Legal or Not

[Marcus Watkins]

I recently had a phone conversation with a Real Estate Agent and, he was explaining to me how wholesaling is illegal in the state of Arkansas and that I can be fined or go to jail if I receive any money off wholesaling. Wholesalers in Arkansas is this true ? 

[Paul Thompson]

Yeah this is an interesting topic. It is against the real estate commission rules in Arkansas to act as an agent with out a license (like most other states). So when "wholesaling" with out a license you have to do it in a very specific way. You must act as a principal and NOT an agent. So you do not represent anyone but yourself and all of your verbiage, disclosures, and conduct cannot be construed as acting as a agent. Specifically you must disclose your are offering your equitable interest in a property and not the actual property itself because you don't have title and do not have the right to act as an agent for the seller who does have title. So you are offering to sell your contract, which gives your equitable interest. Moreover, you cannot effectively bird-dog for a wholesaler without a license. So paying a postman $100 for pointing out a vacant property on his/her route is in effect having that postman act as an agent in the Real Estate Commission's eyes. So by paying that commission you aren't actually acting as an agent. But I wouldn't want to defend myself to anyone about paying those fees to unaware "helpers" when you should know how to operate ethically and legally because you're in the business. Furthermore, this raises a bit of a distinction I'm not fully clear on. As I understand it, violating this would be a civil affair and not a criminal action so therefore isn't really "illegal". It is just in violation of the real estate commission rule book. This is not a point I know for certain but maybe someone else who has delved deeper into the subject could expound on.

Bottom line: you can wholesale in Arkansas if you do it the right way (at least as of right now). 

** I'm not a lawyer and I'm not giving legal advice. This all comes from other wholesalers who have discussed this directly with the Arkansas Real Estate commission which I learned about second hand. **