The state of Ohio recently passed a new wholesaler disclosure law. Here in Missouri, we have a similar law working it’s way through the legislature. We wanted to share how things are working in Ohio to give our members an idea of what to expect when our laws pass. Not the same exact laws, but very similar in sentiment.
And we received an email in our inbox today from attorney John Hyre in regards to their law that explains it very well. He is one of our trusted MAREI Mentors.
Real Estate Wholesaling Armageddon in Ohio
Why listen to John?
I’ve been getting a fair number of PM’s & emails in re Ohio’s new wholesaling law.
Context for newer followers: I lived in Ohio for most of my life before having moved to Puerto Rico. Real estate investors were 90% of my clients until about 9 years ago, when I started taking on all sorts of small-medium sized businesses & high net income/net worth individuals. I still own a piece of a Real Estate Investors Association in Ohio and still take on real estate clients (but only the non-annoying ones, so that cuts the pool in half).
Bottom line, I still hear a lot about Ohio real estate.
Ohio recently passed a new “Wholesaling” law. And evidently The Sky is Falling! I’ve been getting a ton of emails, PM’s, questions, etc. about The Evil New Wholesaling Law.
😮💨 Humans. Hysteria. Alliterative for a reason.
Wholesaling is when someone (the Wholesaler, I hesitate to use the term “investor”) finds a good deal on a piece of real estate. The Wholesaler enters into a contract to purchase the real estate. The Wholesaler finds someone who wishes to the buy the property at a higher price than the Wholesaler contracted to buy it for. The Wholesaler then assigns the purchase contract to the ultimate Buyer for the difference between what the Buyer is willing to pay for the property and the lower price that the Wholesaler negotiated. The Buyer then buys the property and fulfills the purchase-sale agreement.
For example, William (W is for Wholesaler) agrees to buy a property from Sam for $100,000. They have a contract – William shall buy from Sam for $100,000 on such & such date. Bob would love to buy that property for $120,000 – he views that $120,000 price as a great deal. William assigns the purchase contract to Bob for $20,000. Bob closes on the contract with Sam for $100,000. Add the $20,000 “Assignment Fee” he paid to William, and Bob has $120,000 invested in the property.
Can be used for Good or for Evil
Like many techniques, wholesaling may be done well and for Good. Or it may done poorly and for Evil. Since wholesaling requires little start-up capital when compared to rehabbing or renting, it attracts a lot of newbies. And a lot of “gurus”. Some of the “gurus” are unscrupulous, idiots, or both. They “sell the dream” to newbies – and little else. Or they outright teach deception. And sometimes newbies, in spite of having a good teacher, do foolish or unscrupulous things. As a result, “wholesaling” sometimes results in abusive tactics, poor treatment of desperate seller, unfulfilled promises, etc.
It’s also been a great source of real estate purchases for me personally.
Done right Wholesaling is a boon & benefit. I love the Good Wholesalers. I value my time more than the money involved, and the Wholesalers value the money involved more than their time. Free markets, deals that benefit all parties.
The New Law
Ohio recently passed a law with regard to Wholesaling. It is quite simple – about 2 pages. LINK HERE
Look for the underlined text. It’s not complicated, most literate sorts can quickly grasp it.
The first three pages are existing law. Underlining in the text indicates changes that the wholesaling law made – there’s no underlining on the first three pages – so no changes to the law on those three pages were made. The first three pages are an existing list of Naughty Things real estate agents & brokers should not do if they value their licenses.
Page four adds a new Naughty Thing: RE agents & brokers should not ignore the new Wholesaling Law when acting as Wholesalers. Makes sense.
Page five lays out when RE agents & brokers must give back escrow money (aka “deposits”) on a real estate contract. The new law adds “You gotta give the money to the Seller when a Seller legitimately cancels a contract under the new Wholesaling Law”. Makes sense. Not complicated.
Pages six & seven are the new Wholesaling Law. Spoiler alert: The law says you gotta tell Sellers that you are a Wholesaler, not a real estate agent or broker, and not representing the seller or the seller’s best interests. If you don’t tell them in writing, the seller gets to cancel the transaction, take your escrow money, and sue you for a least $5,200. Most of the new law consists of the new disclosure language that should be copied and pasted into a Wholesaler’s Disclosure (separate from the purchase & sales contract) – and made prominent, no 8-point type nonsense.
That’s it.
No Falling Sky. To wit:
This law applies to residential real estate of up to 4 units. The theory is that homeowners, aka “normies”, need notice and understanding of what wholesaling means. But commercial property owners are big boys & girls who do not need such protection.
Wholesaler is then clearly & well defined with a few exceptions (e.g., assignments to/from blood relatives). Read it for yourself, 5301.95(A)(2)(a) on page six. Pretty clear.
5301.95(B)(1) says that Wholesalers, BEFORE entering into a contract that results in a transfer of rights to RE (such as a purchase and sales agreement) needs to provide a disclosure of “I’m a Wholesaler” to the title owner of the property. Here’s the disclosure which takes up a big chunk of pages five & six:
“Ohio law requires a Wholesaler acting as a grantee, before entering into a contract or agreement that conveys an interest in residential real property, to provide certain information to the record owner in a conspicuous manner printed in boldface type in a font size not less than twelve points. Failure by a Wholesaler to present or complete this form is an unfair or deceptive act or practice. Any person who enters into an agreement that conveys an interest in residential real property to a Wholesaler acting as a grantee without receiving this disclosure has a cause of action against the Wholesaler. A Wholesaler acting as a grantee is prohibited from entering into a binding Am. S. B. No. 155 136th G.A. 7 contract to acquire an interest in residential real property unless this statement is signed and dated by the record owner of the property.
The owner acknowledges that the person presenting this document is a Wholesaler, as defined by section 5301.95 of the Revised Code, and that all Buyers and sellers of real estate are entitled to seek legal or professional advice before entering into any agreement or contract regarding the purchase or sale of property, including an agreement with a Wholesaler. A Wholesaler is acting on the Wholesaler’s own behalf and does not represent the owner in this transaction. A Wholesaler enters assignable contracts with owners and seeks to sell or assign the Wholesaler’s interest for a profit. The Wholesaler may assign the Wholesaler’s interest in the purchase contract to a third party without the owner’s consent before closing. The Wholesaler may charge a fee to the third-party Buyer separately for profit. The agreed purchase price between the owner and Wholesaler may be below market value and is conveyed voluntarily.
The owner acknowledges disclosure of the information provided in this form by signing and dating below:
_______________ (Property owner signature) ______ (date)
_______________ (Wholesaler signature) _____ (date)”
Seems pretty reasonable to me.
The disclosure must be signed and dated BEFORE the purchase agreement is entered into. This law applies to purchase agreement entered into from March 2, 2026, onward; it is not retroactive.
What if the Wholesaler does not comply?
1) The seller may cancel the contract prior to closing and any escrow money deposited by the Wholesaler automatically goes to the seller within 30 days.
2) Much more dangerously: The Wholesaler has committed an Unfair or Deceptive Act under Ohio consumer protection laws. The Ohio Attorney General can prosecute those – not fun.
And the seller has a cause of action under Ohio Revised Code 1345.09. ORC 1345.09 = Wholesaler pays seller greater of $5,200 or [(3x economic damages) + $5,000].
“Economic Damages” might for example, include lost profits to the seller on another offer that fell through because the Wholesaler “tied up” the property without appropriate disclosure.
I’d note that providing the disclosure protects against THIS law – and NOTHING else. There are plenty of consumer laws (notably the Deceptive & Unfair Practices laws) that protect homeowners from predatory Wholesalers. For example: Wholesaler “ties up” the property for 6 months, provides disclosure, does very little to market the property, then fails to close on the deal or find someone else to close. I’d not want to be the defense lawyer in that case.
Bad Actors in our Inudstry are causing bad Laws to be passed
In conclusion: Bad actors (don’t even get me started on one well-known “Subject To” guru and his “students”) cause bad laws to be passed. Wholesaling does have more than its share of bad actors – which is a shame, because the good Wholesalers are super useful. Ohio could have passed a far worse law. As it stands, this law was pretty restrained. It created an easy-to-provide disclosure that strikes me as fair.
Wholesalers: Provide the disclosure or lose deals, lose escrow money, and get ready to pay at least $5,200 per deal. And if it becomes a pattern, prepare for the expensive & painful joy that is an Ohio Attorney General investigation.
Just provide the darned disclosure in a timely & proper fashion. And don’t otherwise be a douche or screw people.
While this article is all about Ohio – we have a similar law coming in Missouri and for the same exact reasons.
John Hyre
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