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Is Wholesaling Real Estate Legal In Utah?

Utah is one of America's most unique and fascinating states.  It was admitted to the union as our 45th state in 1896, also making it one of our youngest states. 

Fifty years prior to statehood, Mormons first settled Utah as part of their search for a promised land free from religious persecution. Today, Salt Lake City is the world headquarters of the Church of Jesus Christ of Latter-day Saints.

Mormons still make up about 70% of the state’s 3.2 million people and have considerable influence on many parts of the state and its institutions.

Utah is centrally located making it an important transit center, has a thriving economy, and a relatively young and economically stable population base.

For these reasons and many others, you may be asking yourself if wholesaling real estate is legal in Utah, and if so, what do you need to know if you’re considering this as an income-producing venture.

                                   

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

If you’re considering wholesaling real estate in the Beehive State, it's probably a good idea to start with a high-level overview of Utah.

Utah At A Glance

About two-thirds of Utah’s 84,898 square miles is federally owned, and a little less than one-tenth is owned by the state.  This means many of the state’s population centers are concentrated in certain limited areas.

The economy is driven primarily by manufacturing, tourism, services, agriculture, and mining.  During World War II, several military defense plants and air bases were built.  In addition, during that time, Utah also experienced a uranium boom.

Tourists flock to Utah to enjoy the natural beauty of Bryce, Zion, Arches, and other national parks and a multitude of sculptured natural bridges, arches, and other masterpieces of erosion throughout the Colorado Plateau. The Plateau comprises more than half of Utah's landmass and also includes the Great Salt Lake desert which covers 4000 square miles and includes the world-famous Bonneville Salt Flats. 

Skiing is also another popular tourist activity. There are more than a dozen ski resorts in Utah including several located in or near Park City which was one of the key venues for the 2002 Winter Olympic Games. This area is also home to Robert Redford's world-renowned Sundance Institute and Film Festival.

All of these factors contribute heavily to a vibrant statewide real estate market.

Utah By The Numbers

It’s important to be familiar with important statistical information about Utah as well.

Salt Lake City is the largest and most well-known city in Utah.  Other prominent Utah cities include:

Utah wholesaling real estate cities

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The vast majority of housing units in Utah are detached single-family units.

Utah single family

Many of these units remain affordable with the vast majority valued at $300,000 or less.

Utah real estate investing

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Utah Real Estate Governing Bodies and Associations

Located in the city of Sandy, the primary real estate trade association in Utah is the Utah Association of Realtors (UAR).  There are currently close to 27,000 Realtors licensed in the state and it appears that number is steadily on the rise.

According to the UAR, while overall home sales are down over the past year there have been huge increases in home prices during that same period.

Utah wholesaler properties

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There are also several local Realtor associations serving housing markets in Utah. Some of those larger local organizations are:

Utah Division of Real Estate wholesaling

Under the auspices of the Utah Department of Commerce, the Utah Division of Real Estate (DRE) is located in Salt Lake City and is tasked with protecting the public and promoting responsible business practices through education, licensure, and regulation of real estate, mortgage, and appraisal professionals.

It administers several Utah State laws, including:

The division also allows consumers and industry professionals to search Utah real estate and appraisal license information through a dedicated search page.

                                                  

Is Wholesaling Real Estate Legal In Utah?

The short answer is “yes,” wholesaling real estate in Utah is legal.

However, that answer does come with some caveats.

In simple terms, there are rules and regulations you must follow so that you don't get into any legal trouble with this type of real estate investing.

If you’re going to run into any kind of problem as a wholesaler it's going to be because you don't fully understand what rules and regulations you're bound by as a middleman, or all of the details of common wholesaling strategies such as an assignment of contractdouble closing, or wholetailing.

Title 61 of the Utah General Code governs many of the legalities related to selling real estate in Utah. The vast majority of these laws focus on licensed agents and brokers.

However, by understanding what these rules are, you can also get a firm understanding of what rules and regulations you need to follow if you're an unlicensed wholesaler.

                                                  

What Are The Wholesaling Laws In Utah?

To successfully wholesale properties in Utah, you must make sure you comply with state laws and regulations. Wholesaling can be a lucrative and rewarding career, but you can get into a lot of legal problems unless you pay attention to a few key provisions.

In many cases, if you’re not sure what may apply to you, or if you need help creating purchase agreements or other legal documents, it's always wise to seek the help of a real estate attorney, preferably one who has experience with investment properties and wholesale deals. It may cost you a few dollars but the investment you make will be well worth it.

wholesaling laws Utah

The first and most important law to understand is that if you are an unlicensed wholesaler, and you want to assign a contract that gives a third-party a controlling interest in a piece of real estate, you can only market the rights to the contract and not the piece of the property itself to potential buyers.

Per Utah Code 61-2f-201 - License Required, “Anyone who offers or attempts to offer the purchase, sale, lease, management, or exchange of another person’s property with the expectation of receiving valuable consideration must first obtain a Utah real estate license. An offer or attempt to offer includes advertising of a property or service. Failing to obtain a real estate license before engaging in any of these practices may be a violation of Utah law.”

Another key provision is found in Title 61, Chapter 1 of the Utah Uniform Securities Act and covers securities fraud, including real estate.  It states:

is wholesaling real estate legal

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This means as a wholesaler or a licensed real estate agent, full disclosure about material facts related to the property in question must be disclosed or a person shall be guilty of fraud.

Chapter 1, also clarifies the licensing requirements for those involved in real estate transactions.  In part, it states:

is wholesaling real estate legal in utah

Another important part of the Act is 61-2f-305 which details restrictions on commissions.  This is especially noteworthy since a wholesaler who undertakes an assignment of contract can only collect a fee for their efforts.  It is illegal for them to collect a commission which is only allowed for licensed agents.

Utah wholesaling legality

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Several additional statutes and rules that apply to licensed real estate agents who wholesale through assignable purchase contracts include:

  • 61-2f-306 (1) - Using state approved forms
  • R162-2f-401b (17)(a) - Obtaining written permission to market the property
  • R162-2f-401a (2) - Establishing and defining in writing the licensee’s scope of agency
  • R162-2f-401a (10)(a) - Confirming the prior agency disclosure in the currently approved Real Estate Purchase Contract
  • R162-2f-401a (6)(b) - Disclosing the licensee’s status as a licensee
  • R162-2f-401a (6)(a) - Disclosing that the licensee is a principal in the transaction
  • R162-2f-401a (16)(a)(b) - Disclosing additional compensation and ensuring that the compensation is paid to the principal broker.
  • R162- 2f-401h (1)(2) - Disclosing the licensee's brokerage on all advertisements.

                                                  

Do You Need A License To Wholesale In Utah?

You don’t need a license to wholesale real estate in Utah. However, many people who engage in wholesaling activities do get a real estate license for a variety of reasons.

Licensing is regulated by the Utah Real Estate commission.  Detailed oversight in general provisions explained in Title 61 Chapter 2f under the Real Estate licensing and Practices Act.

According to Title 61-2f-201, a license is required under these circumstances:

Utah real estate license

You may also want to look closer at Title 61-2f-202 which details exempt persons in transactions.

License To Wholesale Real Estate Legally in Utah

As previously mentioned, the Utah Department of Commerce, Division of Real Estate is the administrator for real estate licenses in the state.  There are several requirements if you decide to apply for a Utah real estate license. They include:

  • You must be at least 18 years old. You must be a citizen of the United States or a lawfully admitted alien.
  • You must have a valid Social Security number.
  • You must have a high school diploma or equivalent.
  • You must complete 120 hours of pre-licensing courses.
  • You must complete 18 hours of continuing education for each licensing term.
  • You must meet the statutory licensing qualifications of honesty, integrity, truthfulness, reputation, and competency. (Utah Code Annotated 61-2f).
  • You do not qualify for a real estate license if you have a felony on your record in the last five years, or if you have a misdemeanor involving fraud, misrepresentation, theft, or dishonesty within the past three years

Pre-licensing courses cost between $400 to $525.  There is a $59 exam fee as well.

Before you can get a license, you must successfully pass a State exam. It consists of 110 questions and 165 minutes of writing time. The exam has both a national portion and state portion, and the required passing score is 75% or higher.

If you complete these other requirements, you can apply for a license.  The request must be made within 90 days of passing the exam.  The application fee is $100, as well as a $12 recovery fund fee, a $40 fingerprint processing fee, and a $5 FBI RAPBACK enrollment fee.  This $157 amount is non-refundable.

If you take the exam in Utah, fingerprints will be taken after the exam. If the test is taken outside of Utah, fingerprint cards are available from the Division or a local police station.

                                                  

Is Wholesaling Real Estate Legal In Salt Lake City?

As Utah’s largest city, Salt Lake City represents the place where the most wholesaling real estate deals can take place in the state.  With more than 200,000 people in the greater Salt Lake City area, you should be able to find several potential real estate investors that you can use to create a dynamic cash buyers list.

Because real estate laws apply throughout the state and there do not appear to be any laws specifically related to wholesaling in Salt Lake City, you can legally wholesale real estate in this jurisdiction.

However, in recent years, and in response to some complaints from brokers, the Utah Division of Real Estate has been monitoring wholesaling activities much more closely. This is especially true with the assignment of contract strategy.

It’s been reported that the Division is starting to consider wholesaling a licensed activity.  This means wholesalers may be under heightened scrutiny to meet licensing requirements, disclose wholesale fees to a seller, run the transaction through a brokerage, and disclose an agency relationship, and meet other related compliance issues.  In response, some non-licensed wholesalers have been mounting a legal challenge and the issue does not appear to be resolved yet.

To avoid possible problems in this area, as a non-licensed wholesaler, your best bet is to use a double close or a buy and sell strategy.

You may also want to contact a real estate attorney or other local industry professionals to find out the latest on wholesaling and licensing issues throughout the state.

                                                  

Utah Wholesale Contract

There are two primary real estate contracts used for wholesaling real estate in Utah. Those include:

  1. Real Estate Purchase Contract “REPC”
  2. Assignment Of Interest Addendum To Real Estate Purchase Contract

Real Estate Purchase Contract

The purpose of this form is to solidify the rights of a buyer to purchase a real estate property from a seller. Below is the first page of the primary purchase and sales agreement that’s been approved by the Utah Real Estate Commission and the Office of the Utah Attorney General.


Download Free Wholesale Real Estate Contracts Here (PDF)


Utah real estate purchase contract

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Utah Assignment Contract

Functioning as an addendum to the Real Estate Purchase Contract, the Assignment Of Interest Addendum To Real Estate Purchase Contract effectively transfers the buyer’s interest in the purchase contract to another entity.

Below is the first page of the assignment contract that is provided by the Utah Association of Realtors.

Utah real estate assignment of contract

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Real Estate Skills Tip: In section 1 of the Utah assignment contract, there’s a blank space for inserting an assignment fee that is due to the wholesaler once this document is executed and the deal closes.

                                                  

Final Thoughts

Utah remains an attractive market for real estate wholesalers.  An enviable lifestyle, upward trending population, and rising home costs mean that flippers who work hard have an opportunity to do well.

Given the fact that the barrier of entry to starting a wholesaling business can be low with little or no initial capital outlay, and no mandatory requirement to get a real estate license, many wholesalers like the freedom and flexibility that this type of career can provide them.

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