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

Real estate wholesaling has recently received much media attention as an investment vehicle because the nature of the investment strategy has made it one of the most popular investment strategies in the current appreciating real estate market. Ironically, wholesaling real estate is nothing new, with the principles of wholesaling present in every sector of a capitalistic economy.

Here are the things you need to know to answer the question, "Is wholesaling real estate legal in North Carolina?":

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

*Before we begin our guide on whether real estate wholesaling is legal in North Carolina, 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 bit like being an intermediary in the real estate world. Essentially, a wholesaler finds properties typically under market value and enters into a contract to buy them. Instead of buying the property themselves, they find someone else who wants to buy it and sell them the contract for a higher price. The wholesaler makes money from the difference between the contracted purchase price with the seller and the amount the end buyer pays.

The key here is that the wholesaler never actually owns the property. They simply secure the rights to buy it and then pass those rights on to someone else, usually for a fee. This strategy is attractive because it doesn't require a lot of upfront capital—wholesalers don’t need to buy the property or make renovations; they just need to be good at finding potential deals and negotiating.

In the real estate industry, this process relies heavily on being quick and efficient. Wholesalers need to find potential deals, get them under contract, and then find a buyer fast enough to make a profit before the contract with the original seller closes. It’s a fast-paced and often lucrative way to make money in real estate, which begs the question: Is wholesaling real estate legal in North Carolina?

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

Before diving into the dynamic world of real estate wholesaling in North Carolina, aspiring investors should arm themselves with a solid understanding of several critical areas. First and foremost, it's crucial to familiarize yourself with the laws that govern real estate transactions within the state. Ensuring that your wholesaling activities comply with local regulations is essential for operating legally and effectively.

Knowing which properties and situations are suited for specific exit strategies, such as contract assignments, double closings, or wholetailing, is also vital. Each strategy has its own set of benefits and is chosen based on the specifics of the deal and the condition of the property. This knowledge enables you to navigate various investment scenarios adeptly and maximize your profitability.

Understanding the local market dynamics is equally important. According to RedFin, the real estate market is currently experiencing a 4.6% increase in median sales prices over the last year, indicating a growing market where property values are appreciating. However, the number of homes sold has decreased by 11.2%, suggesting a potential decrease in competition among buyers. Additionally, properties are selling faster, staying on the market for 41 days on average—5 days less than the previous year. With only two months of inventory available, this indicates a seller's market, where demand outstrips supply.

These indicators suggest that while the market is competitive, the increased property values and quicker sales times create favorable conditions for wholesalers. Investors can leverage these conditions by securing properties at competitive prices and quickly flipping contracts for a profit.

For those wondering if wholesaling real estate is legal in North Carolina, the answer is yes, as long as you adhere to state laws and regulations. Aspiring investors should engage with North Carolina's prominent Realtor organizations for more detailed information and ongoing updates about market conditions and legal requirements. These bodies provide invaluable resources, education, and networking opportunities to help you succeed in your wholesaling endeavors. More importantly, they are well-positioned to answer the question we posed earlier: Is wholesaling real estate legal in North Carolina?

These are the state's larger trade and professional organizations dedicated to the real estate profession. Each of these associations is a member of the National Association of Realtors (NAR):

• The North Carolina Association of Realtors (NCAR): Established in the 1930s, the NCAR now serves more than 53,000 professional real estate members, supported by 45 local real estate boards within North Carolina. The state of North Carolina, to divide the boundaries of the state’s real estate boards, is divided into ten regions.
• The Canopy Realtors Association (CRA - Charlotte): The Canopy REALTORS Association is the rebranded name of the original Charlotte Regional REALTORS association. The change occurred in August 2019. The Canopy REALTORS offers a variety of services to its members and the greater Charlotte community, including a housing foundation and a real estate institute. The CRA’s mission is to advocate for homeownership opportunities.
• The Raleigh Regional Association of Realtors (RRAR): The RRAR is recognized as one of North Carolina’s largest associations in the Tar Heel state, serving more than 9,000 real estate community members of Raleigh and surrounding neighborhoods. The Raleigh Regional Association of REALTORS was established nearly a century ago to help community residents reach the American dream of homeownership.
• The Land of the Sky Association of Realtors (LOTSAR): Located in Asheville, LOTSAR is a non-profit organization established in 1917 and managed by members. It is a professional organization that now serves nearly 2,000 professional members, resulting from the merger of the Brevard and the Asheville Board of REALTORS.
• The Greensboro Regional Realtors Association (GRRA): Founded in 1920, the GRRA recently celebrated its centennial anniversary. Serving the Greensboro community and surrounding areas for the past 100 years, the GRRA represents more than 500 professional members in the markets of Greater Greensboro, Rockingham, and Randolph counties.

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

The North Carolina Real Estate Commission (NCREC)

The North Carolina Real Estate Commission, located in Raleigh, ensures the public's protection from licensees who have violated license law. As an independent government agency, the NCREC administers and enforces the license law for the state’s real estate activities. More than 100,000 real estate agents and brokers are licensed in the Tar Heel State.

However, the Real Estate Commission is not authorized to provide legal advice other than answering inquiries regarding the state’s license law.

Since 2006, the NCREC has exclusively issued real estate broker licenses. Before that, the North Carolina Real Estate Commission granted licenses as real estate salespeople and brokers.

Source

North Carolina §93A Real Estate License Law, Section 2 defines a real estate broker, ‘broker-in-charge (BIC)’, or ‘provision broker’. It also notes the following situations that do NOT require a real estate license in North Carolina.

North Carolina Real Estate License Reciprocity

North Carolina’s real estate laws do not include a formal reciprocity arrangement with any other state – even with South Carolina. However, a licensed agent from another state may be able to speed up the licensing process by getting approval for an education waiver.

An applicant for a North Carolina real estate license who currently holds a valid real estate license from another state – that is equivalent to the requirements mandated by North Carolina’s provisional broker license, may seek a waiver of specific licensing conditions if they have had an active license for at least 3 years before applying.

In addition, the state offers this guidance concerning nonresident licenses [93A-10].

Read Also: How To Wholesale Real Estate In North Carolina: Step-By-Step

Is Wholesaling Real Estate Legal In North Carolina?

Yes, wholesaling real estate is legal in North Carolina. This strategy is lawful because wholesalers do not actually buy or sell homes in the traditional sense. Instead, they acquire the right to purchase a property and then transfer this right to an end buyer for a fee. This process is supported by the doctrine of equitable conversion, which recognizes that the contractual right to purchase a property can be treated as an interest in the property itself. Thus, wholesalers are essentially dealing in the rights to properties rather than the properties themselves, operating within legal boundaries as long as they comply with relevant state laws.

What Are The Wholesaling Laws In North Carolina?

Currently, there are no specific laws in North Carolina that prohibit real estate wholesaling in the state.

However, North Carolina Real Estate License Law can be found in Chapter 93A of North Carolina’s General Statutes of North Carolina. This title of North Carolina law covers these areas of the law –

• Article 1 - Licensing Of Brokers And Brokerages
• Article 2 - Real Estate Recovery Fund
• Article 3 - Education Providers
• Article 4 - Times-Shares
• Article 5 - Real Estate Appraisers
• Article 6 - Broker Price Opinions (BPOS) And Comparative Market Analyses

Violations of North Carolina license law are stated in § 93A‑8.

North Carolina Is An Attorney-Close State

Like many states, North Carolina is recognized as an attorney-close state. As such, a licensed North Carolina real estate lawyer must perform the closing.

This mandate from North Carolina’s state government offers real estate wholesalers the opportunity to consider the potential legality concerns of certain decisions prior to acting on the decision as they complete their first real estate deals and real estate transactions. If you must pay for a real estate attorney, take advantage of their legal expertise and market know-how.

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment. Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

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

No, a real estate wholesaler in North Carolina does not need a license to wholesale real estate if their actions do not rise to a level that requires a license. That said, a real estate wholesaler must be the transaction's principal buyer, as this is the only thing a wholesaler can sell: their right to buy the property. They can't market the property, as that would require a North Carolina real estate license.

It can be helpful to become knowledgeable about North Carolina’s real estate and licensing laws. Still, no formal assessment is required to wholesale real estate in North Carolina if the wholesaler remains within the legal limits of state law.

Wholesale Real Estate Contract North Carolina

A contract of sale is a legal document that sets forth the enforceable terms of the contract of sale. A real estate contract legally defines the rights of the seller and the buyer. A contract of sale is a complex document that requires specific information that includes -

• The property’s legal description and mailing address.
• Notice of the earnest money given in good faith when the buyer signs the purchase agreement.
• An itemized list of the seller’s personal items that may be included as a part of the sale.
• The agreed-upon financing terms.
• Relevant contingency dates with regard to a home inspection and financing, among others.

Source

The Assignment of Contract

An assignment of contract is the legal instrument that allows a buyer to transfer their equitable interest in the subject property. The wholesaler – assigning the contract is known as the Assignor, and the end buyer (who is often a cash buyer) is known as the Assignee.

Final Thoughts

Is wholesaling real estate in North Carolina legal? Wholesaling real estate in North Carolina is a legal and viable strategy for those looking to enter the real estate market. This legality stems from the fact that wholesalers are not buying or selling properties directly. Instead, they acquire contractual rights to purchase properties and then transfer these rights to end buyers for a profit. Supported by the doctrine of equitable conversion, this practice allows wholesalers to operate within the framework of North Carolina law, provided they adhere to all applicable regulations.

Wholesaling offers a unique opportunity for investors to engage with the real estate market with lower initial capital and less risk compared to traditional property transactions. As long as wholesalers understand and comply with local laws, they can successfully leverage this strategy to generate income and gain experience in real estate investment.

*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.