All Forum Posts by: Mark Rogers

You should also be ok from a rental standpoint if you're in one of the communities located between Little Rock and Pine Bluff.  A friend had a listing for an apartment complex near Redfield, and one of the selling points was that it had 100% occupancy and a waiting list.  There are a fair number of folks who work in Pine Bluff but who choose to live north of there and commute to work.  

The Arkansas Real Estate Commission (AREC) discussed real estate investing and unlicensed real estate activity at its monthly meeting this morning.  AREC expressed a desire to protect unsavvy, sometimes desperate sellers from savvy, predatory, unlicensed wholesalers. It is a Class D Felony to engage in unlicensed real estate activity in Arkansas. Unlicensed real estate activity is broadly defined to cover most activities related to buying, selling, or leasing real estate or marketing or negotiating such purchase, sale, or lease without a valid active Arkansas license. Exemptions allow individuals to undertake those types of activities for themselves.

In the past, unlicensed “wholesalers” have attempted to fit within the exemption by getting a house under contract and claiming that they had an equitable interest in the property that allowed them to fit within the ownership exemption and market their contract, not the property.  In 2017, the Arkansas legislature attempted to eliminate this potential loophole by stating that the ownership exemption did not apply if the person “[o]btains an equitable interest in real estate with knowledge that the interest was obtained on behalf of a person or entity that intends to gain an interest in the real estate other than that of ownership.” Ark. Code 17-42-104(c).

AREC looks to the intent of the purported buyer and takes the position that the “buyer” must have an actual intent to close on the purchase of the property or the “buyer” will not qualify for the ownership exemption. AREC highlighted a few red flags that it looks for in the purchase and sale agreement which it believes suggest a lack of intent to close on the purchase of the property. A few of those red flags include:

(1)Provisions allowing the buyer to unilaterally extend the closing date without the consent of the seller;

(2) Provisions allowing the buyer to walk away at any time with no real negative consequences;

(3)Provisions indicating that the buyer may market the property;

(4)Extremely long inspection periods, like 60 days;

(5)Provisions allowing the buyer to put a lien on the property;

(6)Other one-sided provisions which tend to lock in the seller but not the buyer.

AREC and the Assistant Attorney General mentioned ongoing litigation over the issue involving a wholesaler who put a house under contract in Maumelle, Arkansas, Stassi V. Isom, 525 S.W.3d 27 (Ark. Ct. App. 2017).  AREC found that Stassi had engaged in unlicensed real estate activity and assessed a $5,000 penalty plus hearing costs. Stassi appealed to Arkansas Circuit Court, which affirmed AREC’s findings. Stassi then appealed to the Arkansas Court of Appeals. The Court of Appeals is sending the matter back to AREC for AREC to add more details to its findings of fact and conclusions of law to address Stassi’s exemption argument. From the tone of today’s discussions, it sounds highly unlikely that Stassi will fair any better in front of AREC the second time around.

If you plan on wholesaling in Arkansas, you should strongly consider seeking counsel from an Arkansas attorney who has experience dealing with these types of issues.

On Friday, the National Labor Relations Board (NLRB) overruled one of its own decisions from 2014 to make it easier for a company to establish that a worker should be treated as an independent contractor instead of as an employee. The current board was fairly critical of the 2014 board, accusing it of fundamentally shifting the analysis for political reasons.  The SuperShuttle DFW case on Friday restored the importance of "entrepreneurial opportunity" as an important principle against which to apply the usual common law factors.  "[C]ommon-law factors that support a worker’s entrepreneurial opportunity indicate independent contractor status; factors that support employer control indicate employee status."   This return to the previous standard is very welcome news for companies who want to use independent contractors.  Link to NLRB Press Release

The Fannie Mae maximum allowable foreclosure timeframes probably indirectly gives a decent feel for how landlord friendly a state might be.  The states with the shortest timeframes are Georgia, Minnesota, and Mississippi (320 days) and the jurisdictions with the longest timeframes are New York City (2,190), New York (1,740), and New Jersey (1,530).  Arkansas comes in on the low end at 420.  

https://www.fanniemae.com/content/guide_exhibit/fo...

Congratulations on a solid project!  Great work.  We look forward to seeing your next one.  

Alexander is split between two counties, Pulaski & Saline.  It is much better to be in Bryant schools/Saline County than to be in Little Rock schools/Pulaski County.  I would also be wary of some of the newer subdivisions with high foreclosure rates.  Much of Alexander qualifies for Rural Development loans with 0% down, and there are a fair number of subdivisions that sprung up with cheaply built, low quality houses sold to first time home buyers for 0 down.  We watch foreclosures, and at one point, one fairly small development had four houses scheduled for foreclosure over a two-day period, with others in the queue.  On a positive note, there are some nice developments going on in nearby areas, like Benton/Bryant and the Bass Pro Shop and Outlet Mall area of Little Rock and a newer UPS facility in the area.  Still, when we recently flipped a dumpy little house in Bryant, a local Bryant Realtor told us that she had a lot of folks interested in that price range who would prefer an older house in Bryant over one of the newer, cheaply built houses in Alexander.  

Similar to what the others are saying, we call the mortgage broker who issued the letter to see what has been done.  We typically ask if the buyer has been through "automated underwriting," which I think is a generic phrase that covers LP and DU.   You will likely get some push-back from local buyer's agents on non-refundable deposits and earnest money, and the earnest money addendum that they will use in Arkansas will give you virtually no protection in that it makes it pretty difficult for a potential buyer to lose their earnest money.   

Yes, the local REIA is a good place to start. CARREIA changed its name to ARKREIA, and it's a good place to network.

A friend is selling three rentals in an Opportunity Zone in North Little Rock, Arkansas. Attached is a flyer with information on the FSBO properties. The seller also has a short article about the tax advantages of investing in Opportunity Zones that she can provide to you upon request. Please direct your inquiries to the seller using her contact information, below.

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