MANSFIELD — If you get a text message, receive a post card or drive past a billboard with an offer from a stranger to buy your home, it’s likely from a real estate wholesaler.
Ohio lawmakers recently passed legislation to require wholesalers to offer a disclosure statement to clients about their business model.
That bipartisan legislation, Senate Bill 155, was introduced by Republican Senator Andy Brenner and Democratic Senator Katherine Ingram in March.
The bill passed unanimously in both the Ohio Senate and House of Representatives and now awaits a signature from Gov. Mike DeWine.
Real estate wholesalers enter into contracts to purchase homes, but don’t actually take ownership of the property. Instead, they find another buyer (typically an investor) and reassign the contract to them for a higher price — which may or may not exceed a real estate agent’s typical commission.
Wholesalers typically buy distressed properties or ones that are priced below market value, but unlike flippers, they don’t make significant improvement repairs to the property.
Wholesaling isn’t illegal, but opponents of the practice say some wholesalers act unscrupulously — using confusing contracts or taking advantage of sellers who are desperate to sell or may not understand their property’s true worth.
“What they’re doing is they’re preying upon people at weak moments,” said William Naumoff, an attorney with Milestone Title Agency.
“The general goal is that they extract as much as they can by finding a buyer that’s willing to purchase it well above what they’ve promised to buy it from the original homeowner.”
Jami Kinton-Sluss, marketing director at Sluss Realty, was one of several people to testify in favor of Senate Bill 155.
The Ontario graduate said she’s met multiple local residents — including a retired physician with dementia and an elderly veteran — who have been negatively impacted by real estate wholesaling.
“This was such an unregulated industry for so long,” Kinton-Sluss said. “Seniors have been a really big target. People who live in lower income neighborhoods have been a really big target.
“For me personally, there’s still more work to be done, but this is a really phenomenal start to generate awareness and start putting provisions in place to start protecting people,” she added.
Other proponents included Zillow, Ohio REALTORS, the Area Agency on Aging District 5 and AARP of Ohio, whose representatives said wholesalers often act in a predatory manner.
Organizations like the Ohio Land Title Association, County Treasurers Association of Ohio and the Ohio Recorders Association also advocated for the bill.
What does Senate Bill 155 do?
The new law requires real estate wholesalers to provide property owners with a written disclosure form that must be signed before they can enter into a contract to transfer the property.
In his sponsor testimony, Sen. Andy Brenner said the legislation will increase transparency surrounding the wholesaling process.
“This disclosure is vitally important as it informs the homeowner that the wholesaler is not representing them, that the wholesaler intends to assign their rights to the contract for a profit, and that they may be offering below fair market value for their home,” Brenner said.
Senate Bill 155 also allows the owner of the property to cancel a sales contract with a wholesaler any time before closing, without penalty, if they do not receive such a disclosure.
Lastly, the bill creates a mechanism for wholesalers to be penalized by law if they don’t provide such disclosure forms.
The law’s definition of real estate wholesalers does not include real estate transactions between blood relatives, parents, affiliates, subsidiaries or affiliated groups.
What do wholesalers think of the legislation?
Tristan Gardner is a local real estate professional whose business model includes wholesaling.
He said he had concerns about an earlier version of the bill that would have required wholesalers to be licensed, but has no issue with the final version of Senate Bill 155.
“I’m also in full support of real estate wholesaling when it’s done ethically and transparently,” said Gardner, founder of Gardner Property. “Whether someone is a licensed agent, a wholesaler, or anything in between, the seller deserves to know exactly how that person plans to solve their problem.”
Bradley Partin, CEO of Richland County Home Buyers, said he welcomes any “thoughtful regulatory framework.”
“Clearer standards help elevate the profession and filter out the ‘fly-by-the-night’ operators who fail to transparently disclose their intent to assign or wholesale contracts. Removing these operators will only strengthen reputable companies like ours,” he said.
Partin also noted wholesaling is a small part of his business’ operations.
“In the vast majority of our transactions, we take title to the properties we acquire. Traditional wholesaling, by definition, does not involve the contract holder taking title, so the bill’s core provisions do not apply to how we primarily operate,” he said.
Both men argued wholesaling and commercial home buying can be done ethically and are a better fit for certain customers.
“Real estate agents cannot solve every situation a homeowner faces,” Gardner said. “That flexibility is important. Some sellers need speed, convenience or certainty more than they need top dollar.”