A new Oklahoma law, going into effect on Nov. 1, aims to crack down on predatory wholesalers by enforcing stricter regulations and giving homeowners more control over transactions.
The legislation introduces consumer safeguards, transparency requirements and penalties for deceptive practices, marking a significant shift in how wholesaling is regulated across the state.
Bailey Crotty, executive director of the Oklahoma Real Estate Commission, said the law legitimizes the practice of wholesaling by providing safeguards for consumers, such as preventing predatory businesses from "clouding" titles, misrepresenting themselves, or pressuring homeowners into unfair agreements.
Max Nowakowski, managing attorney at Avenue Legal Group, an Oklahoma law firm that works closely with wholesalers on all types of real estate transactions and disputes, said there has been a positive response from wholesalers to the bill.
"They are looking to get their contracts and operating procedures into compliance to ensure a smooth transition to the new rules," Nowakowski told Homes.com via email. "Most wholesalers we have encountered understand that there's a need for more transparency to the initial homeowner seller, and this law allows wholesaling to continue in a more honest manner. "
What is 'wholesaling?'
Crotty defines wholesaling as when “a real estate professional, licensed or unlicensed, approaches a home seller and has no intention of taking legal or financial ownership of that property, but approaches them with the intent to then sell it to an end buyer or an end investor.”
Wholesalers typically reach out to homeowners via emails, mailers, text messages or phone calls. “Sometimes you’ll also see that on street corners with … signage that says, ‘We buy houses,’ and then a phone number,” she said.
The bill was signed into law in May. The commission had passed a law in 2021 to regulate the practice in Oklahoma, but this allowed unscrupulous wholesalers to employ tactics such as double closings. Since then, there has been an uptick in complaints to the commission regarding predatory wholesaling, according to Crotty.
What is a double closing? It occurs when the wholesaler simultaneously completes two separate transactions on the same property — one with the original seller and one with a third party, allowing the company to conceal the profit margin from the original seller, Crotty said.
Crotty explained that the typical victims of predatory wholesalers are individuals who may not be aware of the value of their home.
“Sometimes, [predatory wholesalers] may pose as a real estate agent or as an attorney, or as another type of licensed professional, when they might not actually hold that license,” Crotty said. “A predatory wholesaler isn't really explaining the process to the homeowner. [The homeowners] think that they're just offering them a quick way to sell their home fast.”
What wholesalers can’t and must do
The new law grants homeowners the right to cancel a contract within two business days without incurring any penalties. Additionally, the new law prohibits predatory wholesalers from filing documents with the county clerk's office that would "cloud the title," thereby preventing the homeowner from selling the property until the claim is resolved.
“We have in recent months seen an uptick in clouded titles and financial harm from wholesalers,” Crotty said.
It also requires wholesalers to provide written disclosures before any contract is signed, including their intent to resell the property at a higher price, a recommendation for the homeowner to seek legal advice and a clear notice of the owner’s right to cancel the contract within two business days without penalty.
Crotty said the contracts must include specific details such as the wholesaler’s contact information, payment terms, and a standardized cancellation form that the commission created.
What are the penalties?
Penalties for predatory wholesaling may include returning earnest money to homeowners and disciplinary actions such as fines.
The commission can regulate those with licenses. Courts would handle cases involving unlicensed wholesalers, Crotty said.
A transaction as small as $5,000 can represent serious public harm, and in cases involving predatory practices or widespread consumer impact, the state attorney general may intervene, she said.
Law looks to protect consumers, not shut out scrupulous wholesalers
Crotty said the state wants to allow the wholesale real estate business to continue for good actors.
Wholesaling can be beneficial to those who wish to sell their homes, Crotty said, and she hopes the new law will provide more consumer protection, awareness and research.
“Wholesaling is being reviewed and scrutinized on a national level by numerous regulators and consumer protection agencies, and Oklahoma wants to empower real estate professionals while also protecting and informing consumers. We believe this legislation accomplishes both of these things,” Crotty said.