Is it Illegal to Flip foreclosures in Maryland

[Khaled Helmi]

Was talking to a friend and they had mentioned that their realtor had said that Flipping properties in Maryland is illegal unless you have a license.  I thought it was very strange because i've never heard that, but sure enough there is some discussion on this on other blogs:

https://thebaltimoreinvestor.wordpress.com/2008/04...

It seems that Maryland Law SB 761 (2005) does have some clauses regarding dealing with homeowners in pre-foreclosure and foreclosure proceedings, but I wanted to know how applicable this law is to buying REOs, foreclosures from banks, and short sales.  

Its hard for me to believe that it applies to anything more than direct negotiations with homeowners in foreclosure, but i'd love to hear from more experienced Maryland flippers.

Thanks so much in advance!

Khaled

[J Scott]

I'm not an attorney, but I'm somewhat familiar with Maryland real estate law and practices (my wife has her real estate license in Maryland)...

In Maryland, it is illegal for a pre-foreclosure sale to take place without a qualified intermediary (read the bill for definitions) facilitating the sale.  That essentially means that investors can't market to homeowners in pre-foreclosure foreclosure and can't purchase a house from a homeowner who is behind on their payments, at least not without a qualified distressed property expert facilitating.

As for REOs, as others mentioned above, the sellers have their own rules/regulations/deed-restrictions in place to make it difficult to wholesale REOs, but they can certainly be purchased and resold (with or without rehab) if the investor is willing to wait the required amount of time and doesn't run into logistical issues. There are no Maryland-specific laws that I am aware of regarding REO purchases/sales.

As for short sales, you will typically be required to sign -- at closing -- an affidavit that indicates that you have no other deals negotiated around the property that haven't been disclosed to the lender.  Which means you'd be committing fraud by signing that affidavit and then wholesaling the property prior to purchase without telling the lender you were doing it (which they wouldn't give you permission to do).  You can certainly purchase the short sale and then -- after purchase -- turn around and resell (with or without rehab), but that will require you to complete the purchase and title transfer.