Is wholesaling in Washngton State Illegal?

[Marshall Hawley]

I read another Bigger Pockets post about this but it didn't really get to the meat of the question.
I am a newbie looking to get into wholesaling in the puget sound/seattle area. I recently sent my P&S agreement and agreement to assign to a legal zoom lawyer to review. He basically just told that Washington state not only made it illegal but criminalized flipping and wholesaling properties and that you needs to be a licensed broker to wholesale houses. He said:

1. Buying and selling a property for someone else and being paid for it requires a real estate license.

and 2. You aren't allowed to purchase or flip property from someone who is behind on mortgage payments (or facing preforeclosure/foreclosure) per Washington Law RCW 61.34. And real estate property purchased from someone who is behind on mortgage payments is construed as 'equity skimming' and therefore may be illegal.

Can someone please clear this up for me? I know lots of people in washington and in the seattle area wholesale without a real estate license.
So how is everyone doing it and what makes it NOT illegal by whatever laws that some people think makes it illegal?

Thank you

[Patrick Britton]

Couple of things.

First: I am not an attorney

Second: I like Legal Zoom just as much as the next person.  But in this case I'm not sure how closely the attorney look at the RCW.  If points number one and number two are what he said, there is a very important aspect of the law he neglected to mention.  Namely, that the code refers only to sellers and/or would-be sellers who occupy the home as the primary residence.  If an owner has a rental property that is facing foreclosures you are most definitely ALLOWED to "wholesale" it.

Third: RCW 61.34 is an incredibly vague law in which theoretically every single person who has a mortgage could be considered in distress.  The law does not clearly define the term distress to the extent most real estate attorneys would like.  Perhaps this is done on purpose.

Fourth: most laws are enacted as the results of some previous behavior or action society deems it appropriate or wrong.  If you look at the reasons why this law came into being you will notice it was due to the behavior of a single, horrifically crooked and evil individual.  When you read what this person did you will understand why the state legislature needed to do something.

Fifth: it could be argued that wholesalers are only selling contracts to agreed-upon purchase and sales agreements.  They are not selling the property itself.  There is a huge difference between these two activities, namely that the latter requires a license.  Currently, selling a contract to purchase a property is not against the law.

There are a few more points but none more important than the fact that the code does not refer to non-owner-occupied properties (rentals).  Nor does it apply to properties with five units or more, occupied or not.