Is Wholesaling Real Estate Legal In West Virginia?

Real estate investing is an investment technique that has exploded onto the real estate scene recently to the surprise of many. Similar to a flipper, flipping houses, wholesaling properties is designed for investors to enter the real estate market with a reduced amount of capital than typically needed for more traditional real estate investments.

With its recent rise in popularity, real estate agents and licensees have voiced their objections to the process of wholesaling real estate – asserting that a wholesaler takes a circuitous route to avoid West Virginia’s license law. And in doing so, the real estate wholesaler’s actions are purported to rise to the level that requires a real estate salesperson or broker’s license in the state.

But vocal opponents fail to recognize that the concept of wholesaling is part & parcel of a healthy economy – implemented in many ways - from the local gas station to supermarkets and beyond. And the assertion that wholesaling violates West Virginia law simply ignores the fact that real estate wholesalers are not selling real property per se, but their beneficial interest to purchase the property awarded through a legally enforceable contract of sale. 

A real estate wholesaler finds a property they wish to purchase, which is typically priced below market value. The reduced price is usually because there is a motivated seller – with financial motivations to sell their investment property or rental property. The capital needed to complete a wholesale deal would be applied to the provision of an earnest money deposit – a measure of good faith held in escrow after signing the purchase contract.

An executed contract follows the Doctrine of Equitable Conversion (or Equitable Title or Equitable Interest). This legal principle redefines the property’s ownership while the home is under contract to be sold, awaiting the closing.

The Doctrine of Equitable Conversion legally provides the buyer with equitable interest in the property, which includes the ability to assign the contract to other cash buyers. This transfer of the buyer’s ‘purchasing rights’ is done with a legal instrument known as the assignment of contract. That is unless it is specifically prohibited by a provision in the purchase agreement. The seller’s interest converts to personal property and is used as security until closing.

The current real estate market offers investors a digital landscape, with investment opportunities often available through one of the many sites online. Consider reviewing the properties that are being sold due to a divorce, an estate liquidation, or a foreclosure, to name a few.

Wholesaling real estate is a practical way to gain market experience and to build a buyers list of potential buyers or end buyers who are ready to buy the property that meets their investment objectives.

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

What Do You Need To Know About Wholesaling Houses In West Virginia?

West Virginia is the 35^th state. West Virginia reached statehood in 1863 at the beginning of the Civil War and was a key state along the North/South border at that time. West Virginia covers approximately 24,230 square miles, with only 152 square miles of water.

West Virginia is known for its rolling hills and mountains. It is a significant coal producer - generating the second most coal production in the nation. The highest elevation in West Virginia is Spruce Knob – in the eastern portion of the state -

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Spruce Knob is noted to be the highest point in the eastern portion of the state - located between The Blue Ridge Mountains of Virginia and New York’s Adirondacks. In 2021, the population of West Virginia is as follows –

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The five largest cities in West Virginia include -

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The state capital, Charleston, is also its largest city. The largest demographic statistical area combines West Virginia’s two largest cities and three counties and accounts for approximately half of the state’s residents.

The following represents West Virginia’s larger professional organizations dedicated to the real estate profession. Each of these West Virginia associations is a member of the National Association of REALTORS (NAR) –

• The West Virginia Association of REALTORS (WVAR)

The WVAR is a state-wide professional organization supporting property owners and real estate professionals. The West Virginia Association of REALTORS offers a variety of member benefits, including E & O insurance, a legal hotline, a political action committee, and a safety academy for licensed real estate agents, to name a few.

• The Kanawha Valley Board of REALTORS (KWBR)

Located in Charleston, the KWBR operates as the largest REALTOR board in the state, covering east and central West Virginia. The Kanawha Valley BOR performs as a trusted leader and real estate advocate in the communities they serve.

• The Eastern Panhandle Board of REALTORS (EPBR)

Incorporated in the late 1970s, the EPBR is West Virginia’s panhandle local real estate board. The Eastern Panhandle Board of REALTORS seeks to promote property rights and equal housing across the area with progressive leadership, education, and accountability initiatives.

• The Huntington Board of REALTORS (HBR)

Founded in 1938, the HBR is a wealth of information and resources in support of property owners and real estate professionals. The HBR offers guidance and advice to homeowners, consumers, and real estate agents licensed in the state or by reciprocity.

• The Greenbrier Valley Board of REALTORS (GVBR)

The GVBR was established in the mid-1990s to unite and support real estate agents and professionals in and around the Lewisburg vicinity. The Greenbrier Valley Board of REALTORS seeks to maintain the highest ethical standards of all members through shared respect.

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According to Zillow, in August 2021, the median home price as of August 2021 in West Virginia is $118,581, which is about an 8% increase year over year. However, in comparison, the median home sale price in the United States as of August 2021 was $356,700 –

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The reduced cost of homes in West Virginia – with a median price equivalent to about 1/3 of any home in the country, makes the West Virginia real estate market quite accessible compared to most other states.

Established in 1937, the West Virginia Real Estate Commission (REC) is tasked with the responsibility of protecting property owners and the real estate market in the state. The commission’s power and duties are set forth in the provisions of this article - WV Code §30-40-7. The Real Estate Commission offers two types of real estate agent licenses for West Virginia residents who work in a registered real estate brokerage –

• A Real Estate Salesperson License 

• A Real Estate Broker license – which can be a broker or associate broker, defined as follows.

West Virginia also offers non-resident salesperson and non-resident broker’s license opportunities for those who hold a license in another jurisdiction. The licensing requirements of nonresidents are found in West Virginia code §30-40-15, as follows -

West Virginia is an Attorney-Close State

Because state law considers the closing processes of real estate transactions as the practice of law, all retail and wholesale real estate deals within the state must use a real estate attorney licensed by West Virginia’s state bar. This requirement will likely help guide investors to avoid legality issues and consequences.

Is Wholesaling Real Estate Legal In West Virginia?

Yes, wholesaling real estate in the Mountain State of West Virginia is within legal boundaries. If a real estate wholesaler vigilantly navigates the transactions without overstepping the legal boundaries of West Virginia’s license law.

A contract of sale is typically executed as a bilateral real estate contract – which means that both parties (i.e., the buyer & the seller) must perform and meet the terms listed in the purchase agreement.  Most contracts are assignable, by default, that is, unless the agreement specifically states otherwise.

The key to navigating a business with wholesale properties is understanding that the real estate wholesaler is in possession of the legal right – as the buyer in a fully executed contract – to sell the ‘right to purchase this property’ delineated in the contract to another buyer.

This is fundamentally different from selling or marketing real property.

What Are The Wholesaling Laws In West Virginia?

The real estate laws that govern the actions of real estate licensees in West Virginia are found in West Virginia’s Real Estate License Act (WV Code § 30 – 40). The Real Estate License Act denotes that practicing real estate in West Virginia is “a privilege” that requires a license to protect public interest. As noted below -

The practice of real estate in West Virginia is defined in §30-40-4 (c) 1 – 3 -

And note, West Virginia law includes a single act as evidence of real estate practice, and thus, does not require a pattern of behavior which can be found in WV §30-40-23

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Exceptions to West Virginia’s License Law

According to provisions of this article - §30-40-5 (b), West Virginia’s license law does not include those activities that are typically performed by the following –

• Appraisers
• Mortgage Companies
• Lawyers
• Contractors, Surveyors
• Engineers
• Home Inspectors or any other professionals performing ancillary services supporting a real estate transaction.

In addition, the provisions of West Virginia’s Real Estate License Act (WV Code § 30 – 40) notes that the act does not apply to these individuals (See WV Code 30-40 –5, 1-8)

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Potential Penalties for Violations of West Virginia License Law

According to West Virginia Code 30-40-22, these are potential violations for individuals. Other potential violations follow in the same provision.

Do You Need A License To Wholesale Real Estate In West Virginia?

No, West Virginia real estate wholesalers may operate legally within the state if their actions and choices do not violate West Virginia’s real estate and license laws. The key is to avoid these actions, defined as real estate services by West Virginia lawmakers. These actions are noted below (See §30-40-4 (c) 1 – 3) -

(1) Lists, sells, purchases, exchanges, options, rents, manages, leases or auctions any interest in real estate; or 

(2) Directs or assists in the procuring of a prospect calculated or intended to result in a real estate transaction; or

(3) Advertises or holds himself or herself out as engaged in, negotiates or attempts to negotiate, or offers to engage in any activity enumerated in subdivision (1) of this subsection.

Exiting the West Virginia Wholesale Deal

Wholesalers will find it best to be transparent about their intentions to everyone involved, allowing everyone to make well-informed decisions. This includes managing the expectations of the seller by smartly wording the contract to avoid ambiguities. 

Remember, a real estate wholesaler in West Virginia CANNOT market or sell real property. They can, however, market or sell their ‘right to purchase real property’ as defined by the terms detailed in the contract of sale.

Because West Virginia law considers the closing processes of real estate transactions as the practice of law, all retail and wholesale deals within be performed by an attorney licensed by West Virginia’s state bar. Take advantage of this law and use the legal guidance offered by the licensed legal professional when managing the process of real estate wholesaling.

The Double Close

The most direct way to steer clear of legal issues as a real estate wholesaler in Mountain State is to complete the wholesale deal using a double closing. The double close ensures a wholesaler has an interest in the property and, thus, does not need a West Virginia real estate license to complete the deal.

As the ‘double closing’ name suggests, a wholesaler completes two closing –typically back-to-back. The real estate wholesaler is the buyer in the first closing. However, in the second closing, the real estate wholesaler becomes the seller.

The difference between each sale’s price would be considered the investor’s assignment fee. But note, although certainly the most cautious of exit routes, a double close has double closing costs.  Some investors believe this is money well spent when one considers the amount of protection a double closing offers.

Success Story: How Peter Made A $70k Profit Wholesaling Houses Off the MLS!

Final Thoughts

Real estate investors have always been adept at evaluating profitable real estate opportunities, adjusting strategies as the market flows through its cycles.

But note, current market conditions have required real estate investors to modify existing business models and seeking proper training to meet the attributes that define the current market and the ongoing technological developments streamlining many of the more traditional real estate investment processes.

Real estate investors also tend to have an entrepreneurial spirit, driven by a need to succeed, tempered by the market’s current conditions. Real estate has always offered emerging investment opportunities for those willing to buck conventional wisdom but stay within the legal limits of West Virginia law.

*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