Sorry for the delay but I did email Amy Higgins, Real Estate attorney in Cincinnati, about the legality of wholesaling on Ohio. Her response is below:
"Depends on whom you ask. The Ohio Department of Commerce seems to think so and has issued charges against wholesalers. But others argue they are in the business of selling contracts, not real estate, so it’s ok. To me, it just doesn’t smell right so I try to avoid working with wholesalers. It’s not worth it.
The key is in Ohio Revised Code Chapter 4735 (http://codes.ohio.gov/orc/4735), which requires a license to be a broker and then defines broker as –
(A)"Real estate broker" includes any person, partnership, association, limited liability company, limited liability partnership, or corporation, foreign or domestic, who for another, whether pursuant to a power of attorney or otherwise, and who for a fee, commission, or other valuable consideration, or with the intention, or in the expectation, or upon the promise of receiving or collecting a fee, commission, or other valuable consideration does any of the following:
(1)Sells, exchanges, purchases, rents, or leases, or negotiates the sale, exchange, purchase, rental, or leasing of any real estate;
(2)Offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of any real estate;
(3)Lists, or offers, attempts, or agrees to list, or auctions, or offers, attempts, or agrees to auction, any real estate;
(4)Buys or offers to buy, sells or offers to sell, or otherwise deals in options on real estate;
(5)Operates, manages, or rents, or offers or attempts to operate, manage, or rent, other than as custodian, caretaker, or janitor, any building or portions of buildings to the public as tenants;
(6)Advertises or holds self out as engaged in the business of selling, exchanging, purchasing, renting, or leasing real estate;
(7)Directs or assists in the procuring of prospects or the negotiation of any transaction, other than mortgage financing, which does or is calculated to result in the sale, exchange, leasing, or renting of any real estate;
(8)Is engaged in the business of charging an advance fee or contracting for collection of a fee in connection with any contract whereby the broker undertakes primarily to promote the sale, exchange, purchase, rental, or leasing of real estate through its listing in a publication issued primarily for such purpose, or for referral of information concerning such real estate to brokers, or both, except that this division does not apply to a publisher of listings or compilations of sales of real estate by their owners;
(9)Collects rental information for purposes of referring prospective tenants to rental units or locations of such units and charges the prospective tenants a fee.
[N]o person, shall act as a real estate broker or real estate salesperson, or advertise or assume to act as such, without first being licensed as provided in this chapter.
TO ME – that bans wholesaling without a broker’s license. You have the advertise, market and list the house, even if you are only assigning the contract. You are dealing with unsophisticated buyers and sellers, who don’t know the difference between selling the contract and selling the house. These statutes are in place to protect those unsophisticated folks. So again, I think they apply and ban wholesaling without a license.
A lot of REIA folks disagree with me, however. Still, I wouldn't want to have to spend tens of thousands of dollars in legal fees, and associated headaches, defending myself against a Dept of Commerce charge (or other legal action) on something so iffy.
Good rule of thumb: If you feel like you are “getting around” something, or “pulling one over on the law,” you probably are not doing something legal."
