Wholesaling is when someone, typically an unlicensed individual trying to make money in the real estate market, enters a contract to purchase real estate and then immediately attempts to resell, for profit, their interest in that real estate contract to a different purchaser, typically a rental real estate investor, prior to the closing of the sale of the property. The wholesaler usually has no intention of purchasing the property and rarely takes title to the property unless it is a part of a dual closing transaction where the ultimate purchaser is closing the second transaction at the same time as the homeowner is closing the sale with the wholesaler.
One of the problems with wholesaling is that, if the wholesaler is unable to assign the contract to another buyer for a sufficient profit, the wholesaler will typically cancel the contract and the homeowner must start over again selling the house. Because wholesalers typically use custom short form purchase contracts instead of the Oklahoma Real Estate Commission “OREC” form, there is usually no earnest money deposit to forfeit or other seller protections found in the OREC form.
Wholesalers may publicly market the property as if they own the property, but it is more often the case that they have a list of regular rental real estate investors that they offer the contract to at a markup which would be a type of real estate commission if the sale were regulated by the OREC. This practice is often indistinguishable from the activities an Oklahoma real estate licensee engages in when marketing a property for a seller, yet the wholesaler is currently not required to hold an Oklahoma real estate license.
As of November 1, the regulation:
- “Provides protection to the public and accountability for buyers and sellers in real estate transactions for the largest financial transaction individuals will make.”
- “Requires individuals engaged in wholesale activity to pass national and state real estate license examinations.”
- “Requires individuals engaged in wholesale activity to pass a basic background check and reduces opportunities for harm to the public.”
- “Provides oversight by the Oklahoma Real Estate Commission to investigate consumer complaints at no cost to the public. Provides a free avenue for the public to resolve disputes and claims that otherwise could only be addressed by litigation, which is costly to the public and difficult to resolve.”
- “Allows the Real Estate Commission to implement common-sense regulations via administrative rules for predatory actions as they evolve moving forward.”
- “Requires individuals engaged in wholesale activity to obtain the same amount of continuing education as all real estate licensees. Promotes education, best practices, and conformity with Oklahoma laws and regulations.”