House Study Bill 637 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON LUNDGREN) A BILL FOR An Act relating to the wholesaling of residential property by a 1 wholesaler, and providing civil penalties. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5978YC (2) 90 nls/ko

H.F. _____ Section 1. NEW SECTION . 543B.6A Wholesaling of residential 1 property. 2 1. As used in this section: 3 a. “Residential property” means real property that includes 4 no less than one but no more than four dwelling units. 5 b. “Wholesaler” means a licensee, or a person represented 6 by a licensee, who holds an equitable interest, but not legal 7 title, in a residential property for the purpose of selling the 8 equitable interest to a buyer. 9 c. “Wholesaling” means the practice of a wholesaler entering 10 into an assignable contract with an owner of residential 11 property for the purpose of marketing and selling the equitable 12 interest of the residential property to another person. 13 2. A person must be licensed as a real estate broker 14 under this chapter, or be represented by a real estate broker 15 licensed under this chapter, to engage in wholesaling. 16 3. a. A wholesaler shall disclose all of the following 17 information in writing to all parties to a wholesale 18 transaction prior to executing a contract to purchase or to 19 convey an equitable interest to a buyer or other entity: 20 (1) The legal identities of all parties to the wholesale 21 transaction. 22 (2) An explanation of the wholesaling process, including 23 but not limited to disclosure that the wholesaler holds an 24 equitable interest in the residential property that is the 25 subject of the transaction and may not be able to convey title 26 to the property. 27 b. A wholesaler shall provide a copy of an executed agency 28 agreement to all parties to a wholesale transaction prior 29 to executing a contract to purchase or convey an equitable 30 interest to a buyer or other entity. 31 c. Notwithstanding provisions to the contrary contained in a 32 contract executed pursuant to this subsection, if a wholesaler 33 fails to comply with the disclosure requirement under paragraph 34 “a” , the seller or the buyer may cancel the contract at any time 35 -1- LSB 5978YC (2) 90 nls/ko 1/ 3

H.F. _____ prior to the closing of the sale of the residential property 1 without penalty, and may retain any earnest money paid by the 2 wholesaler. 3 4. An individual engaged in wholesaling in violation of 4 this section shall be subject to a civil penalty of up to the 5 greater of ten thousand dollars, or ten percent of the sale 6 price of each residential property for which the individual 7 engaged in wholesaling in violation of this section. 8 5. The real estate commission shall adopt rules pursuant to 9 chapter 17A necessary to implement and administer this section. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill relates to the wholesaling of residential property 14 by a wholesaler. “Wholesaling”, “residential property”, and 15 “wholesaler” are defined in the bill. 16 The bill requires a person to be licensed as a real estate 17 broker, or to be represented by a licensee, to engage in 18 wholesaling. The bill permits a licensee to represent a 19 wholesaler in a wholesaling transaction. 20 The bill requires a wholesaler to disclose to all parties 21 to a wholesale transaction prior to executing a contract to 22 purchase or to convey an equitable interest to a buyer or other 23 entity the legal identities of all parties to the wholesale 24 transaction and an explanation of the wholesaling process, 25 including disclosure that the wholesaler holds an equitable 26 interest in the residential property and may not be able to 27 convey title to the property. The bill also requires the 28 wholesaler to provide a copy of an executed agency agreement to 29 all parties prior to executing the contract. 30 If a wholesaler fails to comply with the disclosure 31 requirements, the seller or the buyer may cancel the contract 32 at any time prior to the closing of the sale of residential 33 property without penalty, and may retain any earnest money paid 34 by the wholesaler. 35 -2- LSB 5978YC (2) 90 nls/ko 2/ 3

H.F. _____ An individual engaged in wholesaling in violation of the 1 bill is subject to a civil penalty of up to the greater of 2 $10,000, or 10 percent of the sale price of each residential 3 property for which the individual engaged in wholesaling in 4 violation of the bill. 5 The real estate commission shall adopt rules as necessary to 6 implement and administer the bill. 7 -3- LSB 5978YC (2) 90 nls/ko 3/ 3