Is Wholesaling in Tennessee Legal

[Wendy Schultz]

I contacted Tennessee Real Estate Commision to inquire about whether or not Wholesaling in Tennessee was legal. The lady I spoke with said that it was an illegal question that they could not answer, and told me that I should contact a Real Estate Attorney to find the answer to that question. I want to Wholesale but I don't want to get into legal trouble.

[Shawn Swisher]

@Wendy Schultz TREC won't answer legal questions, even when asked by the agents it licenses. They always recommend seeking counsel from a real estate attorney. 

Fair warning: I'm not a real estate attorney and I can only speak specifically for Tennessee as I hold a real estate license there.

The act of bringing buyers and sellers together with the intention of collecting a fee is "brokering" a transaction. Brokering real estate transactions for a fee requires a license in the state of Tennessee. Property owners are exempt from this, which allows folks to sell their own property without needing a license.

I think where the controversy arises is what exactly constitutes ownership? Obviously, being on the deed would qualify you as an owner of the property but what about simply being under contract? The standard Realtor contract in Tennessee is assignable by default but does that make the buyer an owner of the property at the moment they sign the contract? Although they may have an equitable interest in the property, does that qualify them for the owner exemption from licensing? I think most folks would argue no, it does not. 

The argument can further be made that even advertising the sale of the contract (as opposed to advertising the property) is still brokering because you are bringing a buyer and seller together with the full intention of receiving compensation for your efforts. Selling the contract as opposed to selling the property is still soliciting for the exchange of real estate for a fee and that meets the definition of brokering defined by state law.

In my opinion, the safest thing to do if you don't want to get your license is to close first, then advertise and sell the property. Obviously, that requires you to have the financial resources to actually close on the property. However, the upside is it allows you to give potential buyers easier access to inspect the property and allows you to market and sell the property on your own timeline, potentially holding out for a higher price.

Again, this is not legal advice and I can't answer whether wholesaling without a license is illegal in Tennessee. I can say for certain though that wholesaling with a license is perfectly legal. If you want to wholesale with complete certainty, I recommend getting your real estate license.

See Tennessee Law for more info.