If you’re looking to get a start in real estate investing, the chance of stumbling upon the wholesaling strategy, the process of assigning purchase contracts from buyer to seller, is high. Wholesaling is a popular investment strategy, especially for those new to real estate, because unlike purchasing properties to renovate, you don’t need a lot of capital. It also poses (generally) less risk than traditional investing since the wholesaler does not hold on to the property.
The topic of wholesaling also comes with a bit of controversy. Many wonder if it’s legal to wholesale properties and, if so, how they can do it ethically. This is because, unlike traditional real estate where agents must undergo training and are held to a set of standard practices and a code of ethics, wholesaling has been a largely unregulated industry.
Wholesalers help their communities by offering sellers who do not have the time or resources to undergo a traditional sale a solution to quickly offload an unwanted property. However, without any formal regulations in place, some bad actors have been allowed to enter the wholesaling scene and conduct shady business, damaging the reputation of good and bad wholesalers alike.
The industry is changing, in part due to pressure from community members who want wholesalers to be held to similar ethical standards as real estate agents to prevent any shady dealings. New regulations have been proposed in Oklahoma City that will require real estate wholesalers in our city to change the way they operate.
Predatory Real Estate Wholesaler Prohibition Act
In February 2020, Oklahoma state representatives introduced a bill called the Predatory Real Estate Wholesaler Prohibition Act that aims to cut down on unethical wholesale practices. The bill would make wholesaling and assigning contracts without a real estate license illegal.
While the original bill ultimately failed, it was reintroduced in early 2021 and is currently making its way through the Oklahoma House of Representatives. If the bill passes, wholesalers who are not already licensed will need to obtain a real estate license in order to continue their practice.
Specific details on consequences for non-compliance if the bill becomes law are not yet available, but in other states, we are seeing hefty fines. In Illinois, for example, failure to obtain a broker’s license can result in a $25,000 fine for wholesalers who contract more than one deal per year.
Do Wholesalers in Oklahoma Need a Formal License?
While the answer to this question depends on if the proposed Predatory Real Estate Wholesaler Prohibition Act bill becomes law, becoming licensed could be a responsible move for Oklahoma wholesalers.
All real estate investors should possess a working knowledge of the rules and procedures that govern real estate transactions. Even if it is not required by law, there are many benefits to obtaining a real estate license. Having a license can help boost your credibility to sellers and help you avoid getting into shady dealings.
How To Become Licensed
“To qualify for a provisional sales associate real estate license in Oklahoma, you need to be at least 18 years of age, and provide evidence of citizenship or qualified alien status” states the Oklahoma Association of Realtors.
5 Steps to A Real Estate License in Oklahoma
- Complete a 90-hour basic pre-license course
- Submit your real estate license application to the Oklahoma Real Estate Commission (OREC).
- Complete a background check
- Pass the Oklahoma Salesperson exam
- The exam fee is $60, and a score of 70% or better is needed to pass the exam.
- Pay your license fee to the Oklahoma Real Estate Commission
- Apply for your license
- $100 application fee
Make the Most of the Change
While disruption in the industry might feel daunting to some, change is inevitable. But by staying informed of what is happening in Oklahoma, you can prepare yourself for the future. New regulation presents new challenges for investors and wholesalers alike, but with it also comes new opportunity.
Investors working to improve their communities while also pursuing their own goals of financial independence are in a unique position to step up, embrace the change, and refuse to allow bad actors to define our industry.