT market or sell the wholesale properties connected to their equitable interest. They can market/sell the right to purchase real property as defined by the purchase agreement’s terms. 

Oregon Real Estate Wholesaling Exit Strategies

Real estate wholesalers operating in the Oregon real estate market have several exit strategies from which to choose -

• The Buy & Sell Wholesale Exit Strategy
• The Buy & Assign Wholesale Exit Strategy
• The Double Close Wholesale Exit Strategy – if following a double closing exit strategy, a real estate wholesaler will actually complete two closings – often the same day and even back-to-back. It is noted that this may be the costlier of exit options (with closing costs generated from each closing), but likely offers the most protection against allegations of the violation of license law in Oregon.
• Wholetailing

Final Thoughts

As an overall investment strategy, real estate investing has never offered guarantees. Real estate investing does provide varying and continually evolving investment opportunities to savvy, well-informed real estate investors.  All real estate investors must have a decent understanding of the cyclical nature of real estate if they are ready for the different investment opportunities created by the market’s varying cycles.

Currently, real estate wholesaling has become a wildly popular real estate investment strategy because of its limited capital requirements, coupled with a market characterized by an acceleration in prices. In this appreciating marketplace, wholesaling can be profitable as well as legal.

Wholesaling real estate allows investors to reduce many of the potential risks associated with flipping houses as the investor is not required to tie up significant amounts of capital for a long time or be dependent on the cost of construction, which may vary over time. 

However, like any investment investors must approach wholesaling with judiciousness, transparency, and awareness of their actions if they are to toe the line of Oregon state law. Wholesalers who have gone through proper training and operate within the legal lines of Oregon law will find tremendous opportunities across the state.