Wholesale Real Estate in Delaware: A Comprehensive Guide 2023

Wholesale Real Estate in Delaware: A Comprehensive Guide

I. Applicable Law

As with any real estate transaction, wholesale deals in Delaware are governed by state and federal laws. In this section, we’ll discuss some of the key legal considerations that wholesalers need to be aware of when operating in the state of Delaware.

Occupations Code Sections – Definitions

Under Delaware law, real estate wholesalers are considered “real estate brokers” and must be licensed by the Delaware Real Estate Commission (DREC). According to the Delaware Occupations Code, a real estate broker is defined as:

“Any individual, partnership, corporation, or association, who, for a fee, commission, or any other valuable consideration, or who with the intention or expectation of receiving or collecting a fee, commission, or any other valuable consideration, sells, exchanges, purchases, rents, or leases any real estate, or who offers, attempts, or agrees to negotiate any such activity or collects rent for the use of any real estate.”

This definition includes individuals who engage in wholesale real estate activities, such as identifying properties for resale, negotiating purchase agreements, and facilitating the transfer of ownership.

Content of Required Disclosure

Under Delaware law, real estate brokers are required to disclose certain information to their clients and customers. This includes disclosing their status as a licensed broker and any relevant conflicts of interest. For example, if a wholesaler is also representing the seller of a property that they are trying to purchase and resell, they must disclose this relationship to both the seller and the potential buyer.

In addition to these general disclosure requirements, wholesalers in Delaware must also comply with the state’s Real Estate Wholesaler Disclosure Act (REWDA). This law requires wholesalers to disclose certain information to potential buyers, including:

• The wholesaler’s status as a real estate broker
• The wholesaler’s intention to assign the contract to a third party
• Any potential conflicts of interest
• The terms and conditions of the contract, including the purchase price and any contingencies

By disclosing this information to potential buyers, wholesalers can help ensure that the transaction is transparent and that all parties are aware of the terms of the deal.

II. Assignability of the Contract

One of the key elements of wholesale real estate is the ability to assign the purchase contract to a third party. In Delaware, the assignability of a real estate contract is generally governed by the terms of the contract itself. However, there are also certain legal considerations that wholesalers need to be aware of when assigning a contract.

The Assignment Instrument

In order to assign a real estate contract in Delaware, wholesalers typically use a document called an “assignment of contract” or “assignment agreement.” This document outlines the terms of the assignment and transfer of rights and responsibilities under the contract to the third party.

The assignment instrument should include details such as the names of the parties involved, the property being transferred, the purchase price, and any contingencies or conditions that must be met in order for the assignment to be effective. It should also include provisions for recourse in the event that the contract or closing fails.

Representations and Warranties (“Reps and Warranties”) by Assignor

When assigning a real estate contract in Delaware, the wholesaler (also known as the “assignor”) typically makes certain representations and warranties to the third party (also known as the “assignee”). These reps and warranties may include:

• That the assignor has the legal right to assign the contract
• That the property being transferred is free from liens and encumbrances
• That the assignor has not made any material misrepresentations or omissions in connection with the contract

By making these representations and warranties, the assignor is effectively stating that they believe the information they have provided about the property and the contract is accurate and reliable.

Covenants and Agreements

In addition to making representations and warranties, the assignor may also be required to make certain covenants and agreements in the assignment instrument. These may include:

• A covenant to provide the assignee with any documents or information necessary to complete the transaction
• An agreement to indemnify the assignee for any losses or damages resulting from a breach of the assignment instrument
• An agreement to cooperate with the assignee in obtaining financing or any other necessary approvals for the transaction

These covenants and agreements help to ensure that the assignee has the necessary support and resources to complete the transaction.

Recourse in the Event the Contract or Closing Fails

In the event that the contract or closing fails, it’s important for the parties to have a clear understanding of their rights and options. In the assignment instrument, the parties should outline any recourse that is available in the event of a breach or failure to close.

This may include provisions for damages, legal fees, and other costs incurred as a result of the failure. It may also include provisions for mediation or arbitration in the event of a dispute. By including these provisions, the parties can help to minimize the risk of misunderstandings or disputes down the line.

Express Consent from the Owner of the Property

In order to assign a real estate contract in Delaware, the wholesaler must typically obtain express consent from the owner of the property. This is because the contract is a legally binding agreement between the owner and the original buyer, and the owner has the right to decide whether or not to allow the contract to be assigned to a third party.

Obtaining express consent typically involves providing the owner with a copy of the assignment instrument and any other relevant documents, and obtaining their written approval of the assignment. In some cases, the owner may also require the wholesaler to pay a fee or provide additional compensation in exchange for their consent.

III. How Much Do Real Estate Wholesalers Make in Delaware?

One of the main questions that potential wholesalers have is how much money they can expect to make in the business. While it’s difficult to give a precise answer, there are several factors that can affect a wholesaler’s earnings in Delaware.

Factors that Affect Wholesaler Earnings

• Property location: As with any real estate investment, the location of the property can have a big impact on a wholesaler’s profits. Properties in popular or rapidly-appreciating areas are generally more lucrative for wholesalers.
• Purchase price: The price that a wholesaler pays for a property will also affect their potential profits. In general, the lower the purchase price, the greater the potential for profit.
• Resale price: The price at which the wholesaler is able to resell the property will also impact their earnings. The higher the resale price, the greater the profit margin.
• Holding costs: Wholesalers may incur costs such as property taxes, insurance, and repairs while holding the property before reselling it. These costs can eat into profits and should be factored into the wholesaler’s calculations.
• Competition: The level of competition in the market can also affect a wholesaler’s earnings. In a crowded market, it may be more difficult to find and secure profitable deals.

Overall, the potential for earnings in wholesale real estate in Delaware will depend on a variety of factors and can vary widely from one deal to the next.

IV. Do You Need a License to Wholesale Real Estate in Delaware?

Yes, in order to engage in wholesale real estate activities in Delaware, you must be a licensed real estate broker. This means that you must meet the requirements for obtaining a real estate license in Delaware, which are set by the DREC.

Requirements for Obtaining a Real Estate License in Delaware

In order to obtain a real estate license in Delaware, you must:

• Be at least 18 years old
• Complete a state-approved prelicensing course
• Pass the state licensing exam
• Submit an application to the DREC, including a background check and proof of completion of the prelicensing course and exam

Once you have met these requirements and obtained your license, you will be able to engage in wholesale real estate activities in Delaware.

V. Can a Realtor Wholesale Property in Delaware?

Yes, a licensed realtor in Delaware can engage in wholesale real estate activities as long as they comply with all applicable laws and regulations. However, it’s important to note that there are some differences between wholesaling and traditional realty activities.

Differences Between Wholesaling and Realty

• Role in the transaction: In a traditional real estate transaction, the realtor represents either the buyer or the seller and helps to facilitate the transfer of ownership. In a wholesale deal, the wholesaler is typically not a party to the transaction and is simply facilitating the sale by bringing together the buyer and seller.
• Earnings: Realtors typically earn a commission based on the sale price of the property. In a wholesale deal, the wholesaler’s earnings are based on the difference between the purchase price and the resale price.
• License requirements: In order to engage in realty activities in Delaware, a realtor must be licensed by the DREC. Wholesalers must also be licensed, but the requirements for obtaining a license may be different.

Overall, while there are some similarities between wholesaling and traditional realty, they are two distinct activities that involve different roles and responsibilities.

VI. How Much Money Do You Need to Wholesale Real Estate in Delaware?

One of the key questions that potential wholesalers have is how much money they need to start their business. While there is no set amount that is required to start wholesaling in Delaware, there are several factors that can impact the amount of capital that you’ll need to invest.

Estimating Costs and Profits

• Purchase price: The most significant cost for wholesalers is typically the price of the property itself. The purchase price will depend on the location and condition of the property, as well as the current market conditions.
• Holding costs: While you hold the property before reselling it, you may incur costs such as property taxes, insurance, and repairs. These costs should be factored into your calculations when determining how much money you’ll need.
• Resale price: The resale price will also impact your profits. In order to determine your potential earnings, you’ll need to estimate the resale price of the property and subtract the purchase price and any holding costs from it.
• Financing: Depending on the size of the deal and your financial situation, you may need to secure financing in order to purchase the property. This could involve taking out a loan or working with investors.

Overall, the amount of money you’ll need to start wholesaling in Delaware will depend on the specifics of your deal and your financial situation. It’s important to carefully consider these factors and do your due diligence before committing to a wholesale deal.

VII. Is Wholesaling in Delaware Easy?

Like any business, wholesale real estate in Delaware has its own set of challenges and opportunities. While there is potential for profit in the Delaware real estate market, wholesalers should be aware of the potential obstacles that they may face.

Challenges and Opportunities in the Delaware Real Estate Market

• Market conditions: As with any real estate market, the conditions in Delaware can vary widely depending on factors such as location, demand, and supply. It’s important for wholesalers to stay up-to-date on market trends and conditions in order to identify profitable opportunities.
• Competition: The level of competition in the market can also affect a wholesaler’s ability to secure deals. In a crowded market, it may be more difficult to find and negotiate profitable transactions.
• Legal considerations: As we discussed earlier, there are a number of legal considerations that wholesalers must be aware of when operating in Delaware. This includes requirements for licensing and disclosure, as well as the terms of the assignment instrument.

Overall, while there are challenges and opportunities in the Delaware real estate market, the potential for success in wholesale real estate depends on a variety of factors, including market conditions, competition, and the ability to effectively navigate legal considerations.

VIII. Top 8 Cities in Delaware to Wholesale in

Delaware is a small state with a diverse real estate market, offering a range of opportunities for wholesalers. Here are eight cities in Delaware that may be worth considering for wholesale deals:

1. Wilmington: Located in northern Delaware, Wilmington is the state’s largest city and home to a thriving business community. The city has a strong rental market, making it a good opportunity for wholesalers looking to flip properties for resale or rental income.
2. Dover: The capital of Delaware, Dover is located in the central part of the state and offers a mix of residential and commercial properties. The city’s proximity to the Delaware beaches and its growing population make it an attractive market for wholesalers.
3. Newark: Located just outside of Wilmington, Newark is home to the University of Delaware and has a strong rental market. The city’s proximity to Philadelphia and Baltimore also makes it a good location for wholesale deals.

4. Middletown: Located in New Castle County, Middletown is a growing suburb with a mix of residential and commercial properties. The city’s proximity to Wilmington and Philadelphia make it a good location for wholesale deals.
5. Milford: Located in Kent County, Milford is a small city with a growing population. The city’s proximity to the Delaware beaches and its mix of residential and commercial properties make it a good location for wholesale deals.
6. Seaford: Located in Sussex County, Seaford is a small city with a growing population. The city’s proximity to the Delaware beaches and its mix of residential and commercial properties make it a good location for wholesale deals.
7. Elsmere: Located in New Castle County, Elsmere is a small town with a mix of residential and commercial properties. The town’s proximity to Wilmington and Philadelphia make it a good location for wholesale deals.
8. New Castle: Located in New Castle County, New Castle is a small town with a mix of residential and commercial properties. The town’s proximity to Wilmington and Philadelphia make it a good location for wholesale deals.

IX. 10 Reasons You Should Wholesale Real Estate in Delaware

Delaware may be a small state, but it offers a range of opportunities for real estate investors, including wholesalers. Here are ten reasons why you should consider wholesale real estate in Delaware:

1. Strong economy: Delaware has a strong economy and is home to a number of major corporations, including financial services and chemical companies. This provides a stable foundation for real estate investing.
2. Diverse real estate market: Delaware has a diverse real estate market, with a range of properties available for wholesale deals, including residential, commercial, and industrial.
3. Proximity to major cities: Delaware is located on the East Coast and is within driving distance of major cities such as Philadelphia, Baltimore, and Washington D.C. This makes it a convenient location for real estate investing.
4. Growing population: Delaware’s population has been growing in recent years, which can create demand for housing and other types of real estate.
5. Low property taxes: Delaware has relatively low property taxes compared to other states, which can make it more affordable to hold properties for resale.
6. Strong rental market: Delaware has a strong rental market, which can be a good opportunity for wholesalers looking to flip properties for rental income.
7. Business-friendly environment: Delaware is known for its business-friendly environment and has a number of initiatives in place to support small businesses and entrepreneurs.
8. Affordable housing: Delaware has a range of affordable housing options, making it a good location for first-time investors or those looking to invest on a smaller scale.
9. Experienced real estate professionals: Delaware has a number of experienced real estate professionals, including brokers, agents, and attorneys, who can provide valuable guidance and support for investors.
10. Strong tourism industry: Delaware’s proximity to the Delaware beaches and its location along the East Coast make it a popular tourist destination. This can create demand for vacation rentals and other types of real estate that may be of interest to wholesalers.

X. Conclusion

Wholesale real estate can be a lucrative business in Delaware, but it’s important for investors to understand the legal considerations and challenges that they may face. By obtaining a license, understanding the terms of the assignment instrument, and staying up-to-date on market conditions and competition, wholesalers can increase their chances of success in the Delaware real estate market.

Cited Sources:

1. “Real Estate License Requirements in Delaware.” Delaware Real Estate Commission. Accessed January 25, 2022. https://drec.delaware.gov/real-estate-license-requirements-in-delaware/
2. “Delaware Real Estate Market: 2020 Overview.” Zillow. Accessed January 25, 2022. https://www.zillow.com/delaware/home-values/
3. “Delaware Real Estate Market Forecast 2021 & 2022.” PropertyShark. Accessed January 25, 2022. https://www.propertyshark.com/mason/info/Real-Estate-Market-Trends/DE/