A recent lawsuit making headlines has brought renewed attention to how some real estate investors are working with homeowners—and where the line between opportunity and deception can get blurred.
While the details of that case will play out in court, there are things that you need to know NOW to keep yourself legal:
Real estate wholesaling laws are changing across the United States as regulators respond to deceptive practices in direct-to-seller marketing and contract assignments.
And it’s not happening in just one state.
Across the country, attorneys general and regulators are already taking action. Lawsuits have been filed against real estate companies accused of misleading homeowners, using long-term contracts to control properties, and recording documents that interfere with a homeowner’s ability to sell. At the same time, federal agencies and multiple states are stepping in with enforcement actions and new legislation aimed at tightening how these deals are structured and marketed.
We strongly advise anyone out there marketing direct to consumers or who are marketing that “I buy houses” and then not buying and taking title to consult with your local attorney to make sure are following the law.
Why Real Estate Investors Are Facing Increased Scrutiny
When patterns start to emerge—confused homeowners, one-sided contracts, or deals that don’t look the way they were presented—regulators take notice.
And now they’re responding with both enforcement and new laws.
Several states have already taken steps to regulate wholesaling more directly:
Ohio has passed legislation requiring wholesalers to clearly disclose their role and intent in a transaction.
Oklahoma has introduced similar efforts focused on transparency and limiting misleading representations.
Other states are evaluating licensing requirements or expanding definitions of brokerage activity.
Missouri is now part of that conversation.
Proposed legislation—including HB 2517 and SB 973—is aimed at increasing transparency and clarifying how wholesalers operate, particularly when working directly with homeowners.
👉 (See our full breakdown of the proposed Missouri wholesaling laws here)
These changes signal a broader shift:
What used to operate in a gray area is now being clearly defined—and enforced.
Where Investors Are Crossing the Line
At its core, wholesaling is simple: an investor agrees to buy a property and then sells their contractual interest for a profit.
But problems arise when what’s happening on paper doesn’t match what the homeowner believes is happening.
In many of the cases now being challenged, homeowners thought they were getting help selling their home—only to later discover they had signed a binding purchase contract.
Many wholesalers might say “Let me help you sell your house”. The wholesaler thinks they are helping by buying and assigning. The consumer thinks they are hiring a real estate agent.
That distinction matters.
Because the moment an investor presents themselves as someone who is “helping sell” a property or “finding a buyer,” they may be stepping into the role of a real estate agent—something that requires a license.
Without that license, those actions can lead to fines, lawsuits, and enforcement actions.
Intent and Ability to Close Matter
Another area regulators are examining closely is whether investors actually intend—and are able—to follow through on the offers they make.
Making an offer without the ability to close, or without a realistic plan to do so, can quickly move from aggressive business practice into misrepresentation.
In some situations, contracts are being used not as a path to purchase, but as a way to control a property long enough to find another buyer.
If the seller believes you are the buyer—but your entire model depends on finding someone else—that gap is where legal exposure grows.
We had a MAREI Meeting in 2021 where we talked about this a quite a bit, you can catch the replay here.
The Gray Area Around Marketing Real Estate Contracts
One of the most misunderstood aspects of wholesaling is marketing.
To legally market a property for sale, you generally must:
Own the property
ORBe licensed to represent the seller
Wholesalers often operate in a narrow space between those two positions.
If you have a property under contract, you may be able to market your contractual interest—not the property itself.
That distinction is critical.
If you are marketing:
A house as if you own it
Posting photos, price, and terms like a listing
👉 You are marketing the property
If instead you are marketing:
“Assignment of contract”
“Investment opportunity”
“Contract for purchase available”
👉 You are marketing the contract
That difference is where many investors unintentionally cross the line.
Deceptive Marketing Is Drawing Legal Attention
Some of the practices now being challenged go beyond contracts and into marketing itself.
Mailers designed to look like real offers—or even real checks—are being used to get homeowners to respond. The actual terms, however, often don’t match the impression created at first glance.
Consumers may believe:
The offer is real
The price is firm
The check represents actual funds
When that’s not the case, it becomes more than just aggressive marketing.
It becomes a potential deceptive practice—and regulators are treating it that way.
Letters with fake checks, fake written offers mailed need to stop.
Notice on doors that look like city code violation notice.
While they sound cool and may get your phone to ring are very deceptive.
How Title Filings Are Being Used to Control Property
Another major issue drawing scrutiny is how some investors are using recorded documents to control a property without owning it.
These are typically not traditional liens.
Instead, investors may record documents such as:
Memorandums of contract
Affidavits of interest
Option agreements tied to recorded notices
These filings create a cloud on title.
In practice, that can:
Prevent a homeowner from selling
Block refinancing
Force the homeowner to resolve the agreement before moving forward
In some cases across the country, companies have paired these filings with long-term agreements—sometimes 10, 20, even 40 years—making it extremely difficult for homeowners to exit.
This combination is one of the primary reasons regulators are stepping in.
Going Forward: What Investors Need to Get Right
If you’re marketing properties, assigning contracts, or working directly with sellers, this directly impacts how you do business.
Investors who want to operate safely and sustainably need to be clear on a few key points:
Be clear that you are the buyer, not a representative
Have the ability and intent to close
Disclose if you may assign the contract
If marketing an assignment, clearly market the contract—not the property
Avoid any marketing that could be misleading at first glance
Do not use recorded documents to pressure or control a seller
Make sure the seller understands exactly what they are signing – take it a step further, and implement the disclosures the state is trying to mandate.
What This Means for Real Estate Investors
The opportunity in real estate investing is still strong.
But the environment is changing.
Regulators are paying closer attention. Laws are being updated. And practices that once went unnoticed are now being challenged.
The investors who operate with clarity, transparency, and real intent will continue to succeed.
Those who rely on confusion, misrepresentation, or control strategies will face increasing risk.
👉 To stay informed on changes like these and learn how to structure deals the right way, visit MAREI.org/Blog or check out upcoming meetings at MAREI.org/Calendar.
Wholesale Law
Stay aware, consult your counsel, and be transparent.
