Michigan Wholesaling

[Nate Miersma]

Michigan Investors: Can anyone tell me if there are laws, statutes, or other forms of regulation that prohibit activities related to wholesaling in Michigan?

For example:

Are contracts legally assignable?

Are simultaneous closings prohibited or otherwise not done by title companies?

I've seen a few articles online that reference a Michigan law that restricts investors to selling 4 houses per year - is this actually tracked/enforced? This could be prohibitive for anyone doing real wholesaling, as well as anyone with a scalable business model that wants to get 2, 3, 4 houses going at one time, obviously selling many more than 4 annually.

Thoughts?

[Brandon Krieg]

Hi Nate,

I'd be interested to look at the articles you're mentioning. Also, people may be hesitant to respond, simply because this is a legal issue and I know many people on here aren't attorneys (and therefore don't want to give advice that sounds legal). As the necessary disclaimer, I am not an attorney, so please don't take this as legal advice.

I can only add my own experiences, that I have not had problems assigning contracts here. This has often gone through a title company, and they just want to see all of the proper documentation.

As to my own understanding, a wholesaler is not buying or selling real estate at all... they are selling their interest in a contract. So any rules about the number of homes to buy and sell would not apply.

Typically, either the contract is assigned before closing (which is simpler) or the assignment fee is added as a line item on the HUD-1 form. Therefore, double closings are not a necessary component of wholesaling.

I have not conducted a 'double closing.' However, I have been told of at least one title company which is fine with them. However, the cash for both transactions must be on hand first (i.e., you can't use the buyer's money to pay off the original contract. You need a separate amount of money to do that). This would be where transactional funding comes in, as I understand it.

Again, if others have specific legal knowledge, I welcome those words as well. This is my understanding of the workings of it in Michigan.