Oregon Clamps Down on Wholesaling With a New Law and Registry

The times are a-changin’ for wholesalers. Oregon has joined a growing list of states that have amended their real estate laws to increase transparency and strengthen consumer protections in transactions, with a focus on eliminating many of the aspects that have given wholesalers a bad reputation. 

What Is Wholesaling?

Before diving into the nitty-gritty of the new law, here’s a recap on what wholesaling is. It is generally understood to mean putting a property “under contract,” usually at an under-market price. That means signing a sales agreement with a seller and assigning it to another buyer without ever owning the property. By doing this, the wholesaler has acted as an intermediary, profiting from the difference between the initial contracted price and the final sales price. 

Why Wholesaling Is So Contentious

Wholesaling can cause issues for several reasons, most of which have to do with transparency, which is why laws are being enacted to rid the practice of its cloak-and-dagger reputation. 

These are some of the main issues:

• The initial seller fails to disclose that they are a wholesaler to the seller, who feels that they have been manipulated when the wholesaler sells the house to another buyer, increasing the sales price without the initial seller’s knowledge.
• A wholesaler can tie up a property without producing a buyer, preventing the seller from finding a legitimate buyer. This scenario worsens when the wholesaler does not include a deposit when they enter the contract, meaning the seller has no financial recourse.
• Licensed Realtors and brokers feel wholesalers are taking their business.

What House Bill 4058 Is 

House Bill 4058, which the Oregon Senate passed last year, went into effect on Jan. 1, 2025. It requires real estate licensees to use written agreements when representing buyers or sellers in real estate transactions, and prohibits buyers’ agents and sellers’ agents from sharing compensation with each other without disclosing it to their clients. It also prohibits the assignment of contracts without the homeowner’s consent.

Here is a breakdown of the essential components of House Bill 4058:

• Effective date: The law takes effect on Jan. 1, 2025. 
• Wholesaler registration: Wholesalers must register by July 1, 2025. 
• Requirements: Applicants must be trustworthy and competent and provide evidence that they are registered with the Secretary of State. 
• Definitions: The law defines wholesaling as marketing a property where the marketer has an equitable interest or option to purchase and has invested less than $10,000 in it for less than 90 days. 
• Other provisions: The law also prohibits future right to list contracts, requires real estate agents to use written agreements, and requires transparency in agent compensation. 

Wholesalers Must Register With the Oregon Secretary of State

One of the most irksome aspects of the new law for wholesalers is the requirement they must register their activities with the Secretary of State by July 1, 2025.

The online registration to become a licensed wholesaler (real estate agents are exempt from this, as they are already licensed) includes:

• Completing a complete background check, including fingerprinting,
• Paying a $300 annual fee for the license.
• Wholesalers must also fall under the purview of state real estate laws.
• All wholesalers must have a high school diploma or a GED and provide a list of all the entities they plan to wholesale under. 

You can read a full and detailed description of the new Oregon Property Wholesaling Law here.

Disclosures and Equitable Interest

Another interesting aspect of the new law concerns the written disclosure the wholesaler must provide in at least 10-point bold type. Of particular concern to wholesalers is the “equitable interest” section. In short, the wholesaler must disclose that they have an equitable interest in the property being sold, even if they do not have legal title.

Buyers have equitable interest whenever they enter into a contract with a seller. According to the new Oregon law, they can still “assign equitable interest to another party prior to closing for profit.” This means that if all parties are agreed upon, a wholesaler can continue to wholesale— only with increased transparency.

However, wholesalers must disclose upfront to potential buyers, sellers, and agents and in all advertising that:

• They are wholesalers. 
• They do not have legal title (only an equitable interest) and might not be able to transfer title.
• They are not a licensed agent or appraisal specialist. 

Other Important Aspects of House Bill 4058

Cancelation of contract

Buyers and sellers may be able to cancel a contract up to three days after receiving a wholesaler’s disclosures and get back deposits or earnest monies. 

Exceptions

Oregon wholesalers do not need to register their activities with the state if they attain a Realtor’s license. In this case, other rules, such as disclosures, still apply.

Final Thoughts 

It’s not surprising that the biggest sponsor of the new Oregon bill is the National Association of Realtors. Wholesalers are a disparate collective that often operates under their own rules—clearly to the chagrin of licensed Realtors. As more states enact tighter measures to combat wholesaling, it is clear that the only way for wholesalers to function effectively will be to get Realtor’s licenses. 

If out-of-state wholesalers want to assign contracts in Oregon, they, too, will have to adhere to Oregon state laws. They can accomplish this by getting a Realtor’s license or teaming up with someone who does. One workaround in the latter scenario is for a wholesaler to pay for lead generation and marketing costs and get paid a consultation fee on the settlement sheet, which would come from the Realtor or broker’s proceeds, having disclosed their involvement ahead of time.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.