Do you need a license to assign contracts in Michigan?

Question

Hi BP, im a newbie here and I really just want to know if a license is truly needed to wholesale in Michigan. Even if you're not actually buying or selling the property and ONLY assigning the contract to an investor thats actually purchasing the property, is it really necessary to obtain a license in Michigan? In my position I would be representing myself and not acting as a broker. But would you need to disclose you're not a broker and that you dont have a license? is this something that just all fits in place in your contract you create? Hope somebody in the Michigan area can help out, specifically someone in Michigan who has wholesaled deals without a license! Thanks guys!

Joshua B. · Answer

The government of the state of Michigan regulates real estate for many reasons, one of them being to protect its citizens. The government wants people trained properly in real estate law to further that goal. That's why there are licensing procedures.

People on this forum will read the statute and think "how could I read this to avoid getting a license". That's a mistake. The way to look at it is from the regulator's point of view. That is, will regulators view wholesalers just like they view regular agents? The answer is - of course! Wholesaling, just like a vanilla purchase and sale, has a substantial impact on the most valuable investment that the average citizen has. If anything, it's a more convoluted way of dealing with real estate and has more potential for confusion/error/etc.

Charles Kao · Answer

@Joshua Birk

Tens of thousands of transactions a year get done by wholesalers in Michigan alone.  While the statute may say one thing it also doesn't make sense for a wholesaler to be licensed because often times to get the best deal you are not acting in a "fiduciary" capacity.  I would argue you are more likely to get in trouble wholesaling if you are licensed and again you are not selling real estate you are selling a contract.  Time will tell if  state law has an actual case addressing this but until then it is still not 100 percent clear whether wholesaling requires a realtor license and I have not heard of this being enforced to date.  I find this very similar to the many brokers paying "consulting" fees to unlicensed real estate sales persons when we all know it is a referral fee.

Will Barnard · Answer

I second @Joshua Birk comments and agree, a license is required if you expect to make a fee from a real estate transaction.

@Aiden Lamb - assigning a contract means you negotiated a contract with a seller, then you had to find a buyer which means you likely had to advertise the property (or your contract to purchase with assignment clause) and as such, you would be considered brokering without a license. A proper wholesale deal in your state would require you to purchase and close on the transaction, then resale to your buyer.

Why not just get your license and avoid all the legal ramifications? There are no short cuts to real estate profits.

Aiden Lamb · Answer

@Joshua Birk Would you say then even if im only assigning contracts to receive my position in the deal and not participating in any purchase or sale that i should still receive a license regardless? now would this be a license for brokerage, correct?

Aiden Lamb · Answer

@charleskao thank you for the idea on that, i only fear getting into deep water legally and im just trying to avoid that, what would you say to do if the sellers title company doesn't accept what im doing? do i just tell the seller that we have to find another? And have you had any troubles with that in your own experience? my goal is to flip contracts and thats it. From my understanding im not actually the participate of any purchase or sale

Joshua B. · Answer

I'd have to disagree. The statute is incredibly widely written and, in my opinion, ropes in wholesalers as well. Here it is:

Article 25 defines a real estate broker as an individual or an entity, who with intent to collect or receive a fee, compensation, or valuable consideration, sells or offers for sale, buys or offers to buy, provides or offers to provide market analyses, lists or offers or attempts to list, or negotiates the purchase or sale or exchange or mortgage of real estate, or negotiates for the construction of a building on real estate; who leases or offers or rents or offers for rent real estate or the improvements on the real estate for others, as a whole or partial vocation; who engages in property management as a whole or partial vocation; who sells or offers for sale, buys or offers to buy, leases or offers to lease, or negotiates the purchase or sale or exchange of a business, business opportunity, or the goodwill of an existing business for others; or who, as owner or otherwise, engages in the sale of real estate as a principal vocation.

Charles Kao · Answer

@Aiden Lamb

You do not need it in Michigan but some title

companies require it to insure the transaction.  Getting a license requires you to disclose you are a realtor which can get in the way of getting deals done so you can stay unlicensed and then refer to another agent a listing if you can't close it for a consulting fee.  If you are licensed you can just convert the deal to a listing if you can't get a price you can wholesale.  In the past my wife was the realtor and I was the

wholesaler and that was a great combo because I could refer her listing but as we started doing commercial I needed to get my license.

Do you need a license to assign contracts in Michigan?

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