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#1 Short-Term & Vacation Rental Discussions Contributor
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New law makes wholesaling illegal is SC
#1 Short-Term & Vacation Rental Discussions Contributor
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The new law the SC Governor just signed makes wholesaling illegal.
It has 3 parts.
1. It defines wholesaling
2. It says you must have a license to wholesale.
3. It says a licensed realtor can't wholesale.
No attorney is going to risk anything that might be deemed wholesaling.
You can't do a double closing because you can't market the property or contract prior to owning it.
You can buy the property then market it.
You could also get owner financing for 60 to 90 days and then market the property for sale.
@Adam Bartomeo Last summer, the SC Real Estate Commission released a bulletin saying they consider wholesaling (assigning contracts, double closing, etc) no different than brokering. Because of that, they said in the release that in order to wholesale, you would have to be licensed, supervised by a BIC and have a signed listing agreement with the owner of record. Basically they were making these into more traditional transactions with a commission attached.
To further complicate it, the NAR clear cooperation policy meant you couldn't share those off market any more without incurring a $500 fine, so they would basically end just going to market anyways in that case. Our MLS board is associated with NAR, so we can't really skirt clear cooperation here. You could refuse to join CTAR, but then you literally won't have MLS access.
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Quote from @Troy Gandee:
@Adam Bartomeo Last summer, the SC Real Estate Commission released a bulletin saying they consider wholesaling (assigning contracts, double closing, etc) no different than brokering. Because of that, they said in the release that in order to wholesale, you would have to be licensed, supervised by a BIC and have a signed listing agreement with the owner of record. Basically they were making these into more traditional transactions with a commission attached.
To further complicate it, the NAR clear cooperation policy meant you couldn't share those off market any more without incurring a $500 fine, so they would basically end just going to market anyways in that case. Our MLS board is associated with NAR, so we can't really skirt clear cooperation here. You could refuse to join CTAR, but then you literally won't have MLS access.
Thanks for the info! Always good to know what is going on in other states.
Sounds really strange to force agents not to be able to have off market or pocket listings without agreements in place. More government regulation…
Quote from @Tom Gimer:
Quote from @John Underwood:
Quote from @Tom Gimer:
@John Underwood I read what I believe to be the new SC legislation. Please provide the full new definition of “wholesaling” and reconcile the conclusion of your post with the last sentence in the definition.
No need. After listening to several Attorneys, they are not going to risk closing these deals goin forward as they have been done in the past.
OK then I will. The definition of wholesaling (a new term under SC brokerage laws) reads as follows:
"Wholesaling" means having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property. Advertising or marketing real estate owned by another individual or entity with the expectation of compensation falls under the definition of "broker" and requires licensure. "Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.
Since every word of a statute has to be given meaning, the last sentence is a clear carve out for investors who assign contracts and offer that interest to the end buyer. Sounds like more business is coming for local attorneys who understand the new law.
This part of the law is giving a lot of entrepreneurial thinkers room to get creative. Unfortunately, lawyers don't think that way. This is a Law. Attorneys cannot knowingly assist someone in Breaking The Law.
"Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.
READ that slowly as an attorney would. Don't fill in the blanks with bias.
It is still legal to assign contractual rights, BUT the previous lines say that you cannot market a property. How do you sell a contract without talking about what is in it?? Thats where the logical conclusion goes....
In order for an attorney to take the closing, they would have to confirm and verify that you did not market that property. The ones i've talked to all say that it is not worth the risk.
Its more government, more regulations, and more rules... That always creates more inefficiencies in the market place and creates room for someone to fill the gap. Not sure what that is yet, but the sellers are still going to need Off-market help.
Quote from @Andrew R. Lucas:
Quote from @Tom Gimer:
Quote from @John Underwood:
Quote from @Tom Gimer:
@John Underwood I read what I believe to be the new SC legislation. Please provide the full new definition of “wholesaling” and reconcile the conclusion of your post with the last sentence in the definition.
No need. After listening to several Attorneys, they are not going to risk closing these deals goin forward as they have been done in the past.
OK then I will. The definition of wholesaling (a new term under SC brokerage laws) reads as follows:
"Wholesaling" means having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property. Advertising or marketing real estate owned by another individual or entity with the expectation of compensation falls under the definition of "broker" and requires licensure. "Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.
Since every word of a statute has to be given meaning, the last sentence is a clear carve out for investors who assign contracts and offer that interest to the end buyer. Sounds like more business is coming for local attorneys who understand the new law.
This part of the law is giving a lot of entrepreneurial thinkers room to get creative. Unfortunately, lawyers don't think that way. This is a Law. Attorneys cannot knowingly assist someone in Breaking The Law.
"Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.
READ that slowly as an attorney would. Don't fill in the blanks with bias.
It is still legal to assign contractual rights, BUT the previous lines say that you cannot market a property. How do you sell a contract without talking about what is in it?? Thats where the logical conclusion goes....
In order for an attorney to take the closing, they would have to confirm and verify that you did not market that property. The ones i've talked to all say that it is not worth the risk.
I am an attorney and I disagree with your analysis. You didn't read my next post where I included language in the new legislation that specifically addresses how marketing a contractual position does not run afoul of the law. Why did they include that language? To enable investors who buy and sell on their own accounts to continue to earn a living... otherwise the law gets challenged immediately on constitutional grounds.
Pretty simple, just be transparent in your marketing. I have a contract. I'm assigning my contract rights.
#1 Short-Term & Vacation Rental Discussions Contributor
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#1 Short-Term & Vacation Rental Discussions Contributor
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Quote from @John Underwood:
Quote from @Joe S.:
Quote from @Tom Gimer:
Quote from @John Underwood:
Quote from @Tom Gimer:
@John Underwood I read what I believe to be the new SC legislation. Please provide the full new definition of “wholesaling” and reconcile the conclusion of your post with the last sentence in the definition.
No need. After listening to several Attorneys, they are not going to risk closing these deals goin forward as they have been done in the past.
OK then I will. The definition of wholesaling (a new term under SC brokerage laws) reads as follows:
"Wholesaling" means having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property. Advertising or marketing real estate owned by another individual or entity with the expectation of compensation falls under the definition of "broker" and requires licensure. "Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.
Since every word of a statute has to be given meaning, the last sentence is a clear carve out for investors who assign contracts and offer that interest to the end buyer. Sounds like more business is coming for local attorneys who understand the new law.
You just can't advertise a property that you don't own as it is now highly illegal is SC and no attorney is going to close these deals anymore. You will have to buy it out right or be buying.it under an installment contract. This is what the attorneys are saying.
Not sure if I already posted this or not. I so I apologize.
This just confirms most attorneys will not want to mess with this. Too much risk.
I guess they could always be a paralegal when they lose their law license.
I'm not an attorney, but have talked to many on this issue. @Tom Gimer are you in SC? Would you do closings where there is an assignment of contract between 2 parties where they told you that they didn't market the property? Below are a few more excerpts.
"The advertising and marketing of real property is to be distinguished from the advertising and marketing of a contractual position in a sales agreement to purchase real estate. An advertisement that markets a contractual position to acquire real property from a person with either equitable or legal title and does not imply, suggest, or purport to sell, advertise, or market the underlying real property is permissible under this section."
Quote from @Tom Gimer:
Quote from @John Underwood:
Quote from @Tom Gimer:
@John Underwood I read what I believe to be the new SC legislation. Please provide the full new definition of “wholesaling” and reconcile the conclusion of your post with the last sentence in the definition.
No need. After listening to several Attorneys, they are not going to risk closing these deals goin forward as they have been done in the past.
OK then I will. The definition of wholesaling (a new term under SC brokerage laws) reads as follows:
"Wholesaling" means having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property. Advertising or marketing real estate owned by another individual or entity with the expectation of compensation falls under the definition of "broker" and requires licensure. "Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.
Since every word of a statute has to be given meaning, the last sentence is a clear carve out for investors who assign contracts and offer that interest to the end buyer. Sounds like more business is coming for local attorneys who understand the new law.
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Quote from @John Underwood:
Quote from @Joe S.:
Quote from @Tom Gimer:
From elsewhere in the new law:
The advertising and marketing of real property is to be distinguished from the advertising and marketing of a contractual position in a sales agreement to purchase real estate. An advertisement that markets a contractual position to acquire real property from a person with either equitable or legal title and does not imply, suggest, or purport to sell, advertise, or market the underlying real property is permissible under this section.
People need to read closer.
Another good catch Tom.
So all the Wholesaler needs to do is disclose that they are selling their interest in their contract and that they do not own the property.
Did I read that right?
Example.
XYZ Main Street
Little town south Carolina
Three bedroom two bath.
Asking $3 million
This will be a contract assignment and we do not own the property simply assigning our interest in our option to purchase contract.
For more information, please call 870-613-xxxx.
( PS I am just guessing and I’m nobody’s legal counsel and don’t wholesale in South Carolina.)
No attorney is going to risk closing an assignment in SC.
it will be their underwriters those that write the title insurance that will have a say in this I suspect.
#1 Short-Term & Vacation Rental Discussions Contributor
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#1 Short-Term & Vacation Rental Discussions Contributor
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Quote from @Jay Hinrichs:
Quote from @John Underwood:
Quote from @Joe S.:
Quote from @Tom Gimer:
From elsewhere in the new law:
The advertising and marketing of real property is to be distinguished from the advertising and marketing of a contractual position in a sales agreement to purchase real estate. An advertisement that markets a contractual position to acquire real property from a person with either equitable or legal title and does not imply, suggest, or purport to sell, advertise, or market the underlying real property is permissible under this section.
People need to read closer.
Another good catch Tom.
So all the Wholesaler needs to do is disclose that they are selling their interest in their contract and that they do not own the property.
Did I read that right?
Example.
XYZ Main Street
Little town south Carolina
Three bedroom two bath.
Asking $3 million
This will be a contract assignment and we do not own the property simply assigning our interest in our option to purchase contract.
For more information, please call 870-613-xxxx.
( PS I am just guessing and I’m nobody’s legal counsel and don’t wholesale in South Carolina.)
No attorney is going to risk closing an assignment in SC.
it will be their underwriters those that write the title insurance that will have a say in this I suspect.
Here's a link to the video that John Underwood referenced. It's lengthy, but does a great job in explaining the new law and a work around.
https://www.youtube. com /watch?v=oB6iQnyO1c4
This is the web address of the discussion with Gary Pickren that John U. referenced.
I watched the video.
The guest spent 30 seconds dismissing the following BRAND NEW language in SC law:
The advertising and marketing of real property is to be distinguished from the advertising and marketing of a contractual position in a sales agreement to purchase real estate. An advertisement that markets a contractual position to acquire real property from a person with either equitable or legal title and does not imply, suggest, or purport to sell, advertise, or market the underlying real property is permissible under this section.
Interesting... why would he do that? Perhaps because he's a closing attorney who has come up with his own work-around (presumably for a tidy fee) which is to set up the deal as a short term land installment contract. So he claims the only way to meet the equitable interest/equitable title/equitable conversion element under the new SC law is through an installment sale. How convenient!
But alas that's just not true. Does the high bidder at a foreclosure auction obtain an equitable interest? What about a purchaser who expressly includes the right to specific performance in the sales contract? What about a purchaser with a non-contingent cash contract? Or one who assumes the risk of loss prior to settlement? What makes an installment sale the only means to obtain equitable title? Nothing. That is actually an inquiry to be determined by SC courts, not a podcast.
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Quote from @Tom Gimer:
I watched the video.
The guest spent 30 seconds dismissing the following BRAND NEW language in SC law:
The advertising and marketing of real property is to be distinguished from the advertising and marketing of a contractual position in a sales agreement to purchase real estate. An advertisement that markets a contractual position to acquire real property from a person with either equitable or legal title and does not imply, suggest, or purport to sell, advertise, or market the underlying real property is permissible under this section.
Interesting... why would he do that? Perhaps because he's a closing attorney who has come up with his own work-around (presumably for a tidy fee) which is to set up the deal as a short term land installment contract. So he claims the only way to meet the equitable interest/equitable title/equitable conversion element under the new SC law is through an installment sale. How convenient!
But alas that's just not true. Does the high bidder at a foreclosure auction obtain an equitable interest? What about a purchaser who expressly includes the right to specific performance in the sales contract? What about a purchaser with a non-contingent cash contract? Or one who assumes the risk of loss prior to settlement? What makes an installment sale the only means to obtain equitable title? Nothing. That is actually an inquiry to be determined by SC courts, not a podcast.
the other reality is if the state actually enforces these laws.. they are on the books like this in many states but the state simply will not enforce them unless there are complaints and someone gets targeted.. Thats how it works in Oregon.. I don't see how a closing attorney has any liability in closing these deals unless their underwriter specifically forbids them and wont write title insurance
Will be interesting to see how it all plays out I think I will call the closing attorney I know well and has closed my new builds in Charleston and get his take on it..
There is no question though the wholesale guru's and industry has brought this to the attention of many state folks and these laws are sweeping the country..
I don't think he is saying that a contract for deed is the ONLY way to obtain legal interest, it's just a A way. The bottom line here is that the State of South Carolina has decided that if someone wishes to advertise or market a property that they have no LEGAL interest in, he has to be a licensed RE agent. AND that agent has to have a written agreement with the legal owner to market the property for an agreed upon price. An agent here was recently censured and fined for selling a house that he had rehabbed but did not own. He had an agreement with the seller to buy, but not close until after rehab. He did not have a listing agreement with the owner. Nobody got 'cheated', everyone was happy with the transaction, but after the fact, he was reported and fined and faced other penalties. Mr. Pickren is on the RE Commission. If someone decides to turn in an investor, and it's easy to do that, he is one of the 9 people you will be in front of.
We had a Zoom call this week with a couple of the heavy hitting closing attorneys in SC. They both said they will not be closing "wholesale deals" any longer. I've reached out to 2 others who say they also will not close them and have heard through the grapevine of a few more who will not be closing them. I've only heard rumor of 1 attorney in Charleston that will still handle those deals and I'm very doubtful they will do it for long.
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@Account Closed They're adopting the definition from the new bill. Basically, any use of public marketing to secure the end buyer is what the law defines as "wholesaling". The attorneys wouldn't really be able to prove whether or not these deals came to fruition through public marketing or not, so they're just going to avoid them. The "public marketing" of these will probably be triggered the minute someone mentions an off-market property for assignment, whether that's online, email, phone call, etc. At least, that's how NAR treats it with the Clear Cooperation rules they put in place a couple of years ago. The second the property is mentioned in any capacity, it has been publicly marketed.
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Quote from @Troy Gandee:
@Account Closed They're adopting the definition from the new bill. Basically, any use of public marketing to secure the end buyer is what the law defines as "wholesaling". The attorneys wouldn't really be able to prove whether or not these deals came to fruition through public marketing or not, so they're just going to avoid them. The "public marketing" of these will probably be triggered the minute someone mentions an off-market property for assignment, whether that's online, email, phone call, etc. At least, that's how NAR treats it with the Clear Cooperation rules they put in place a couple of years ago. The second the property is mentioned in any capacity, it has been publicly marketed.
Well I guess wholesalers better learn how to do their own escrows prep their own deeds and sell without title insurance.. I know in attorney states that is a very foreign concept the thought of transferring title without an attorney..
Out west here its very common.. Title insurance is not mandatory and the recorders office is public
now the question comes in some states Lawyers Must prep the transfer deeds by law.. So maybe the recorder wont record them and that cuts the sharper wholesaler who knows how to do their own escrows off at the knees ???? just musing on this..
In the land business out west especially low value desert land pretty much all of those deals are traded with QC ( Quit Claim) Deeds prepped by the seller and mailed in to record. No Escrow no Lawyer no title company.. But doing this on a improved property in Charleston area from 300 to 3mil probably not going to fly..
so if that is the case that only the lawyers prep the deeds and they wont close these then wholesaling is dead in SC ??? U think ? thats a correct statement ?
Quote from @John Underwood:
Quote from @Tom Gimer:
@John Underwood I read what I believe to be the new SC legislation. Please provide the full new definition of “wholesaling” and reconcile the conclusion of your post with the last sentence in the definition.
No need. After listening to several Attorneys, they are not going to risk closing these deals goin forward as they have been done in the past.
Go to a better closing attorney who decides to actually read law. Legislature is NOT outlawing wholesaling in full. There are limitations but it's not a full ban.
Quote from @Tom Gimer:
Quote from @John Underwood:
Quote from @Tom Gimer:
@John Underwood I read what I believe to be the new SC legislation. Please provide the full new definition of “wholesaling” and reconcile the conclusion of your post with the last sentence in the definition.
No need. After listening to several Attorneys, they are not going to risk closing these deals goin forward as they have been done in the past.
OK then I will. The definition of wholesaling (a new term under SC brokerage laws) reads as follows:
"Wholesaling" means having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property. Advertising or marketing real estate owned by another individual or entity with the expectation of compensation falls under the definition of "broker" and requires licensure. "Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.
Since every word of a statute has to be given meaning, the last sentence is a clear carve out for investors who assign contracts and offer that interest to the end buyer. Sounds like more business is coming for local attorneys who understand the new law.
100%. Somebody actually decided to read it
Quote from @Tom Gimer:
From elsewhere in the new law:
The advertising and marketing of real property is to be distinguished from the advertising and marketing of a contractual position in a sales agreement to purchase real estate. An advertisement that markets a contractual position to acquire real property from a person with either equitable or legal title and does not imply, suggest, or purport to sell, advertise, or market the underlying real property is permissible under this section.
People need to read closer.
OMG, thank you so much for being the very few who actually reads and comprehends. I've been saying this to some of the "Gurus" out there who are spreading fear.
Quote from @John Underwood:
The new law the SC Governor just signed makes wholesaling illegal.
It has 3 parts.
You can't do a double closing because you can't market the property or contract prior to owning it.
You can't double close, but you can you buy and then decide to sell 2 minutes later?
Makes no sense...lets see how this plays out.