Wholesaling is a popular real estate investing strategy that’s taken off everywhere, including South Carolina. But now, South Carolina’s new law bans it, and other states are starting to do the same, making laws to limit or stop wholesaling. Why is this happening now? If a nationwide ban comes, are there loopholes for wholesalers to still make money? Let’s find out.
What Is Real Estate Wholesaling?
Purchasing a property under contract and then swiftly reselling it to another investor for a profit is known as real estate wholesaling (read also the basics of real estate wholesaling). In wholesaling, the property is purchased as-is and is promptly advertised to customers. This strategy contrasts with typical real estate transactions when the investor improves the property. The difference between the original purchase price and the selling price is where the profit comes from.
Why Problems Arise With Wholesaling
Issues arise when the first buyer doesn’t clearly explain their intentions to the seller or adds a high assignment fee without the seller knowing. Delays in finding a buyer, not including a deposit in the contract, or failing to show proof of funds for real estate transactions can also cause problems. These issues can anger the seller and lead to legal trouble. Plus, wholesaling laws vary by state, so knowing and following local regulations is important. Transparency is key. Disclose everything to the seller, and get their sign-off to stay legally above board.
What the South Carolina Law Says
- Assigning is allowed; marketing or advertising for profit is not.
- You can advertise your stake in a property under contract but can’t sell it.
- Real estate brokers must honor their client commitments and cannot wholesale properties or help others do so.
Is This Law Completely Banning Wholesaling in South Carolina?
Traditional wholesalers purchase the right to buy the properties they deal with, not the actual properties. They sign a deal with the homeowner to purchase the house exclusively. Instead of buying the home, they assign their right to another buyer, profiting from the price difference. This method is still legal for vacant land and commercial real estate in South Carolina. However, House Bill 4754, enacted on May 29, 2024, introduces new restrictions.
How to Wholesale Real Estate Under This Law
- Partner with a wholesale mentor in South Carolina.
- Learn South Carolina real estate wholesaling laws and contracts.
- Understand the real estate market.
- Build a cash buyers list.
- Find motivated sellers and distressed properties.
- Put distressed properties under contract.
- Assign the contract to the cash buyer.
- Close the deal, and collect the assignment fee.
- Double close or wholesale when necessary.
How to Avoid Problems if This Law Enacted Nationwide
Genuine Double Closings
To sell a property for a profit shortly after owning it, ensure you complete the initial purchase without marketing it to another buyer beforehand. Then, arrange a separate closing with your end buyer. Make sure you contact this buyer only after you own the property.
Installment Agreements
Under an installment agreement, the customer pays the seller in installments over a predetermined length of time. For example, an investor could provide the seller $200,000 in exchange for temporary legal home ownership for ninety days. The investor can use this time to repair the house before selling it for a profit.
Wrapping Up Wholesaling with the New Law
You must stick to the new rules to wholesale real estate under House Bill 4754. Team up legally with buyers or use installment contracts to work around these changes. Following these laws makes the entire process smoother and keeps you in the clear. Always play fair, stay updated on new laws, and keep your real estate game strong in South Carolina and beyond. For more updates, stay with DoubleClose.com, your best transactional funding company in double closing situations.