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

Wholesaling real estate is a fantastic investment strategy for new investors, yet many are uncertain about its legality, a concern that often holds them back. The question, "Is wholesaling real estate legal in Idaho?" looms large for those looking to enter the market. As a result, this article aims to clear up any confusion by covering all the essentials you need to know about the legalities of wholesaling real estate in Idaho. From regulatory requirements to practical tips, we'll provide the insights necessary to navigate this investment path confidently and legally, starting with the following:

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

*Before we begin our guide on Is Wholesaling Real Estate Legal in Idaho, 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!

Idaho is a state full of natural beauty. Wildlife, abundant lakes and streams, sweeping mountain landscapes, and vast protected wilderness areas make the Gem State desirable to live and raise a family.

With a population of about 1.9 million, there are plenty of opportunities to wholesale properties in Idaho. However, far too many people on the outside looking in are left asking the same question: Is wholesaling real estate legal in Idaho?

If you're considering wholesaling properties in Idaho, you must understand real estate laws and the resources available to answer the question, "Is wholesaling real estate in Idaho legal?" To help you answer this question, we have developed the following guide to clarify a topic unnecessarily complicated by those unfamiliar with the strategy.

What Is Real Estate Wholesaling?

Real estate wholesaling is a strategy in the real estate industry in which an investor, known as a wholesaler, acts as an intermediary between property sellers and buyers without actually owning the property. This approach primarily involves assigning contracts, double closings, and wholetailing. Those who know how to find off-market properties in Idaho or those in distress with motivated sellers have several options at their disposal.

Starting with contract assignments, this is the most traditional form of wholesaling. In this method, the wholesaler enters into an Idaho real estate contract to buy a property and then sells their right to purchase it to an end buyer. The key here is that the wholesaler doesn't buy or sell the property itself; instead, they acquire the rights to purchase the property. Thanks to the doctrine of equitable conversion, this legal concept allows the wholesaler to transfer their contractual rights to the property to another buyer for a fee, often called an assignment fee.

Double closings involve the wholesaler actually closing on the property and then reselling it to the end buyer, typically on the same day. This method requires two sets of transaction documents and potentially more capital or short-term funding, but it can keep the original purchase price hidden from the end buyer.

Wholetailing is a hybrid approach where the wholesaler buys the property, typically does some minor repairs or simply holds onto it to benefit from market appreciation, and then sells it on the retail market, often to an end buyer looking for a home.

Each of these strategies offers unique advantages and considerations, making real estate wholesaling a flexible option for investors to enter the property market with relatively low upfront capital compared to traditional real estate transactions.

You can also check out our video on Wholesale Real Estate Contracts!

What Do You Need To Know About Wholesaling Houses In Idaho?

Aspiring wholesalers in Idaho should first understand local real estate laws to ensure compliance with regulations. It’s also crucial to grasp market dynamics, including buyer preferences and pricing trends, which influence property demand. Additionally, knowing various exit strategies, such as contract assignments, double closings, and wholetailing, can help tailor approaches to different market conditions and opportunities for success.

If you plan on doing wholesale deals in Idaho, starting with a basic understanding of trends and key statistics is always a good idea. While they may not directly answer the question, "Is wholesaling real estate legal in Idaho?" they can paint a clearer picture for new investors breaking into the field.

An Idaho Overview

Idaho has a total surface area of 83,570 square miles, making it the country's 14th-largest state by area. However, much of the state isn't suitable for permanent settlement because of the Rocky Mountains and other natural water and geologic features. In fact, Idaho has more than 3,100 miles of rivers, the most of any state in the United States.

Although Idaho's population has grown by 6.8% since 2020, it is still one of the most sparsely populated states, with an average of slightly over 20 people for every square mile of land. No more than five years ago, there were approximately 750,000 housing units throughout the state, with a median value of $451,298, according to Zillow.

The ten largest cities in Idaho, according to World Population, are Boise City, Meridian, Nampa, Idaho Falls, Pocatello, Caldwell, Coeur d'Alene, Twin Falls, Post Falls, and Lewiston, respectively.

Idaho Governing Bodies

In 1947, Idaho's legislature established the Idaho Real Estate Commission (IREC). Under Chapter 20 of the Idaho Real Estate License Law, Title 54 authorizes the IREC to administer the Law regulating real estate brokerage. The IREC comprises five Governor-appointed Commissioners and one "at large" public member.

The Commission issues licenses to real estate brokers and sales associates, develops and oversees education programs and licensing exams, investigates complaints, and takes disciplinary actions for license law violations. Not surprisingly, the IREC is an excellent source for anyone attempting to answer the question, "Is wholesaling real estate legal in Idaho?"

Idaho Realtors (IR) is the state's primary real estate trade association. More than 90% of active Idaho real estate licensees belong to this group.

The IREC and the IR sometimes have competing interests, but the two groups also often work together to reach a consensus on licensing issues. As a result, anyone interested in wholesaling properties in Idaho should heed their rules and regulations.

Idaho Realtors is comprised of 16 local boards and associations. However, some parts of the state lack representation.

A few of the largest boards and associations in Idaho are:

• Boise Regional Realtors (BRR)
• Couer D’Alene Association of Realtors (CAR)
• Greater Pocatello Association of Realtors (GPAR)
• Greater Idaho Falls Association of Realtors (GIFAR)

Read Also: The Pros & Cons Of Wholesaling Real Estate: An Investor's Guide

Is Wholesaling Real Estate Legal In Idaho?

You can wholesale properties in Idaho, but not without disregard for the law; there are some essential things you need to know first.

To be clear, you don't need a license to wholesale houses. As a result, your actions can differ quite a bit from those of someone licensed in the state. Nonetheless, your goal remains the same: to assign your rights to purchase a property within the confines of the law to another buyer.

You can pursue three popular wholesaling methods when working with motivated sellers and real estate investors. They are the assignment of the contract, a double closing, and wholetailing (also sometimes known as buy and sell). In all cases, you can’t market or sell a property you don’t own. So, with an assignment of contract, you can only market your contractual interest in the property (not the property itself). You'll collect an assignment fee when you act as the intermediary and assign the contract.

However, with a double closing and a buy-and-sell strategy, once you execute a purchase contract with a homeowner and close on the property as a separate deal, you can market it directly to new investors. Because the time frame is longer, in wholetailing, you can list it on the multiple listing service (MLS) and/or advertise it after you own the property. Also, in some cases, buyers may want improvements made before the transaction is completed, creating a short delay.

Most states, including Idaho, don't have specific laws addressing wholesaling; this creates grey areas where wholesalers sometimes engage in activities that cross legal lines.

Some wholesalers get real estate licenses to protect themselves better; this gives them more freedom to market properties instead of just marketing rights to a contract or facing other limitations related to marketing a property without a license.

What Are The Wholesaling Laws In Idaho?

There are no specific state laws about wholesaling real estate in Idaho. However, Title 54 of the Idaho Statutes covers professions, vocations, and businesses, including the formation and rules that govern the Idaho Real Estate Commission.

The IREC has created 25 Guidelines and other supporting documentation that govern real estate transactions in Idaho. The vast majority of these apply to licensed salespeople and brokers.

Here's a closer look at some of the more important guidelines you should know about.

Guideline 2

Brokering Idaho property requires an Idaho real estate license. Brokers and salespeople must hold an active Idaho real estate license to engage in any form of real estate brokering activities.

Idaho law prohibits any person from engaging in any act of a real estate broker without an active Idaho real estate license under Idaho Code 54-2002; his is true even if the broker, salesperson, or their clients do not reside in or personally enter Idaho.

The legal language specifically states that a "real estate broker" is defined to include "any person who, directly or indirectly, while acting for another for compensation or promise or expectation thereof, sells, lists, buys, or negotiates, or offers to sell, list, buy or negotiate the purchase, sale, option or exchange of real estate," and also includes "any person who represents to the public" that he is engaging in any of these acts.

This also includes "any person who directly or indirectly engages in, directs, or takes any part in the procuring of prospects, or in the negotiating or closing of any transaction which does or is calculated to result in any of the acts above set forth." The Commission interprets procuring prospects to include any marketing or advertising designed to attract the attention of buyers or sellers.

In other words, under the Idaho Code, any person who "sells, lists, buys, or negotiates" the purchase or sale of real property in Idaho is engaging in acts requiring an Idaho real estate license.

According to the guidelines, any person who engages in any defined real estate broker act but who does not hold an active Idaho license is guilty of unlicensed practice, regardless of any contractual arrangement with an Idaho-licensed brokerage.

Guideline 5

In some instances, a brokerage must disclose that it is receiving a transaction fee; this is covered under Idaho Code Section 54-2054.

The provision requires that when a brokerage is receiving "compensation" "from more than one party" (e.g., when the brokerage is receiving compensation from both the buyer and the seller), the brokerage must make a "full disclosure in writing to all parties."

Although unlicensed flippers are not regulated the same way licensed real estate people are, in the interest of full disclosure, wholesalers should consider revealing the amount of the fee they're getting in an assignment of contract situation. Wholesalers receive no fees (they receive profits instead) in a double close or a buy-and-sell strategy, which does not apply in those situations.

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Guideline 10

A licensee cannot pay or reward an unlicensed person for referring customers. Paying or offering to pay a "finder's fee" or referral fee to an unlicensed person is considered fee-splitting.

Also, any person who engages in public "procuring of prospects" must hold an active real estate license; an unlicensed person who engages in this activity violates the law's licensing requirement.

When this happens, both parties may violate the License Law: the licensee for fee-splitting and the unlicensed person for unlicensed practice.

Guideline 13

This guideline discusses the advertising requirements applicable to licensees on an overview level. Still, it does not cover trade association codes, franchise requirements, Federal regulations, or the Idaho Consumer Protection Act provisions governing advertising. It is limited to the Idaho Real Estate License Law.

Idaho Statutes Section 54-2053 on advertising states:

54-2053. ADVERTISING

(1) "Only licensees who are actively licensed in Idaho may be named by an Idaho broker in any type of advertising of Idaho real property, may advertise Idaho property in Idaho or may have a sign placed on Idaho property."

(2) "All advertising of listed property shall clearly and conspicuously contain the broker’s licensed business name. A new business name shall not be used or shown in advertising unless and until a proper notice of change in the business name has been approved by the commission."

(3) "All advertising by licensed branch offices shall clearly and conspicuously contain the broker’s licensed business name."

(4) "No advertising shall provide any information to the public or to prospective customers or clients that is misleading in nature. Information is misleading if, when taken as a whole, there is a distinct probability that such information will deceive the persons whom it is intended to influence."

Many wholesalers get into trouble because they are not clear about limitations regarding marketing and advertising properties. Again, wholesalers can only advertise the rights to assign a contract to an end buyer. Wholesalers can only develop private sources of potential cash buyers in a simultaneous or back-to-back closing.

It can't be stressed enough that a wholesaler can't advertise or market a property without a real estate license.

Designated brokers have additional responsibilities regarding advertising. Idaho Code 54-2038 prohibits brokers from allowing "any person who is not properly licensed to represent that broker as a sales associate or otherwise, in any real estate business activities requiring a real estate license."

This means that a broker may not advertise licensees until they are officially licensed at the brokerage.

Guideline 24

Section 54-2055 of the Idaho Code requires all active real estate agents to conduct personal real estate transactions through the broker they are licensed with; this will impact wholesalers who conduct personal real estate business when they are also licensed.

In addition, licensed wholesalers must also disclose their agent or broker status when acting as a principal in any transactions.

54-2055. LICENSEES DEALING WITH THEIR OWN PROPERTY

(1) "Any actively licensed Idaho broker, sales associate, or legal business entity shall comply with this entire chapter when that licensee is buying, selling or otherwise acquiring or disposing of the licensee’s own interest in real property in a regulated real estate transaction."

(2) "A licensee shall disclose in writing to any buyer or seller no later than at the time of presentation of the purchase and sale agreement that the licensee holds an active Idaho real estate license, if the licensee directly, indirectly, or through a third party, sells or purchases an interest in real property for personal use or any other purpose; or acquires or intends to acquire any interest in real property or any option to purchase real property."

(3) "Each actively licensed person buying or selling real property or any interest therein, in a regulated real estate transaction, must conduct the transaction through the broker with whom he is licensed, whether or not the property is listed."

Guideline 25

This guideline has extensive information about short sales, working with unlicensed intermediaries, for-sale-by-owner (FSBO) situations, and options. It also clearly defines what is and isn't allowed when structuring deals and marketing properties.

The IREC Idaho Real Estate License Laws and Rules (updated July 2020) contain this and all other guidelines.

Do You Need A License To Wholesale Real Estate In Idaho?

No, you do not have to have a real estate license in Idaho to wholesale real estate. You can conduct wholesaling activities without a license. The key is understanding the difference between what is allowed when you have a license and when you do not.

Many Idaho wholesalers choose to get a real estate license for added flexibility and protection. It's often a good idea to retain an experienced real estate attorney who can provide you with legal advice on purchase agreements and wholesale contracts.

Getting an Idaho real estate license involves several steps:

• Have a high school diploma or equivalent
• Be 18 years of age
• Take 90 hours of pre-license education classes
• Pass state and national portions of the salesperson licensing exam
• Go through fingerprinting and a background check
• Register with IREC
• Apply for a license through IREC
• Obtain Errors & Omissions Insurance
• Provide proof of legal residence in the United States

For detailed information on obtaining an Idaho real estate license, visit the Idaho Real Estate Commission licensing page.

Read Also: How To Become A Real Estate Agent In Idaho (5 Steps)

Final Thoughts

For those wondering, "Is wholesaling real estate legal in Idaho?" the answer is a resounding yes. Wholesaling in Idaho is perfectly legal, offering investors a viable and exciting opportunity to enter the real estate market. This article has provided a comprehensive overview of the necessary legal frameworks and guidelines that ensure your wholesaling activities are conducted within the bounds of Idaho law, empowering you to pursue this investment strategy confidently.

Now that you know wholesaling is legal in Idaho, it's the perfect time to kickstart your journey in the real estate industry. To get off on the right foot, consider attending Real Estate Skills' free training video. This resource provides valuable insights and practical tips to help you navigate the wholesaling process effectively and start capitalizing on opportunities in Idaho’s real estate market.

*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