Now is the perfect time to talk about wholesaling in Missouri! And here’s why: A big change is coming this week.
Effective this Friday, August 28th, Missouri will officially regulate real estate wholesaling for the first time. A component of Senate Bill 973, this new requirement adds a 14-day mandatory disclosure period for anyone who wholesales residential real estate in the Show-Me State. If you’re a real estate professional or homeowner who’s ever come across a “we buy houses” advertisement, this law addresses exactly what those companies do.
We connected with our own John Banjak, principal and general counsel of True Title, to break down what’s changing and who it affects. Here’s what he said sellers and investors need to know about the new requirements.
What counts as “wholesaling” under the new law?
Missouri’s new law defines a wholesaler as a person or entity that enters into a purchase contract for residential property and then transfers that contract to another buyer, rather than taking legal title. In exchange, the wholesaler collects a fee or other compensation for the transfer.
According to Banjak, wholesaling has remained a modest but steady part of the transaction volume that True Title has handled over the years. He noted that both local players and larger regional and national firms commonly engage in the practice. What’s changing now is not who’s doing the wholesaling, but what’s required of them.
A mandatory 14-day notice
The most notable update SB973 brings to the wholesaling process is the new disclosure requirement. Wholesalers must now give sellers written notice of at least 14 calendar days before signing a contract to acquire the property. The notice must clearly explain the wholesaler’s intent to transfer or assign the contract for profit. Additionally, it must state that the agreed purchase price may be below market value. Finally, this disclosure must also appear in bold, 12-point font at minimum (no fine print allowed).
There are no exceptions to this requirement, even if a seller is in a hurry to close due to an urgent situation, such as pending foreclosure or unpaid property taxes.
Failure to provide the disclosure is considered an unlawful and unfair practice under the Missouri Merchandising Practices Act. This means sellers who don’t receive proper notice have a legal cause of action against the wholesaler.
Will this affect wholesaling volume in Missouri?
When asked this question, Banjak said, “We do anticipate a reduction in the number of wholesale transactions to the extent they are assigned or novated, as specified by the law.” He noted that many wholesalers have indicated they’d rather avoid the 14-day notice requirement altogether.
Instead of assigning contracts, he expects many wholesalers to shift toward purchasing properties outright and then reselling to a buyer in a separate (sometimes back-to-back) transaction (also commonly referred to as “double-close” or “flips”). This approach sidesteps the disclosure requirement because the wholesaler takes title and sells as the new owner, rather than assigning a contract.
What do wholesalers and investors need to know?
Wholesalers planning to assign or novate their contracts should take this new rule seriously, execute the required disclosure two weeks before entering into the contract, and manage their dates carefully. They may also consider treating the transaction as a double-close, in which case they can avoid the 14-day notice requirement.
The good news for wholesalers and investors closing with True Title is that there is NO CHANGE in our standard procedures. Because the law does not impact title, we will not have any new or additional requirements when a contract is assigned or novated.
What should agents and investors do differently?
If you engage in wholesaling as defined under the new law, it’s time to review your process. Banjak’s advice is straightforward: consult independent legal counsel to ensure you’re fully compliant.
“Like with any new compliance-related law, it makes no sense to move forward without seeking and obtaining legal counsel guidance,” he said.
What should sellers know before signing?
For sellers considering a wholesale offer, understand that the 14-day notice cannot legally be waived, regardless of your level of urgency. If you receive a wholesale offer, take the time to read the disclosure carefully, and consult a real estate attorney if anything about the offer isn’t clear.
Bottom line for Missouri real estate
Missouri’s new wholesaler disclosure law adds a layer of transparency and protection for homeowners looking to sell. It also protects the quality wholesalers in our area who are committed to doing things the right way. Understanding these new requirements is essential for anyone involved in Missouri real estate, so make sure your team has the proper protocols in place to stay compliant.
Have questions about how this law might affect an upcoming transaction? Reach out to our team at True Title anytime.
