SSB 3133 (LSB 5978XC (1) 90)

SENATE FILE _____ 

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON BROWN)

A BILL FOR

An Act relating to the wholesaling of residential property by a wholesaler, and providing civil penalties.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  543B.6A  Wholesaling of residential property.
   1.  As used in this section:
   a.  “Residential property” means real property that includes no less than one but no more than four dwelling units.
   b.  “Wholesaler” means a licensee, or a person represented by a licensee, who holds an equitable interest, but not legal title, in a residential property for the purpose of selling the equitable interest to a buyer.
   c.  “Wholesaling” means the practice of a wholesaler entering into an assignable contract with an owner of residential property for the purpose of marketing and selling the equitable interest of the residential property to another person.
   2.  A person must be licensed as a real estate broker under this chapter, or be represented by a real estate broker licensed under this chapter, to engage in wholesaling.
   3.  a.  A wholesaler shall disclose all of the following information in writing to all parties to a wholesale transaction prior to executing a contract to purchase or to convey an equitable interest to a buyer or other entity:
   (1)  The legal identities of all parties to the wholesale transaction.
   (2)  An explanation of the wholesaling process, including but not limited to disclosure that the wholesaler holds an equitable interest in the residential property that is the subject of the transaction and may not be able to convey title to the property.
   b.  A wholesaler shall provide a copy of an executed agency agreement to all parties to a wholesale transaction prior to executing a contract to purchase or convey an equitable interest to a buyer or other entity.
   c.  Notwithstanding provisions to the contrary contained in a contract executed pursuant to this subsection, if a wholesaler fails to comply with the disclosure requirement under paragraph “a”, the seller or the buyer may cancel the contract at any time prior to the closing of the sale of the residential property without penalty, and may retain any earnest money paid by the wholesaler.
   4.  An individual engaged in wholesaling in violation of this section shall be subject to a civil penalty of up to the greater of ten thousand dollars, or ten percent of the sale price of each residential property for which the individual engaged in wholesaling in violation of this section.
   5.  The real estate commission shall adopt rules pursuant to chapter 17A necessary to implement and administer this section.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the wholesaling of residential property by a wholesaler. “Wholesaling”, “residential property”, and “wholesaler” are defined in the bill.
   The bill requires a person to be licensed as a real estate broker, or to be represented by a licensee, to engage in wholesaling. The bill permits a licensee to represent a wholesaler in a wholesaling transaction.
   The bill requires a wholesaler to disclose to all parties to a wholesale transaction prior to executing a contract to purchase or to convey an equitable interest to a buyer or other entity the legal identities of all parties to the wholesale transaction and an explanation of the wholesaling process, including disclosure that the wholesaler holds an equitable interest in the residential property and may not be able to convey title to the property. The bill also requires the wholesaler to provide a copy of an executed agency agreement to all parties prior to executing the contract.
   If a wholesaler fails to comply with the disclosure requirements, the seller or the buyer may cancel the contract at any time prior to the closing of the sale of residential property without penalty, and may retain any earnest money paid by the wholesaler.
   An individual engaged in wholesaling in violation of the bill is subject to a civil penalty of up to the greater of $10,000, or 10 percent of the sale price of each residential property for which the individual engaged in wholesaling in violation of the bill.
   The real estate commission shall adopt rules as necessary to implement and administer the bill.