Is Wholesaling Real Estate Legal In North Dakota? A 2024 Guide For Investors

Are you curious about the ins and outs of real estate wholesaling up in North Dakota? Well, you're not alone. One burning question that keeps popping up among investors is: Is wholesaling real estate legal in North Dakota? It's a valid concern, especially if you're looking to dip your toes into the real estate market in the Peace Garden State. In this blog, we're diving deep into the legal side of things, giving you a 2024 tailor-made guide for investors like yourself. So, let's get to it and unravel the mysteries surrounding real estate wholesaling in North Dakota, starting with the following:

• What Is Real Estate Wholesaling?
• What Do You Need To Know About Wholesaling Houses In North Dakota?
• Is Wholesaling Real Estate Legal In North Dakota?
• What Are The Wholesaling Laws In North Dakota?
• Do You Need A License To Wholesale Real Estate In North Dakota?
• Final Thoughts

*Before we begin our guide on whether wholesaling real estate is legal in North Dakota, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!

What Is Real Estate Wholesaling?

Real estate wholesaling is a popular investment strategy where an individual, known as a wholesaler, facilitates the transaction of a property without actually owning it. This approach is particularly appealing because it requires minimal capital compared to traditional real estate purchases. There are three main types of real estate wholesaling:

• Assigning Contracts: This is the most traditional form of wholesaling. Wholesalers enter into a contract to purchase a property, but instead of completing the purchase themselves, they sell their rights to buy the property to an end buyer. The transaction leverages the doctrine of equitable conversion, which allows the wholesaler to transfer their contractual purchase rights for a fee, commonly known as an assignment fee.
• Double Closings: Also known as "simultaneous closings," this method involves the wholesaler actually closing on the property first, then reselling it to the end buyer immediately afterward. It requires two sets of closings almost back-to-back, allowing the wholesaler to keep the original purchase price and the resale price separate and confidential.
• Wholetailing: A hybrid between wholesaling and retailing, wholetailing involves purchasing a property, possibly making minor repairs or improvements, and then selling it directly to a retail buyer. This method often attracts those looking for a move-in-ready home but can offer better pricing than typical retail properties.

Each method offers unique advantages and caters to different investment strategies, making real estate wholesaling a flexible option for entering the property market with relatively low upfront commitments. Now that you know what wholesaling is, it's time to ask the most important question: Is wholesaling real estate legal in North Dakota?

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Ready to learn how to wholesale real estate in North Dakota?

What Do You Need To Know About Wholesaling Houses In North Dakota?

Before starting to wholesale houses in North Dakota, aspiring wholesalers should focus on understanding several foundational aspects. First, it’s crucial to learn about the local real estate laws in North Dakota to ensure all dealings are legally compliant. Knowledge of the market dynamics, such as current housing demand, pricing trends, and economic factors, is also essential for identifying profitable opportunities. Additionally, familiarizing oneself with various exit strategies, including contract assignments, double closings, and wholetailing, can provide flexibility and enhance profitability. Mastering these areas will equip you to navigate North Dakota’s real estate market effectively.

Some of the best sources of information involve real estate organizations spread across the state. The following includes a list of the larger real estate professional organizations in North Dakota, each of which can help answer the question, "Is wholesaling real estate legal in North Dakota?" Each of these associations is a member of the National Association of Realtors (NAR):

• The North Dakota Association of Realtors (NDAR): Established over 75 years ago, the NDAR is the voice for real estate in North Dakota. Through support, resources, and advocacy platforms, the North Dakota Association of REALTORS’ mission is to create the best possible for real estate professionals and property owners today and in the future.
• The Fargo-Moorhead Area Association of Realtors (FMAA): Founded in the early 1920s, the FMAA serves professional real estate agents, brokers, and property owners in the greater Fargo-Moorhead (and surrounding) community. The FMAA has approximately 1,000 members and partners with more than 250 businesses.
• The Badlands Board of Realtors Incorporated (BBR): Located in Dickinson, North Dakota, the Badlands Board of REALTORS seeks to serve real estate professionals and consumers in Western North Dakota and beyond. The BBR is a NAR and a North Dakota Association of REALTORS member.
• The Grand Forks Area Association of Realtors (GFAAR): The GFAAR was developed to meet the professional needs of real estate agents and brokers in and around the Greater Grand Fork area. The GFAAR serves communities in North Dakota and nearby Minnesota, situated to the east in a statistical area known as the Grand Cities.
• The Jamestown Board of Realtors (JBOR): Located in the ninth-largest city in North Dakota, the JBOR has long served Jamestown, Valley City, and its surrounding neighbors. Its primary mission is to further the interests of all property owners by supporting successful real estate practices.

The North Dakota Real Estate Commission (NDREC)

The North Dakota REC is the state agency tasked with managing North Dakota’s real estate agents, license processes, real estate brokerages, and activities. The commissions’ function and history are noted in Section 70-01-01-01 -1, which requires the governor to appoint a real estate commission whose responsibility is to administer the real estate license law regarding brokers and salespersons and to regulate the sale of out-of-state subdivided lands offered for real estate to residents of North Dakota.

Its authority is referenced in ND State Real Estate Commission 43-23-02, which states that the governor shall appoint each member of the commission for a term of five years.

North Dakota's real estate law is clear as to when a real estate license is required for any person who may not act as a real estate broker or salesperson, advertise as a real estate broker or salesperson, or assume to act as a real estate broker or salesperson without a license issued by the real estate commission.

For this North Dakota statute, real estate is defined as follows (43-23-06.1-8) – any interest or estate in land, including leaseholds, whether such interest or estate is corporeal, incorporeal, freehold, or nonfreehold, and whether situated in this state or elsewhere.

The North Dakota Real Estate Commission grants the following real estate licenses, which expire on the last day of each year. According to 43-23-06.1-7, a licensee is a real estate broker, an associate real estate broker, or a real estate salesperson who is associated with a real estate brokerage firm.

A Real Estate Salesperson (43-23-06.1-11) means any person who for a fee, compensation, salary, or other consideration, or in the expectation or upon the promise of that compensation, or other consideration, or in the expectation or upon the promise of that compensation, is employed or engaged by a licensed real estate broker to do any act or deal in any transaction as provided in subsection 6 for or on behalf of such licensed real estate broker.

Or an Associate Real Estate Broker or (Designated) Real Estate Broker, with an associate broker working under the supervision of the brokerage’s designated real estate broker (43-23-06.1-9) means any person that, for another, for a fee, commission, or salary, or other consideration, or with the intention or expectation of receiving or collecting such compensation from another, engages in or offers or attempts to engage in, either directly or indirectly by continuing course of conduct by a single act or transaction.

In addition, North Dakota law requires salespersons to work under the supervision of a designated broker (43-23-12(2)).

Further, North Dakota law indicates that these circumstances are exempt from state law (43-23-07).

North Dakota’s Rules Regarding Nonresident Brokers & Reciprocity (43-23-10)

More specifically, North Dakota has written reciprocity agreements with:

• Georgia
• Iowa
• Minnesota

Is Wholesaling Real Estate Legal In North Dakota?

Yes, wholesaling real estate is legal in North Dakota. This investment strategy involves a wholesaler acquiring the right to purchase a property and then selling that right to an end buyer, rather than the property itself. It's crucial for wholesalers to ensure that their contracts do not prohibit the assignment of these rights before signing. Additionally, some contracts may require the seller's written approval for any assignments. Wholesalers must carefully navigate their actions to avoid engaging in activities that, under North Dakota law, would require a real estate license.

What Are The Wholesaling Laws In North Dakota?

North Dakota’s real estate license law is found in NDCC Chapter 43-23 – The State Real Estate Commission. According to 43-23-06.1-9, these actions in North Dakota require a real estate license to comply with license law -

a. Lists, offers, attempts, or agrees to list real estate or any interest in that real estate, or any improvements affixed on that real estate for sale, exchange, or lease.

b. Sells, exchanges, purchases, or leases real estate or any interest in that real estate, or any improvements affixed on that real estate.

c. Offers to sell, exchange, purchase, or lease real estate or any interest in that real estate, or any improvements affixed on that real estate.

d. Negotiates or offers, attempts, or agrees to negotiate the sale, exchange, purchase, or leasing of real estate or any interest in that real estate, or any improvements affixed on that real estate.

e. Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or any interest in that real estate, or any improvements on that real estate.

f. Who is a licensee under this chapter and performs any of the acts set out in this subsection while acting in the licensee's own behalf.

g. Advertises or holds out as being engaged in the business of buying, selling, exchanging, or leasing of real estate or any interest in that real estate, or any improvements on that real estate.

h. Assists or directs in the procuring of prospects, calculated to result in the sale, exchange, or leasing of real estate or any interest in that real estate, or any improvements on that real estate.

But not, that a real estate license is not required in these incidences [See 43-23-07], such as any person, partnership, association, corporation, or limited liability company who is a bonafide owner or lessor or who accepts or markets leasehold interests in residential or agricultural property and performs any of the acts mentioned above concerning property owned or leased by them, nor does it apply to regular employees thereof, when the acts are performed in the regular course of or as an incident to the management of the property and the investment therein.

Violations Of North Dakota License Law

According to NDCC 43-23-17, any person violation section 43-23-05 is guilty of class B misdemeanor, and any person violating section 43-23-14 is guilt of infraction.

Further, as stated in 43-23-18, if any person or entity has engaged in any act or practice that constitutes or will constitute a violation of this chapter, the commission may commence an action in the district court of the county in which the person or entity resides or in the district court of the county in which the act or practice occurred for an injunction to enforce compliance with the chapter or rules adopted by the commission.

The NDCC 26.1-20-5 notes: All title evidence be examined by a licensed attorney, that a domestic corporation organized for the purpose of insuring title to real property in this state or of insuring against loss by reason of defective titles to real property, or encumbrances on real property or a foreign corporation authorized to do business in this state, may not issue any policy, binder, or certificate unless it has secured from a person, firm, or corporation holding a certificate of authority under chapter 43-01 the record title evidence of the title to be insured, and the title evidence has been examined by a person duly admitted to the practice of law as provided by chapter 27-11.

North Dakota Is An Attorney Close State

In addition, North Dakota is considered an attorney-close state, which means that buyers in a purchase-and-sale transaction are required to hire a real estate attorney (and obtain legal advice) to handle the closing.

As such, North Dakota wholesalers will be required to use a licensed attorney when working in North Dakota. And while this adds to the cost of doing business, it also ensures the real estate wholesaler stays within the legal limits. It will also provide a wholesaler with a great source of essential information.

Read Also: How To Wholesale Real Estate in North Dakota: Step-By-Step

Do You Need A License To Wholesale Real Estate In North Dakota?

No, real estate wholesalers in North Dakota are not required to hold a state-issued license if their actions do not rise to the level that requires a license dictated by state law.

As a reminder, a wholesaler in North Dakota is awarded equitable rights through the execution of a legally enforceable contract of sale. These equitable rights (or equitable interest) are the asset a wholesaler can lawfully sell, which differs from selling the actual real property.

Wholesalers will benefit from becoming familiar with North Dakota’s real estate and license laws to help them understand which certain actions violate legal lines. But there are no laws or formal procedures required to wholesale real estate in North Dakota – if the wholesaler remains within the state’s legal boundaries.

Many investors wholesaling real estate in North Dakota may decide to earn their real estate license as it may help understand the legal boundaries and offer great business, market, and legal insights.

Final Thoughts

Is wholesaling real estate legal in North Dakota? Yes, wholesaling real estate is indeed legal in North Dakota, offering a viable and potentially lucrative investment strategy for those interested in the real estate market. Now that you understand the legal landscape of wholesaling in this state, you're well-positioned to explore the opportunities it presents. To fully capitalize on these opportunities and navigate today's dynamic market, consider attending Real Estate Skills' free training. This valuable resource can equip you with the essential skills and knowledge needed to succeed in wholesaling and making the most of your real estate investments.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs