Oregon Property Wholesaling - A Law and Rule Overview
Cory Carlson
April 29, 2025
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December 2024 House Bill 4058 (Chapter 3, 2024 Laws) will require the registration of residential property wholesalers beginning July 1, 2025. Additionally, wholesalers will be required to provide a written disclosure to parties to the transaction and in advertising.
Registration
“Residential property wholesaling" is defined as the marketing of residential property where the marketer has only an equitable interest or an option to purchase and, at the time of marketing, the marketer has held such interest or option for fewer than 90 days and invested less than $10,000 in land development or improvement costs associated with the residential property.
With the exception of licensed brokers and principal brokers (see below), individuals wishing to conduct residential property wholesaling must register with the Oregon Real Estate Agency (OREA). Registration includes:
- Submitting an online application.
- Providing the name or names under which wholesaling will be conducted.
- Passing a criminal records check.
- Paying the registration fee of $300.
Registered wholesalers must renew their registration by June 30 of each year for a fee of $300.
Written Disclosure
Residential property wholesalers must provide a written disclosure:
- To potential buyers before entering into a contract for a wholesale transaction.
- To potential sellers before entering into a contract for a wholesale transaction.
- To any broker or principal broker assisting the wholesaler in marketing or listing the property.
- To any broker or principal broker assisting a potential buyer in purchasing the property.
- In any advertising related to the property. Advertising on social media is exempt if it links to a separate page with the required disclosure.
The disclosure must be in at least 10-point bold type and must include:
- A statement that the wholesaler, or the business name under which the wholesaler conducts wholesaling, is a residential property wholesaler and:
- Will have or has only an equitable interest in the property being sold.
- Will not have or does not have legal title to the property and therefore, may not be able to directly transfer title to the buyer.
- Might not be a licensed real estate broker or principal broker and, therefore, might not be permitted to engage in professional real estate activity.
- Might not be a licensed appraisal specialist and, therefore, might not be permitted to provide an opinion as to the value of the property.
- The following plain language definition of equitable interest: A person who has an "Equitable interest" in a property means someone that has contracted with the current owner for the right to buy the property at a later date even though they don't have legal title. The contract may allow the equitable interest holder to sell or transfer the right to purchase the property to someone else prior to close of escrow.
- The following statements:
- A wholesaler may assign equitable interest to another party prior to closing for profit.
- A seller or buyer who enters into a written contract for a residential property wholesale transaction may cancel the contract without penalty by delivery of a written notice of cancellation any time before 12 midnight at the end of the third business day after the receipt of the residential property wholesaler written disclosure. The right of cancellation may not be waived. Upon cancellation, all earnest money or deposits shall be returned to the person who provided the earnest money or deposit.
- If the residential property wholesaler fails to provide a residential property wholesaler written disclosure to the seller before entering into a written contract for a residential property wholesale transaction, the seller may terminate the contract at any time without penalty and retain any earnest money or deposit paid to the seller or deposited in escrow by the residential property wholesaler. An escrow agent may disburse the earnest money or deposit to the seller without the need for separate written instructions from the residential property wholesaler if the seller in writing asserts that the residential property wholesaler written disclosure was not provided to the seller before entering into the written contract for the residential property wholesale transaction and demands disbursement to the seller of all deposits held by the escrow agent and the seller has provided the escrow agent with a written release and indemnification against all liability arising from the disbursement of the earnest money and deposits to the seller.
- If the residential property wholesaler fails to provide a residential property wholesaler written disclosure to the seller or buyer, and if the purchase and sale agreement is terminated as a result, the wholesaler shall be liable for damages incurred by seller and buyer.
- In any mediation or arbitration proceeding or civil action between buyer and seller, between buyer and residential property wholesaler or between seller and residential property wholesaler that arises due to the residential property wholesaler's failure to provide a residential property wholesaler written disclosure before entering into a written contract for a residential property wholesale transaction as prescribed under this section, the prevailing party is entitled to recover all reasonable attorney fees, costs and expenses incurred at trial, on appeal, at mediation, and at arbitration from the residential property wholesaler.
- How to file a complaint: If you believe a real estate licensee or a residential property wholesaler has violated any governing statute or rule, you may file a complaint with the Oregon Real Estate Agency (OREA). OREA will review the complaint. In most cases, other people involved in the case, including the respondent, will be contacted. Based on the information received, OREA will determine whether to start an investigation.
OREA will make a written disclosure available for use by residential property wholesalers by July 1, 2025.
Wholesaling by Brokers and Principal Brokers
If you are a licensed broker or principal broker who conducts residential property wholesaling, you are not required to be registered as a wholesaler. However, you are required to provide a written disclosure:
- To potential buyers before entering into a contract for a wholesale transaction.
- To potential sellers before entering into a contract for a wholesale transaction.
- To any broker or principal broker assisting a potential buyer in purchasing the property.
- In any advertising related to the property. Advertising on social media is exempt if it links to a separate page with the required disclosure.
The disclosure must be in at least 10-point bold type and must include:
- A statement that the broker or principal broker is licensed and:
- Will only have or has an equitable interest in the property being sold.
- Will not have or does not have legal title to the property and therefore may not be able to directly transfer title to the buyer.
- Might not be a licensed appraisal specialist and, therefore, might not be permitted to provide an opinion as to the value of the property.
- The following plain language definition of equitable interest: A person who has an "Equitable interest" in a property means someone that has contracted with the current owner for the right to buy the property at a later date even though they don't have legal title. The contract may allow the equitable interest holder to sell or transfer the right to purchase the property to someone else prior to close of escrow.
- The following statements:
- The broker or principal broker may assign equitable interest to another party prior to closing for profit.
- A seller or buyer who enters into a written contract for a residential property wholesale transaction may cancel the contract without penalty by delivery of a written notice of cancellation any time before 12 midnight at the end of the third business day after the receipt of the residential property wholesaling written disclosure. This right of cancellation may not be waived. Upon cancellation, all earnest money or deposits shall be returned to the person who provided the earnest money or deposit.
- If the broker or principal broker fails to provide a residential property wholesaling written disclosure to the seller before entering into a written contract for a residential property wholesale transaction, the seller may terminate the contract at any time without penalty and retain any earnest money or deposit paid to the seller or deposited in escrow by the broker or principal broker. An escrow agent may disburse the earnest money or deposit to the seller without the need for separate written instructions from the broker or principal broker if the seller in writing asserts that the residential property wholesaling written disclosure was not provided to the seller before entering into the written contract for the residential property wholesale transaction and demands disbursement to the seller of all deposits held by the escrow agent, and the seller has provided the escrow agent with a written release and indemnification against all liability arising from the disbursement of the earnest money and deposits to the seller.
- If the broker or principal broker fails to provide a residential property wholesaler written disclosure to the seller or buyer, and if the purchase and sale agreement is terminated as a result, the broker or principal broker shall be liable for damages incurred by seller and buyer.
- In any mediation or arbitration proceeding or civil action between buyer and seller, between buyer and broker or principal broker, or between seller and broker or principal broker that arises due to the broker's or principal broker's failure to provide a residential property wholesaling written disclosure before entering into a written contract for a residential property wholesale transaction as prescribed under this section, the prevailing party is entitled to recover all reasonable attorney fees, costs and expenses incurred at trial, on appeal, at mediation and at arbitration from the broker or principal broker.
- How to file a complaint. If you believe a real estate licensee or a residential property wholesaler has violated any governing statute or rule, you may file a complaint with the Oregon Real Estate Agency (OREA). OREA will review the complaint. In most cases, other people involved in the case, including the respondent, will be contacted. Based on the information received, OREA will determine whether to start an investigation.
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OREA will create a written disclosure available for use by brokers and principal brokers who wholesale residential property.
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Delaware Statutory Trusts (DSTs) have gained significant popularity among real estate investors, particularly those looking to defer capital gains taxes while maintaining passive income from real estate holdings. A DST is a legal entity that allows multiple investors to own fractional interests in high-quality, institutional-grade properties. It provides a hands-off approach to real estate investment while offering potential tax advantages under the IRS 1031 Exchange guidelines. This article will explore the profile of an ideal DST investor, the tax treatment of these investments, a step-by-step guide on how to execute a DST exchange, and the critical role of an experienced real estate broker in facilitating the transaction. Who Should Consider a Delaware Statutory Trust? DSTs are not a one-size-fits-all investment. They are best suited for a specific type of investor, typically those who: Are Nearing Retirement or Seeking Passive Income: Investors who want to step away from active property management but still earn rental income find DSTs an attractive option. Have Highly Appreciated Investment Properties: Those looking to sell a property that has appreciated significantly and want to defer capital gains taxes through a 1031 Exchange. Seek Portfolio Diversification: DSTs offer access to diversified, professionally managed commercial properties, including multifamily apartments, medical offices, retail centers, and industrial facilities. Want to Avoid the Hassles of Property Management: DSTs eliminate the burden of dealing with tenants, repairs, and ongoing property oversight. Are Looking for Predictable Income: Many DSTs offer stable, projected distributions, making them an appealing choice for income-focused investors. Have a Low Risk Tolerance for Real Estate Investments: Institutional-grade properties with professional management often provide a more secure, stable investment compared to direct ownership of real estate. Tax Treatment of DSTs One of the main attractions of investing in a DST is the ability to defer capital gains taxes via a 1031 Exchange. Here’s how DSTs are treated from a tax perspective: 1031 Exchange Eligibility: The IRS recognizes DST interests as “like-kind” property, meaning investors can exchange their real estate holdings into a DST without triggering immediate tax liability. Tax Deferral: By utilizing a 1031 Exchange, investors can defer capital gains, depreciation recapture, and state taxes on the sale of a relinquished property. Potential for Step-Up in Basis: Upon the investor’s passing, heirs can receive a step-up in basis, potentially eliminating deferred taxes altogether. Depreciation Benefits: Investors receive depreciation pass-through benefits, which can offset taxable income from distributions. Passive Income Taxation: Income generated from the DST is reported on Schedule E, and depreciation deductions may help reduce taxable income. How to Execute a DST 1031 Exchange A 1031 Exchange into a DST follows a structured process. Below is a step-by-step guide: Step 1: Sell the Relinquished Property The first step is to sell the property that you intend to exchange. The sale proceeds must be handled by a Qualified Intermediary (QI) to maintain 1031 Exchange compliance. Do NOT list the real estate until you have FIRST communicated with a QI. Step 2: Identify the DST Investment Within 45 days of selling the relinquished property, you must identify potential replacement properties. Investors typically work with a an experienced real estate broker specializing in DSTs and 1031 exchanges to review available options. Step 3: Conduct Due Diligence Before committing to a DST investment, it’s crucial to analyze: The quality and location of the underlying real estate. The financial strength and reputation of the DST sponsor. The projected income and risk factors. The loan structure, if any. Step 4: Work with a Qualified Intermediary (QI) The QI facilitates the transaction, ensuring the funds are properly transferred and that all IRS regulations are met. The investor never takes possession of the sales proceeds directly from the relinquished properties. A QI needs to be involved early in the engagement to ensure title and escrow is set up to remain compliant. Step 5: Close on the DST Investment Once the due diligence is complete and the paperwork is finalized, the investor formally acquires a fractional interest in the DST property. The transaction must be completed within 180 days from the sale of the relinquished real estate. Constant Commercial Real Estate can assist in multiple property dispositions if it pertains. Step 6: Receive Passive Income and Tax Benefits After the exchange is finalized, the investor begins receiving distributions, typically on a monthly or quarterly basis. They also continue to defer taxes as long as they remain invested in the DST. Why an Experienced Real Estate Broker is Essential A real estate broker with experience in DSTs plays a vital role in ensuring a smooth and successful exchange. Here’s why their expertise matters: Navigating the Complexity of 1031 Exchanges: A broker familiar with 1031 rules helps investors avoid costly mistakes that could disqualify their tax deferral benefits. Access to Institutional-Quality DST Offerings: Brokers have relationships with reputable DST sponsors, giving investors access to high-quality properties not easily found on the open market. Objective Investment Guidance: An experienced broker helps evaluate DST options, considering factors such as market trends, sponsor track record, and risk assessment. Tailored Investment Strategy: Brokers work with investors to align their DST choices with long-term financial goals, ensuring a suitable fit for their portfolio. Streamlining the Identification Process: Given the strict 45-day identification window, a broker can expedite the selection process, helping investors make informed decisions under time constraints. Compliance with IRS Regulations: Working with a knowledgeable broker reduces the risk of missteps that could jeopardize the exchange. Conclusion Delaware Statutory Trusts provide a compelling investment vehicle for real estate owners seeking tax deferral, passive income, and diversification. However, executing a 1031 Exchange into a DST requires careful planning, thorough due diligence, and strict adherence to IRS rules. For investors looking to transition from active property management to a passive investment structure while preserving wealth, DSTs can be an excellent solution. Engaging an experienced real estate broker is key to identifying quality DST opportunities, navigating the 1031 Exchange process, and ensuring compliance with all regulatory requirements. With the right guidance, investors can leverage DSTs to optimize their real estate portfolios while enjoying long-term financial benefits.