A new Maryland law that went into effect Oct. 1, aims to protect vulnerable homeowners from predatory real estate wholesaling practices while preserving legitimate business operations in the industry.
The new law, HB 124/SB 160, reads: Authorizing a seller or assignee of certain residential property to rescind a contract of sale without penalty at any time before closing if a certain seller does not provide a certain notice; establishing that an assignee is entitled to a refund of any deposit paid in connection with the assignment of a contract of sale of the residential property under certain circumstances; requiring that a contract of sale comply with the requirements of the Act; and applying the Act prospectively.
This new law covers contracts that involve wholesaling practices and provides for proper disclosure and a buyer’s right of rescission. A “wholesaler” must provide a disclosure to both the property seller and prospective buyer if a contract will be assigned. If the disclosure is not provided, the contract to purchase may be terminated without penalty prior to settlement.
Real estate wholesaling involves individuals who put homes under contract with homeowners, then sell those contracts to investors or other buyers for a profit without ever purchasing the properties themselves.
Legitimate wholesaling is legal and will continue because the new law doesn’t eliminate wholesaling as it serves a purpose in the real estate market for homeowners who need to sell quickly.
The new law just provides clarity and transparency for sellers and buyers about the type of transaction they are entering into.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
