How New State Disclosure Laws Affect You & Your Business as a Wholesaler
If you’ve been in the wholesaling business this year, then you know there have been major pushes by several different cities and states for investors – particularly wholesalers – to get their licenses, pay dues to the National Realtor Association (NAR), and make disclosures to sellers about their intentions.
Just recently, in my state of Arizona, one such disclosure was passed, requiring that wholesalers disclose that we’re wholesalers.
Now, Arizona is just one such state that makes it a requirement for us to tell sellers what our intent and interest are, but the wording of these laws can be difficult to decipher. This can lead to new wholesalers being confused as to what we can and can’t do, or what we’re required to do.
What AZ’s Disclosure Law Means…
Let’s start by breaking down what disclosure laws actually mean.
According to the Cornell Legal Information Institute, disclosure “requires parties to automatically share routine evidentiary information that would otherwise be available during discovery.”
That’s a lot of legal mumbo jumbo for sure, but what it means is an individual in a party is required to disclose information that is relevant to whatever document or procedure is taking place.
For us, and for those of us in Arizona, this disclosure law just means that we have to disclose, in writing, that we are wholesalers before we enter into a binding agreement with a seller.
Again, the language in the law is a little bit confusing, as one of my AstroFlipping students asked about during our coaching call:
The law requires that we disclose ourselves as wholesalers “when entering into a contract”, which essentially means that we have to put this in our contract before the seller executes it – ie signs it.
Basically, this law prevents people from executing a contract without the wholesaler stating that they are a wholesaler.
How to Disclose Yourself as a Wholesaler
So, now that you know a little about disclosure laws and what the law in Arizona is saying, how exactly do you go and ‘disclose’ to a seller that you’re a wholesaler?
As I state in the video above, I’ve added this particular disclosure in all of my contracts, stating that I – as the buyer – am an investor and that I’m in the business of buying and selling real estate property.
And then I go about explaining what types of exit strategies I use, which include wholesaling, fix and flipping, and buy and holds. I then have this included with the other disclosures in the additional terms and conditions within the contract.
You don’t have to go and create a whole new contract for disclosure, you can use the one you’ll present to the seller.
So, while this law is specific to Arizona, other states may have similar disclosure laws. It’s important that you are aware of what requirements your city or state has in terms of seller contracts.
If you’re still having a hard time understanding your disclosure laws, then come and join AstroFlipping!
Our community is great at answering any questions or concerns you might have.