Is Wholesaling Real Estate Legal In Vermont?

Real estate wholesaling is an investment technique that has grown in popularity in the recent past. Its current rise in popularity is mainly due to the nature of the current real estate market – a seller’s market characterized by rapid appreciation and high demand.

Wholesaling real estate offers a great starting point for new investors who have little capital with which to work. Vermont real estate wholesalers search for available homes with a purchase price below market value – usually because the seller is facing financial hardship or is in a hurry to move.

Real estate investors locate wholesale opportunities using investment properties, owner-occupied properties, or rental properties, etc.  With sites like Zillow, Redfin, & online foreclosure auctions, the modern digital landscape offers an easily accessible conduit to real estate opportunities in ways never thought possible. The 21st-century real estate market allows new wholesalers to begin to develop a lender network and curated list of cash buyers, two keys to succeeding in wholesaling real estate.

Real estate wholesalers acquire the rights or beneficial interest (through the Principle of Equitable Interest) to buy the subject wholesale property by signing a legally enforceable real estate contract. The rearranging of property ownership and rights is established under what is known in the legal realm as the Doctrine of Equitable Conversion.

Source

Investors who possess equitable title (or equitable interest) have the option of selling/assigning their contractual rights to another potential buyer – who is referred to as the end buyer or a cash buyer – using the legal instrument known as an assignment of contract.

Wholesaling properties resemble another real estate investment known as flipping houses, except a flipper must traditionally take title for the short-term, with the intent to renovate/update/rehab the property and then sell. 

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

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

The state of Vermont, the Green Mountain State, was the 14th state admitted to the Union in 1791. Vermont is a part of New England and the only state in the region without a border on the Atlantic Ocean. Vermont's northern border is adjacent to the country of Canada, New Hampshire sits to its east, New York State to its west, & Massachusetts to its south. Other New England states include Connecticut, Rhode Island, and Maine.

Source

Vermont is recognized to be the second least-populated state - only Wyoming has fewer residents. The state population in 2021 population is as follows –

Source

The state’s total area is 9,616 square miles. Vermont’s highest elevation of 4,395 feet above sea level found at Mount Mansfield –

Source

Vermont’s five largest cities include –

Source

The state capital of Vermont is Montpelier is the 8^th largest city in the state. Burlington is Vermont’s largest city and anchors the Greater Metro Burlington area with a population of 221,160 as of 2020. The greater Burlington metropolitan area’s population is equivalent to approximately 35% of Vermont’s total population -

Source

The following list represents the largest trade and/or professional organizations in Vermont for real estate professionals. Each of these real estate-related associations is a member organization of the National Association of REALTORS (NAR), an organization with more than 1 million members nationwide.

• The Vermont Association of REALTORS (VAR)

The Vermont Association of REALTORS was established in the mid-1940s and now serves more than 1,600 real estate professional members. The VAR administers the state’s nine local real estate boards and is a member of the NAR. VAR’s mission is to offer support and resources to members and advocate for Vermont property owner rights.

• The Northwestern Vermont Board of REALTORS (NVBR)

Established in 1968, the NVBR serves realtors and affiliated businesses across these counties - Chittenden, Franklin, and Grand Isle. NVBR provides its professional members with industry news, professional development, networking events, and other relevant resources.

• The Lamoille Area Board of REALTORS (LABR)

Founded in 2007 and located in Stowe, Vermont, the LABR serves the real estate community by offering the resources and tools for professionals to serve the public with the highest level of service.

• The Addison County Board of REALTORS (ACBOR)

Established in the early 1980s in Montpelier, the ACBR is a real estate professional organization representing more than 50 real estate-related professionals across ten real estate brokerages in and around the capital region.

• The Southern Central Vermont Board of REALTORS (SCVBR)

Established in 2008, the SCVBR serves the real estate professional and community in the south and central portions of the Green Mountain State in matters of advocacy, ethics, and professional real estate practices

According to Zillow, in August 2021, the median home price as of August 2021 in Vermont was $308,300, which is about a 13% increase over the previous year. However, in comparison, the median home sale price in the United States as of August 2021 was $356,700 –

Vermont’s Secretary of State’s Office of Professional Regulation (OPR) administers and enforces the real estate laws and regulations in Vermont. Vermont real estate laws are noted to be among the most restrictive in the nation concerning sustainability and the protection of its natural environment. The Secretary of State, the Vermont Real Estate Commission, and the OPR combine efforts to administer the licensing laws for real estate professionals. Vermont offers online services to facilitate real estate licensing in the state. Vermont’s Real Estate Commission’s authority is found in 26 V.S.A. § 2251.

The Real Estate Commission in Vermont is a seven-member board, with members appointed by Vermont’s governor.

Vermont grants two types of real estate licenses which expire every two years. Renewals require 16 hours of continuing education for real estate agents or 24 hours of continuing education for real estate brokers (26 VSA § 2293).

The first real estate license issued by Vermont is the salesperson license -

Source

The second real estate license issued by Vermont is a broker license –

Note that Provision 4 (Listed below as A – G) defines the actions that require either a Vermont real estate salesperson or real estate broker’s license

Vermont real estate law defines real estate as follows –

Vermont law offers exceptions to its license law. These are detailed below. 

Vermont’s License Reciprocity

Vermont offers real estate licensees reciprocity, as follows –

Source

Source

Vermont offers this provision for nonresident brokers –

Source

It is noted that New Hampshire explicitly denotes a reciprocal relationship with Vermont real estate licenses.

Related: Wholesaling Cold Calling Script - The (Ultimate) Guide

Is Wholesaling Real Estate Legal In Vermont?

The qualified answer is yes. However, the final determinant of the legality is based upon the language in the contract of sale and a real estate wholesaler’s actions during the transaction. 

Wholesaling real estate in Vermont is legal if the wholesaler makes sure that their choices and actions do not violate a Vermont legal statute. 

A real estate wholesale deal mandates that the real estate investor legally commit to purchasing real property with its current owner through the purchase contract. The provision of an earnest money deposit in an escrow account is the act of good faith that defines the legal commitment.

The contract of sale or purchase agreement is the legal tool that awards the buyer the legal right to sell/market/assign the contract’s subject property in accordance with the terms and provisions of the contract. 

A purchase agreement is known in legalese as a bilateral contract. This means that each of the parties to the contract must perform the requirements denoted in the purchase agreement. Most purchase contracts, by default, are assignable. But a contract can be modified to include either the prohibition of assignments or a conditional assignment based on the homeowner’s or seller's written approval. 

Wholesaling in Vermont requires that the investor remains cognizant of the fact that they can only sell their equitable interest in the contract – THEY CANNOT SELL THE PROPERTY OR THEIR INTEREST IN THE PROPERTY

Vermont is an Attorney-Close State

Additionally, it is noted that Vermont is recognized as an "Attorney Closing State.” In Vermont, all real estate transactions must be done by a real estate attorney licensed by Vermont’s State Bar.

And while this may seem like an extra cost, this mandate offers excellent protection to wholesalers in Vermont. As a result, a Vermont real estate attorney can become an excellent resource for a real estate wholesaler, helping guide the investor through the transaction to a legal conclusion. 

What Are The Wholesaling Laws In Vermont?

In Vermont, laws relating to the practice of real estate are found in Title 26, Chapter 41 – Real Estate Brokers and Salespersons.

The key to wholesaling in Vermont is to avoid the actions requiring a state-issued real estate license. These actions include the following –

(A) lists, offers, attempts, or agrees to list real estate or any interest therein for sale or exchange;

(B) sells, exchanges, or purchases real estate or any interest therein;

(C) offers to sell, exchange, or purchase real estate or any interest therein;

(D) negotiates, or offers, attempts, or agrees to negotiate the sale, exchange, or purchase of real estate, or any interest therein;

(E) buys, sells, offers to buy or sell, or otherwise deals in options on real estate or any interest therein;

(F) advertises or holds himself or herself out as being engaged in the business of buying, selling, or exchanging real estate or any interest therein;

(G) assists or directs in the procuring of prospects, calculated to result in the sale or exchange of real estate or any interest therein; however, a nonlicensed employee of a licensee shall be allowed to respond to inquiries from members of the public, so long as the employee makes it clear that he or she is not licensed and that any information provided should be confirmed by a licensed person.

This sentiment is further noted in 26 V.S.A. § 2212 –

The consequences & penalties of violating Vermont’s license law, regarding unauthorized practice, are found in VSA § 127.

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

No, real estate wholesalers in Vermont do not need to earn a real estate license if their actions and choices do not violate Vermont’s state laws.

Real estate wholesalers would benefit from following these suggestions, which will help them avoid potential legal issues in Vermont -

• Being transparent throughout the wholesale transaction, which should include one’s intentions. A well-written contract of sale is the easiest way to remain transparent. 
• Appropriately managing the expectations of relevant parties.
• Acting with integrity. Offer a disclaimer when appropriate.
• Consulting with a legal professional for clarification & protection.

Don’t market/sell the real property. Do market/sell your right to purchase – your equitable interest, as defined by the contract’s terms.

Exit Strategies For Vermont Real Estate Wholesalers

Wholesalers can have several viable exit strategies for Vermont reverse real estate wholesalers.

• They can execute Buy & Sell Exit Strategy
• They can execute Buy & Assign Exit Strategy
• They can execute a Double Close– a closing strategy during which a wholesaler buys and sells the same property on the same day – maybe even back-to-back closing. But remember, a double close can be more expensive as two closings might mean two sets of closing costs.

Final Thoughts

Real estate investing has traditionally been an appealing career for entrepreneurs and business types. In Vermont, wholesaling real estate is a legal option for investors who understand the boundaries defined by Vermont’s legal limits and are prepared to accomplish their investment goals within the confines of Vermont law.

A well-defined purchase agreement, a seasoned real estate lawyer, sound legal advice, and having proper training offer a real estate wholesaler the most effective protection from Vermont’s established license and real estate laws.

*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