Is Wholesaling Illegal in Maryland?

Question

I am new to real estate and have a question regarding wholesaling.  Is it legal in Maryland?  I cannot find a legal basis for it in light of the following:

"Except as otherwise provided in this title, a person may not provide, attempt to provide, or offer to provide real estate brokerage services unless licensed by the Commission as a real estate broker."  MD Code, Business Occupations & Professions, § 17-601.

“Provide real estate brokerage services means to engage in any of the following activities: (1) for consideration, providing any of the following services for another person: (i) selling, buying, exchanging, or leasing any real estate; or (ii) collecting rent for the use of any real estate; (2) for consideration, assisting another person to locate or obtain for purchase or lease any residential real estate; (3) engaging regularly in a business of dealing in real estate or leases or options on real estate; (4) engaging in a business the primary purpose of which is promoting the sale of real estate through a listing in a publication issued primarily for the promotion of real estate sales; (5) engaging in a business that subdivides land that is located in any state and sells the divided lots; or (6) for consideration, serving as a consultant regarding any activity set forth in items (1) through (5) of this subsection."  MD Code, Business Occupations & Professions, § 17-101.

It sounds pretty cut-and-dry to me. . . . Am I missing something?

Russell Brazil · Answer

Grabs some popcorn, this should be interesting

Tom Gimer · Answer

To me, the inclusion of the words “for another person” makes Maryland a rather easy jurisdiction to wholesale legally as long as you are marketing the contract interest rather than the property.

I have seen the statute used as a defense to paying a wholesaler a large fee. The case was settled before trial.

Jason D. · Answer

@Will Barnard I was being sarcastic 😁 that's a good link that you posted....

Jonathan Tavarez · Answer

I took a wholesale class by Vena Jones-Cox and I really love the way she explains why wholesale is completely different from being a realtor (or anything using a brokerage service).  A real estate wholesaler do not sell properties, you are selling a contract and nothing more; a wholesaler business is fundamentally with contracts you dont buy or sell properties.  Ultimately you get the rights to sell the contract for a fee, that's all you are doing.

Jason D. · Answer

@Jonathan Tavarez my question would be... how do you sell the contract without marketing the property attached to it?

Marketing the property is what is illegal.

Jason D. · Answer

@James Rippeon I agree that it seems pretty cut and dry....

Tom Gimer · Answer

If you post with Maryland in the title in a general forum, that doesn’t somehow transform the thread into a discussion of general principles.

Good wholesalers don’t advertise on craigslist... they pick up the phone and call their buyers. If you are advertising online with “do not contact the occupant” then you are a rank amateur who is not long for the business.

Will Barnard · Answer

We do have local forums on BP here that are state specific and even area specific. For example, we have a CA forum and inside that, the Los Angeles forum for local discussions.

As to the question, I am not from MD so my input may not be viable but in dealing with these issues across the country, most states have rules and regulations now that specifically disallow a party to lock up a contract with a seller, market that contract which always includes the specifics of the property (otherwise how would the potential buyers know what they are buying) and then "market" that contract and property via Craig's list, emails, their websites, this website, etc which is "publicly marketing" to find a buyer. This constitutes brokering without a license in most states including CA. I do not know MD law but I find it hard to believe they would not have some rule against that as well.

Here is the real issue though no matter what state you or the property are in: Wholesaling in of itself is NOT illegal if done properly and legally, i.e. if you lock up a property, close on it and resell it, that is legal. Or you can lock it up under an entity having your buyer in place in advance and that buyer is added to the entity. Or similar process using a trust whereby you lock up the property, name yourself the trustee of the trust and add your buyer at the end as the beneficiary. Upon closing, the buyer fires you as trustee and names a new trustee. In other words, there are many ways to do it legally, the problem is, most do it illegally.

Try reading this thread which is the longest running (8 years and counting) active and most voted thread on Biggerpockets: https://www.biggerpockets.com/forums/93/topics/58383-the-truth-about-wholesaling-

It may take you a week to read every post in the thread but it is well worth it.

Russell Brazil · Answer

Well this discussion wasnt as interesting as I had hoped

Jason D. · Answer

If only they had local forums where you could post something state specific and only attract local responses.

I should suggest that in my survey....

Is Wholesaling Illegal in Maryland?

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