Legality of Wisconsin wholesaling?

Question

Hello all,

I am fairly new into this game and was looking for some more information as I couldn't find much in my search so far. I am interested in wholesaling property in Wisconsin, but I understand our state is a bit more strict when it comes to REI. Does anyone know the legality of wholesaling without a broker or real estate license in Wisconsin? Any loopholes welcome :)

Scott Schultz · Answer

If you read the Wisconsin Real Estate License Law, you will see what would make it illegal, the key is if you dont find a buyer for your contract, and never intended on purchasing the property, and only intended to sell the contract you would be Brokering under Wisconsin Law, if you have a License you are fine either way, if not Be sure to know what you can and cant do. I think its crap, and I am a Broker, but the law is what it is.

Ryan Seib · Answer

Below are the relevant rules. First I have posted the penalty statute. Notice it covers instances of a nonlicensee 'acting' as a 'broker or salesperson'. Next is the definitions of 'brokers' and salespersons'. If what you do falls within one of those definitions then the WI Real Estate Examining Board has authority and may try to sue you, or the district attorney may sue you both civilly and criminally. Not good. I have bolded and underlined the portions relevant to wholesalers for your convenience.

452.17 452.17  Penalties.

(1)Any person who engages in or follows the business or occupation  of, or advertises or holds himself or herself out as or acts temporarily  or otherwise as a broker or salesperson in this state without a license  under this chapter shall be prosecuted by the district attorney in the  county where the violation occurs or by the attorney general and may be  fined not more than $1,000 or imprisoned not more than 6 months or both.

452.01    Definitions.

(2)“Broker" means any person not excluded by sub. (3), who does any of the following:

(a)  For another person, and for commission, money, or  other thing of value, negotiates or offers or attempts to negotiate,  whether directly or indirectly, a sale, exchange, purchase, or rental  of, or the granting or acceptance of an option to sell, exchange,  purchase, or rent, an interest or estate in real estate, a time share,  or a business or its goodwill, inventory, or fixtures, whether or not  the business includes real property.

(b)  Is engaged wholly or in part in the business of  selling or exchanging interests or estates in real estate or businesses,  including businesses' goodwill, inventory, or fixtures, whether or not  the business includes real property, to the extent that a pattern of  sales or exchanges is established, whether or not the person owns the  real estate or businesses.  Five sales or exchanges in one year or 10  sales or exchanges in 5 years is presumptive evidence of a pattern of  sales or exchanges.

(bm)  For another person, and for commission, money, or  other thing of value shows real estate or a business or its inventory or  fixtures, whether or not the business includes real property, except  that this paragraph does not include showing a property that is offered  exclusively for rent.

(c)  For another person, and for commission, money, or  other thing of value, promotes the sale, exchange, purchase, option,  rental, or leasing of real estate, a time share, or a business or its  goodwill, inventory, or fixtures, whether or not the business includes  real property.  This paragraph does not apply to a person who only  publishes or disseminates verbatim information provided by another  person.

(d)  Issues a written report of property value that is prepared for another person and that is not an appraisal, as defined in s. 458.01 (1).

(3)“Broker" does not include any of the following:

(a)  Receivers, trustees, personal representatives,  guardians, or other persons appointed by or acting under the judgment or  order of any court.

(b)  Public officers while performing their official duties.

(c)  Any bank, trust company, savings bank, savings and  loan association, insurance company, or any land mortgage or farm loan  association organized under the laws of this state or of the United  States, when engaged in the transaction of business within the scope of  its corporate powers as provided by law.

(d)  Employees of persons enumerated in pars. (a) to (c), (f), and (i) when engaged in the specific performance of their duties as such employees.

(dm)  Any employee of an attorney under par. (h) if all of the following are true:

1.  The employee's activities are directly supportive of the attorney's provision of legal services to the attorney's client.

2.  The employee's activities are activities that the attorney may perform under par. (h).

3.  The employee is under the direction and supervision of the attorney.

(e)  Any custodian, janitor, employee or agent of the  owner or manager of a residential building who exhibits a residential  unit therein to prospective tenants, accepts applications for leases and  furnishes such prospective tenants with information relative to the  rental of such unit, terms and conditions of leases required by the  owner or manager, and similar information.

(f)  Any credit union which negotiates loans secured by real estate mortgages or any licensee under ch. 138  which negotiates loans secured by real estate mortgages or any licensed  attorney who, incidental to the general practice of law, negotiates or  offers or attempts to negotiate a loan, secured or to be secured by  mortgage or other transfer of or encumbrance on real estate.

(g)  A person licensed as a mortgage banker under s. 224.72 who does not engage in activities described under sub. (2).

(h)  Attorneys licensed to practice in this state while acting within the scope of their attorney's license.

452.01(3)(i)(i)  A developer, as defined in s. 707.02 (11), negotiating a transaction involving a time share.

(7)“Salesperson"  means any individual who is associated with a firm, other than a broker  or an individual who is not required to hold a license under this  chapter as provided under s. 452.03 (2).

So as you see the problems mainly arise around a pattern of activity and doing things 'for another person'. Also note that while the above statutes are pertinent, there are also consumer protection statutes and contract related issues that could come up that the district attorney, REEB, brokerages, or the investor/consumer buying the wholesaled property could use to legally go after a wholesaler.

Aaron Stuiber · Answer

Yes wholesaling in WI is legal. Make sure to do additional research, there are plenty of articles out there. I suggest finding a REIA in your area and connecting with experienced investors. They’ll be able to explain the in’s and outs of investing and wholesaling the correct and upright way. It’s not something you can just jump into without experience or knowledge of the industry. Good luck!

Ryan Seib · Answer

@Zach Noegel and @Scott Schultz Ah! Sorry I did not see your question Zach. I just got a notification when Scott posted only!

Yes, Scott is correct. The statute para 2(b) deals with a presumptive pattern of exchanges which would qualify one as a real estate broker. And again, if one qualifies under the statute, then one is subject theoretically to the jurisdiction of the REEB in WI. And the REEB says you cannot act as a broker without the licensing of a broker. So, qualifying as a broker is a bad thing here, generally. It is of course only a presumption. So would the REEB prosecute you for selling a portfolio of 15 real estate interests, all of which you wholly-own? Probably not. Unless they have some other reason to go after you. But that may or may not be enough consolation to help you sleep at night!

Let me know if you have any other questions. If I do not respond perhaps I did not get a notice so feel free to message me privately as well. I hope that helps!

Chantz Keller · Answer

Would also like to know if you found out the best way to go about this. And how its been going if you continued to attempt to do it

Todd Allen VanGuerrin · Answer

Late to the party here but I was wondering how things have gone for you after 2 yrs?

Calvin Ozanick · Answer

It is completely legal. I would highly recommend speaking to an experienced real estate broker who has worked with wholesalers. You need to be very careful, especially when working off the MLS.

Zach Noegel · Answer

@Ryan Seib thanks for the info! Would you happen to know if equitable interest has any affect on this? Since it wouldn’t be considered to be on someone else’s behalf?

Zach Noegel · Answer

Appreciate the help, I will be looking into this further. Thanks!

Legality of Wisconsin wholesaling?

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