Wholesaling in Michigan — Are You Licensed?
One of the questions that the RPOA occasionally gets is whether or not real estate wholesalers need a real estate broker or salesperson license.
Some states specifically address wholesaling within their statutes; however, Michigan does not. Instead, Michigan relies on the definition of a real estate broker and what type of activity requires a broker’s license.
Let’s take a look at what Michigan licensure law says about when “owners” of real estate must be licensed:
Licensure as a real estate broker is required of an owner of real estate who engages in the sale of real estate as a principal vocation, unless the owner engages the services of a real estate broker. Acts constituting a principal vocation include any of the following:
(a) Engaging in more than 5 real estate sales in any 12-month period.
(b) Holding one’s self out to the public as being principally engaged in the sale of real estate.
(c) Devoting over 50% of one’s working time, or more than 15 hours per week in any 6-month period, to the sale of real estate.
Wholesalers often say: I don’t take title to the property, so I’m not an owner. Correct. As a wholesaler, they are not an “owner of real estate” per se under the licensing statute, but they do own an interest in real estate by way of the purchase agreement which the wholesaler offers for sale or assignment.
If we read the licensing rule in conjunction with the definition of “real estate broker” under Michigan’s occupational code, we find a very broad definition capturing any individual or entity that:
…who with intent to collect or receive a fee, compensation, or valuable consideration, sells or offers for sale, buys or offers to buy, provides or offers to provide market analyses, lists or offers or attempts to list, or negotiates the purchase or sale or exchange or mortgage of real estate, or negotiates for the construction of a building on real estate; who leases or offers or rents or offers for rent real estate or the improvements on the real estate for others, as a whole or partial vocation; who engages in property management as a whole or partial vocation; who sells or offers for sale, buys or offers to buy, leases or offers to lease, or negotiates the purchase or sale or exchange of a business, business opportunity, or the goodwill of an existing business for others; or who, as owner or otherwise, engages in the sale of real estate as a principal vocation.
One frequent and notable misconception is that if a person only conducts the sale of real estate on their own behalf, as most wholesalers do, they are exempt from licensing. Some states do provide such an exemption, but Michigan–as you can see from the statutes–requires that a person carries a real estate license, even if they do not “represent” third parties, if they meet the prescribed licensing threshold.
Michigan’s licensing statute and definition of “real estate broker” do not directly address wholesaling; however, if you engage in the sale of real estate (or interests in real estate), the State of Michigan could find licensing is required.
Although enforcement action against those only selling their own real estate or wholesalers is not prevalent, if you actively engage in the sale of real estate as your principal vocation–whether as a wholesaler or otherwise–you should consider seeking a license.
Final thought: If you are considering wholesaling in another state, keep in mind that each state has slightly different licensing rules for real estate professionals. Be cautious about seeking or taking advice from others not familiar with the real estate statutes in the state in which you will be conducting real estate activity.
Author: David Hill, licensed attorney and RPOA member. David offers RPOA members free limited legal advice. You may contact David at 616- 254-8417.