Passed legislation aims to curb 'despicable' wholesale real estate practice

SOUTHERN INDIANA — A piece of recently passed Indiana legislation is aimed at eliminating the practice of real estate wholesaling and protecting consumers.

House Bill 1068 was signed by Gov. Eric Holcomb on March 11 after unanimously passing the House and Senate.

Rep. Ed Clere, R-New Albany, wrote the legislation, and has been a real estate broker for the past 20 years. He said there are two parts of the legislation, but both sections have the goal of consumer protection.

Clere said he introduced similar legislation last year where it passed the House but not in the Senate.

The first part addresses real estate wholesale, an action in which an unlicensed real estate solicitor convinces another person who owns property to sell it for a fraction of the cost, and turns around and sells to another buyer for the market price.

“They think they’re selling the house to the wholesaler, but they’re getting permission to go out and market the property to others,” Clere said.

The victims of the practice are typically vulnerable homeowners like seniors and those facing hardships like home repairs they can’t afford or medical issues.

“It’s a despicable practice,” Clere said.

The legislation will require disclosure of the name of the unlicensed solicitor who is shopping around a property to potential buyers.

The second part will require, starting July 1, buyer agency agreements to be made in writing. There are already laws in place where listing agreements have to be in writing.

Bill Burns, broker/owner of RE/MAX First in Jeffersonville, said less than a month ago a homeowner in Jeffersonville was trying to list her house with them to sell. When they returned a few days later so that she could sign the paperwork, she said someone had come earlier in the day with paperwork of their own, which she signed selling her home for a low price.

He said the buyer was out of Tennessee and they took them to court to get him out of the contract, which they were able to do.

Chris Watts, vice president of public affairs of the Indiana Association of Realtors, said these wholesalers will sell a “too good to be true” story to the homebuyer with cash offers and other tactics to get a person to sell their home below the market value .

He said he felt at least some kind of disclaimer language legislation was needed that would advise homeowners of the type of agreement they might be signing on to.

Clere said while the legislation doesn’t outlaw wholesalers, it does implement meaningful disclosure requirements to hold these wholesalers accountable.

“The legislation we passed should go a long way toward ending it,” Clere said.

Watts said he thinks they have heard more about the wholesaling practice in recent years.

Burns said data is now more available and accessible for wholesalers to be able to find properties they’d like to wholesale. Due to the fact that it is so profitable, they can hire people to talk with homeowners, so that the actual buyer can avoid responsibility.

Burns recommends that those looking to sell their home talk with a trusted, licensed realtor, and get a fair market rate analysis of the home.

“It’s not about a realtor making money, it’s about consumers getting the value they deserve out of their properties,” Burns said.