South Carolina is a beautiful and diverse state, steeped in history and with picture-perfect small towns, and friendly locals everywhere you go.
Many people call the Palmetto State home, and more people want to live here than ever before. The same holds true for the entire southeast United States, as more and more people migrate to nearby states such as North Carolina, Georgia, and Florida.
That means there are all kinds of opportunities to do well in the real estate industry. Many people make a great living as traditional agents and brokers, others as real estate investors.
Still, more and more, many people are looking for a flexible alternative which is why many people are exploring real estate wholesaling as a possible career.
The first questions many people ask is whether or not wholesaling is legal in South Carolina?
And if so, what else do I need to know?
Here are some of the answers for you.
There are a couple of key points you need to know before you consider wholesaling real estate in South Carolina.
First, wholesaling is legal, but you must follow certain statutes to comply with state law. They aren't complicated, but if you don't follow the letter of the law, you could end up facing fines and penalties that could cause some big problems for you.
Compliance hinges on the type of wholesaling activity you pursue. The three primary ways to wholesale real estate are through the Assignment of a Contract, The Double Close or a Buy and Sell agreement (sometimes referred to as Wholetailing).
Each of these are structured differently and you must acquaint yourself with the legalities of these methods before starting out.
When you wholesale properties in South Carolina, you must also be transparent. This means disclosing your intentions as a wholesaler, much like a buyer who provides you with disclosures and contingency agreements required for both parties.
Realtor associations throughout South Carolina can be an excellent place for wholesalers to make valuable contacts and gain lots of critical knowledge about local market conditions.
Consider contacting these larger regional associations as a good place to start:
State agencies can also provide an abundance of economic data. The South Carolina Department of Commerce is an excellent place to start. Here is where you’ll get a birds-eye view of the state’s leading indicators.
Individual cities are also very helpful when you’re ready to drill down to a specific market.
Consider some key statistics of the state's five largest cities:
Yes, but you must follow all real estate laws as laid out in Title 40 of the South Carolina State Code of Laws.
Also, all the statutes that apply to real estate licensing laws and policies in South Carolina are governed by the South Carolina Real Estate Commission, a part of the state's Labor, Licensing and Regulation Department (SCLLR) located in Columbia.
To see the latest information and learn more about how the Real Estate Commission regulates Real Estate Brokers, Salespersons, and Property Managers, you can learn a lot with a visit to the commission website.
Wholesaling is also further validated under the South Carolina Code of Laws Section 36-2-210 Delegation of performance; assignment of rights, which states:
Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreement otherwise.
The simple answer is "No," but there are a few things that are good to know about licensing requirements and wholesaling in South Carolina.
Most states use "for another" language in their state licensing laws. This language means that several activities require a license if you do it "for another."
However, South Carolina does not use this provision that sets forth specific exemptions.
South Carolina, real estate law states, in part:
"This chapter does not apply to…the sale, lease, or rental of real estate by an unlicensed owner of real estate who owns any interest in the real estate if the interest being sold, leased, or rented is identical to the owner's legal interest."
However, you must have an interest in the property before you sell it. In lieu of a license, you can have a contract in place, giving you the right to purchase the property. This exempts you from licensing regulations.
A few states limit real estate activities, even if you are acting on a property in which you have an interest.
Maryland, Michigan, Minnesota, South Dakota, and Wisconsin limit the number and frequency of real estate transactions before you need a real estate license. For example, in Michigan, you're limited to four transactions annually before you must have a license.
Without a license, you can't market a property if you want to assign a contract. You can only market the rights to assign the contract. Understand this critical difference to stay on the right side of the law.
To avoid potential conflicts or constraints, many wholesalers do get real estate licenses. To see the requirements to become a Realtor, you can visit the South Carolina Real Estate Commission website for complete details.
There are no laws that specifically address wholesaling in South Carolina. That means general real estate laws will govern all transactions involving property in the state.
Real estate laws are covered under the South Carolina Code of Laws. The governing body to oversee the pertinent codes is the 10-member South Carolina Real Estate Commission under the auspices of the Department of Labor, Licensing, and Regulation.
You can find laws governing South Carolina Real Estate Licensing in Chapter 57 of Title 40 of the state's statutes.
Similarly, laws governing real estate education are found in Chapter 105.
To apply for a real estate license, you can do so online at this link.
Wholesalers also need to be aware of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2607 (2005). This prohibits kickbacks and unearned fees, including any fee, kickback, or anything of value being given to or received by anyone in any business that is incident to or part of a settlement service.
Violating RESPA can result in criminal penalties of up to $10,000 and one year in confinement. Private lawsuits can result in a civil penalty of up to three times the amount paid for the service.
According to the statute:
"Settlement services" includes any service provided in connection with a real estate settlement including, but not limited to, title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate agent or a broker, the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and the handling of the processing and closing of settlement. "Thing of value" includes any payment, advance, funds, loan, service, or other consideration.
When in doubt, it's always best to do additional research or consult a real estate attorney to ensure you are in full compliance with all South Carolina real estate laws, especially if you are a new wholesaler.
The key to legally wholesaling real estate in South Carolina is to learn the processes and follow state laws at all times.
You must be honest and transparent in your dealings. Also, be willing to spend a few well-placed dollars to get legal help when you need it.
It is critical to fully understand the mechanics and legalities of how various types of wholesaling deals work.
For example, if you use the Assignment of a Contract method, you cannot market a property. You can only market the contract's rights to buy the property you have placed under a purchase agreement with the seller. You can only market a property in South Carolina if you have a real estate license.
Also, you are paid a fee when you assign the contract vs. receiving a commission which would be the case you were a real estate agent affiliated with a brokerage who sells a property on behalf of an owner.
If you wholesale a property using either The Double Close or a Buy and Sell (Wholetailing) agreement, you are completing two separate transactions.
These methods require buyer funding to complete the first transaction with the seller. The wholesaler does not collect an assignment fee. Instead, they collect a profit from the sale of the investment property to a buyer they have already lined up.
A Double Close refers to when both transactions are completed in a day or two. A Buy and Sell agreement is the same thing, except the timeframe for buying and selling takes days or weeks to complete both parts of the deal.
A Buying and Selling method is also two separate transactions, but the timing is spaced farther apart, sometimes days or weeks after the wholesaler completes the original purchase.
Wholesalers sell the property to an end buyer/investor who will rehab and then flip the property in most cases. In some cases, a wholesaler might perform minor maintenance or upgrades before selling to a final buyer.
While assigning a contract means no initial cash outlay, the wholesaler must disclose the amount of the fee they will collect upon completion of the assignment.
With the other two types of methods, since they involve two separate transactions, the wholesaler does not need to disclose how much profit they are making, giving them added leverage when putting together a deal.
Co-wholesaling is the act of partnering with one or more other entities to complete wholesaling transactions.
People often choose to work on wholesale deals because they want to do a greater volume of deals, or want added muscle in areas where they are weak. For example, one partner will often search out properties to place under contract while the other partner provides financing resources, works with lenders, seeks out legal advice, determines market value, or assists in negotiating a purchase price.
While you should always vet potential partners in a co-wholesaling arrangement, it is also smart to create a legal and binding co-wholesaling agreement that protects your interests and spells out in detail the expectations for each co-wholesaler.
It's also important to be transparent with any seller that you have additional partners working on your deal.
Reverse wholesaling in South Carolina is exactly what it sounds like. You simply reverse the steps in a wholesaling deal to facilitate a real estate transaction.
Essentially, this means lining up potential buyers before you find a suitable property and execute a purchase contract. Many wholesalers have created buyers lists so they can move quickly when deals arise. This creates more stable and long-term relationships with buyers while also creating a more stable exit strategy for the wholesaler.
As long as you follow laws and processes on the books regarding wholesaling activities in South Carolina, reverse wholesaling is a legal and legitimate activity.
Charleston, Columbia, Myrtle Beach, and other real estate markets throughout South Carolina offer wholesalers excellent opportunities to structure real estate deals, find motivated sellers, and place properties under contract.
But you can put together a deal just about anywhere and with pretty much any kind of property under the right circumstances.
Like any other endeavor, running a wholesaling business is about dedication, knowledge, and hard work to produce results over time.
Understand what the state laws and statutes are, get legal and contract help when it's prudent, and you should be able to enjoy a rewarding wholesaling experience in South Carolina.
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