Virginia is one of the 13 original colonies and was settled more than 400 years ago when the English established Jamestown in 1607.
It's the home state of George Washington, Thomas Jefferson, and other founding fathers. Northern Virginia is close to Washington, D.C., and that's part of the reason it played an important role in the American Revolution and the Civil War.
Known by many names, including Old Dominion, Mother of States, and the Cavalier State, Virginia is an affluent crossroads that makes it one of the key economic and government centers in the United States.
If you’re thinking about investing in Virginia real estate, you may be asking yourself: Is Wholesaling Real Estate Legal In Virginia? This article will help navigate the legal landscape of wholesaling in the Mother of States.
It’s a good idea to get a high-level overview of Virginia to help you better understand market conditions and opportunities.
Officially known as the Commonwealth of Virginia, over 8.6 million people live throughout the state's 42,775 square miles. Some population centers have an extremely high population density which is worth noting to gauge potential wholesaling opportunities.
Virginia is steeped in history and is the birthplace of more U.S. presidents than any other state, including George Washington, Thomas Jefferson, James Madison, James Monroe, William Henry Harrison, John Tyler, Zachary Taylor, and Woodrow Wilson.
The College of William and Mary is the nation's second-oldest institution of higher education and was also where the first law school in America was established in 1779. The Virginia general assembly was established in 1619, making it the oldest current law-making body in North America.
The state is divided into 95 counties and 38 independent cities. The cities are often treated as the equivalent of counties, making Virginia unique in this respect.
Virginia's economy is vibrant and diverse. It is a mix of agriculture, high-tech, and federal government agencies, including the headquarters of the CIA and the U.S. Department of Defense located at the Pentagon in Arlington. Military facilities at Hampton Roads, the state's main port, are the largest in the nation. In all, more than 700,000 Virginians work for government agencies.
Virginia's Loudoun County is not only the fastest-growing county in the state, but it also has the highest median household income in the nation. Northern Virginia is especially affluent. As of 2013, six of the twenty highest-income counties in the United States, including the two highest, were all located in Northern Virginia.
Almost half a million people are employed in the tech industry, which is notable because the median salary in 2020 for these people was $98,292. These jobs are concentrated in Northern Virginia and include several software, communications, and cybersecurity companies.
Virginia's coastal regions have become the country's third-largest producer of seafood anchored by sea scallops, oysters, Chesapeake blue crabs, and hard-shell clams as the largest seafood harvests.
The state's educational system consistently ranks among the top five in the United States. Virginia also has the sixth-highest percentage of residents with bachelor's degrees or higher, with close to 40%.
Virginia wholesalers will be interested to learn that as of 2019, the state's average earnings per job was $63,281, and median household income was $72,600, making both numbers the 11th highest nationwide.
The state's gross domestic product in 2018 was more than $476 billion, ranking it 13th among U.S. states. In addition, before the onset of the COVID-19 pandemic, Virginia's unemployment rate was a minuscule 2.9%.
Much of the state's household income is concentrated in the northern parts of the state, close to Baltimore and Washington, D.C.
All of these indicators point to a robust and active housing market. For example, according to the July 2021 Home Sales Report released by Virginia Realtors, supply has been expanding across Virginia, bringing more options to prospective homebuyers.
More than 17,000 new listings came onto the market in Virginia in July 2021, which is 10% higher than July 2020. Statewide, there were 20,910 active listings at the end of July, about 1,500 more listings than at the end of June, an 8.1% increase.
Despite the uptick in inventory, homes are still selling quickly across Virginia. In July 2021, homes that sold were on the market an average of just 20 days. Homes sold in less than half the time compared to a year ago.
The Home Sales Report also indicated that in July, the statewide median home sales price was $361,000, an 8.7% increase over the July 2020 median price. July's increase reflected a slight slowdown in price growth, as the statewide median home price had been rising at a double-digit rate for 11 out of the past 12 months.
The Virginia Realtors association represents 36,000 real estate professionals engaged in the state's residential and commercial real estate business. The association protects consumers, represents the interests of property owners, and supports Realtors to ensure ethical and fair behavior when Virginians buy, sell and own property.
Wholesalers will find Virginia Realtors to be a great repository for information and contacts. When you're licensed or not, this is an organization that's worth digging into so you can learn as much as possible from a highly reputable source.
The association has a state headquarters and oversees several local associations throughout the state.
The following list represents the more prominent local Realtor associations in Virginia:
In addition, you can access all Virginia Local Association Jurisdictions on the Virginia Realtors website as well.
Under the auspices of the Department of Professional and Occupational Regulation (DPOR), the Virginia Real Estate Board licenses salespersons, brokers, and firms representing others in property transactions. The Board also enforces the state's Fair Housing Law in cases involving real estate licensees and employees.
As an overview regulatory agency, the DPOR determines which professions and occupations including licensure or certification, including real estate professionals. These boards establish minimum competency standards that the DPOR enforces.
Some of the most important of these enforcement actions are:
Yes. However, you must pay attention to state laws to ensure you comply as you begin to wholesale properties.
The most common legal issue where a real estate wholesaler tends to get into trouble is when they inadvertently broker real estate without a license. This trips up many wholesalers, particularly those who use the contract assignment strategy.
If you're using this method, you must understand that you may only market the rights of a contract to potential buyers after you have secured an agreement with a homeowner.
Often, you are searching for distressed properties where motivated sellers are facing foreclosure. You can't market the home itself if you don't have a real estate license. This is a common problem because the assignment of contract strategy provides the lowest barrier of entry into wholesaling, which is why many people start out using this strategy.
There are essentially no costs involved because, as a wholesaler under this type of arrangement, you are not conducting an actual transaction to transfer ownership for a piece of real estate. You enter into a contractual agreement with the homeowner to market the rights to the contract to an eventual end buyer. When the contract is assigned, you collect an assignment fee. You do not collect a commission as you would if you were a licensed real estate professional.
This is especially enticing if you're new to real estate investing and you haven't completed your first deal yet.
A smart wholesaler knows it's in their best interests to understand the laws governing real estate in Virginia as much as possible. An excellent place to grow your education is by picking up a copy of The Virginia Real Estate Manual.
Virginia Realtors published this guide that will answer many of the practical and legal considerations a wholesaler may have when first starting or growing their wholesaling business.
It is an authoritative and convenient one-stop source of annotated statutes and rules for the Virginia real estate industry. It also includes federal fair housing codes.
It's available as a print or ebook for $49 from the official publisher of the Code of Virginia.
While wholesaling real estate is not specifically mentioned in Virginia legal code, the laws in Virginia governing real estate sales are contained in the Code of Virginia Title 54.1 Subtitle II Chapter 21. Real Estate Brokers, Sales Persons and Rental Location Agents.
Part of your job as a flipper is to do your due diligence concerning the legalities of putting together a wholesale deal. To start, we suggest you focus on the following key statutes.
Title 54.1 governs the conduct of Professions and Occupations. The following chapters specifically govern real estate professionals:
Chapter 20.1 Real Estate Appraisers (§§ 54.1-2009 through 54.1-2019)
Chapter 20.2 Real Estate Appraisal Management Companies (§§ 54.1-2020 through 54.1-2023)
Chapter 21 Real Estate Brokers, Sales Persons and Rental Location Agents (§§ 54.1-2100 through 54.1-2146)
Title 55.1 deals specifically with Property and Conveyances. This is where wholesaling professionals would do well to spend as much time as needed to understand Virginia's core laws governing real estate investments.
Some of the more pertinent things to focus on are:
The Commonwealth of Virginia also enacted The Real Estate Transaction Recovery Act which provides relief to eligible consumers who have incurred losses through the improper and dishonest conduct of a licensed real estate salesperson, broker, or firm. Filing a claim does not guarantee payment.
As a wholesaler, you must follow laws about disclosures.
Per the Virginia Real Estate Board:
The Virginia Residential Property Disclosure Act (§ 55.1-700 et seq. of the Code of Virginia) requires the owner of certain residential real property—whenever the property is to be sold or leased with an option to buy—to provide notification to the purchaser of disclosures required by the Act and to advise the purchaser that the disclosures are listed on the Real Estate Board webpage. Certain transfers of residential property are excluded from this requirement (see § 55.1-702).
As such, all selling homeowners in Virginia complete a Residential Property Disclosures Acknowledgement Form. So, if you're wholesaling and using a double close or wholetailing strategy, you must complete this form.
Sellers must also provide buyers with a Residential Property Disclosure Statement as provided by the Virginia Residential Property Disclosure Act: Title 55.1, Chapter 7 of the Code of Virginia.
Sellers may also need to complete one or more of these forms:
If you're not sure whether you need to include these forms as part of the transaction, it might be best to check with an experienced real estate attorney.
If you are involved in flipping a condo unit, take time to review the Condominium Unit Owners' Association Resale Certificate Notice. This document is to be provided with a condominium resale certificate in accordance with §55.1-1990 of the Virginia Condominium Act.
If you're a wholesaler who wants to make some improvements to a property you plan to buy and sell, it's worth reviewing laws governing contractors in Virginia. A good place to start is the Contractor Licensure Consumer Information Sheet.
Two other related regulatory documents published by the Department of Professional and Occupational Regulation that are good to know about are:
The following activities by licensees in Virginia could be seen as improper brokerage commission under Virginia law. While this may not directly apply to real estate wholesalers, it does highlight scenarios of payment that aren’t allowed by the Real Estate Board.
No, but many wholesalers do get a Virginia real estate license for a variety of reasons.
While a license can provide a measure of protection, it also comes with a set of responsibilities. There's a fair amount of work involved in getting a salesperson's or a broker's license as well.
The Virginia Real Estate Board licenses real estate salespersons, brokers, and firms. The decision to join any professional association is voluntary and unrelated to state licensure. State law requires a license to practice real estate but does not require any licensee to be a Realtor. A Realtor is a licensed real estate agent (salesperson or broker) who is also a member of the National Association of Realtors, a private professional organization.
The multi-step licensing process is:
Virginia has reciprocity agreements in place with other states. For details, call the Board at 804-367-8526 (Licensing Section) or 804-367-2406 or by email at [email protected]
There are two primary contracts you'll need to be familiar with as a Virginia wholesaler.
The first is the Virginia REALTORS® Residential Contract of Purchase. Virginia Realtors makes this 10-page fillable purchase agreement available for use and suitable for most residential real estate transactions.
The second document is a standardized assignment of contract. This is sometimes used as an addendum to the purchase contract. In other cases, a party to the transaction may prefer a more customized and specific form to assign the contract.
A typical assignment contract looks like this.
If you're not experienced or comfortable dealing with real estate investors, cash buyers, or any parts of real estate law, it's always a good idea to seek legal advice from an experienced real estate attorney.
Virginia is a land of opportunity in many ways, including those who want to make a career out of wholesaling real estate.
Proximity to major metropolitan areas and a diverse economy fortified by a strong government presence have created an ongoing demand for housing in a market that continues to see escalating prices.
Wholesalers who work hard in this competitive environment can do very well by tapping into bargains at or below market value when they present themselves. The keys are to remain aggressive and be sure and follow Virginia state laws as they apply to real estate transactions.
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