The SC Real Estate Commission is currently evaluating how to best protect the consuming public from reports of problems in wholesaling, flipping, assignment, and investing transactions. So, this area is high risk, extremely fluid, and subject to regulatory change quickly. Stay closely tuned daily.
Currently some risk management thoughts:
Some brokerages view the risks to outweigh the benefits and either refer or avoid these transactions.
The SC Real Estate Commission takes complaints on unlicensed flippers/wholesalers/investors who are advertising a flip/wholesale without using an advertising licensed brokerage. 803-896-4400.
There are public policy concerns about reports of unscrupulous flippers/wholesalers who are alleged to be engaging in equity stripping of the homeowners.
If you have the property listed originally and your flipper/investor/wholesaler wants to get involved with the property, there can be additional ethics risks and legal requirements on you, so get your BIC, team leader, and brokerage attorney involved prior to the flip/assign contract offer being made (e.g., asap).
If you are inexperienced in this area, consider referring to an experienced brokerage.
If you are intent on learning on the job, consider associating an experienced colleague, reading and viewing all information on this topic as quickly as possible, associating experienced closing attorneys asap, and contacting the SCR hotline. The experienced attorney can produce all the tailored forms for the transaction and guide the transaction. The investor may already have the names of some experienced attorneys. Keep your BIC and team leader in the know.
In the typical flip transaction (e.g., wholesale, assigning, investing); there are dual track owners/sellers (e.g., the deeded owners/sellers who no longer own fee simple and the assigning/double-close investors aka the equitable ownership or partial ownership interest).
The listing agent will need listing agreements with both tracks of owners.
The experienced attorney can draft these listing agreements. At a minimum for this issue, you have all the dual track owners sign the SCR standard listing agreement (e.g., SCR220). If the property is listed with another brokerage before the investor becomes involved, the issues are extremely complex so definitely get the experienced attorney drafting all the documents (e.g., listing, contract, flip agreement).
Because this type of transaction is so high risk and complex, the best risk management practice is to keep an experienced attorney in the transaction from start to finish tailoring all the forms (e.g., listing agreement with both sets of owners, the assignment, the offer, the contract, the transaction forms, agency disclosures, other disclosures, access forms, copyright forms, repair forms), and handling the money in the assignment, the single closing, or the double closing.
Posted by: Byron King on 12/13/22 (This information is only accurate as of 12/13/22. You must contact SCR for updates and changes to this information after 12/13/22 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org or email byron at screaltors.org)
This information is not legal advice. This information is intended only to provide general information and may not be relied upon as specific legal guidance. Legal counsel should always be consulted before acting in reliance on this information.