Kentucky Law Update & Wholesaling

House Bill 62

Signed by the Governor on March 23, 2023, House Bill 62 amends the definition of what “real estate brokerage” means in Kentucky. It does not take anything away from the current definition and simply adds certain advertisements that require a real estate license.

Real estate brokerage, or simply actions that require a real estate license, now includes “advertising for sale an equitable interest in a contract for the purchase of real property between a property owner and a prospective purchaser.” This is also known as “Wholesaling.”

What is Wholesaling in Real Estate?

Wholesaling in real estate is a method of investing in which an individual or company finds a property at a below-market price and then quickly sells (or assigns) the contract to another investor, typically at a higher price, before actually purchasing the property themselves.

In a typical wholesale real estate transaction, the wholesaler first identifies a distressed or undervalued property and negotiates a purchase contract with the seller. The wholesaler then markets the property to potential buyers, such as rehabbers or landlords, and assigns the contract to the buyer who agrees to purchase the property at a higher price than the wholesaler has contracted to pay the seller.

Wholesaling is often used as a way to quickly generate cash flow for real estate investors without having to take on the risks and responsibilities associated with owning and managing a property. However, it is important to note that wholesaling requires strong negotiation and marketing skills, as well as knowledge of the local real estate market.

What does a Wholesale deal look like?

In a wholesale real estate transaction, the wholesaler signs a contract with the property seller agreeing to sell the property for a minimum price by a specified date. The wholesaler may need to put in some earnest money to secure the deal. For example, they might agree to sell the property for $150,000 within 90 days.

Once the contract is signed, the wholesaler looks for a buyer, usually a real estate investor, to take over the contract. The wholesaler aims to sell the property for more than the price listed in the contract. For instance, if the contract price is $150,000, the wholesaler might try to sell the property for $175,000. The difference between the contract price and the sale price is called the "spread," which represents the wholesaler's profit. In this case, the spread would be $25,000.



Before House Bill 62, someone did not need a real estate license to market a wholesale contract for real estate. They were restricted to marketing their interest in the contract but could not market the property itself. While it could be argued that wholesaling was a workaround to needing a real estate license, with HB62, it becomes illegal to market the interest in a wholesale contract without a real estate license.

What does this mean for Wholesalers in Kentucky?

Considering the bill was signed only a few weeks ago, it is understandable that the Real Estate Commission does not have new rules on the law change yet. Then again, they may have no intention of issuing any new regulations or guidance regarding wholesalers.

While it looks like wholesalers either need to be licensed as a sales associate or broker OR employ a broker company to advertise for sale a wholesale contract for them, there may be some exceptions found in KRS 324.030.  For those independent wholesalers not licensed as a broker, it may mean getting a new license and possibly splitting fees with a broker until they can be eligible for broker licenses. For those looking to get licensed or already licensed, maybe this opens the door to a non-traditional use of your real estate license. And one should be an expert in contracts to be a wholesaler. In any event, you should always consult with an attorney before starting a new business model or rethinking your wholesale business.

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