Is Wholesaling Real Estate Legal In New Mexico? A 2024 Guide For Investors

Are you a new investor eager to dip your toes into real estate? Wholesaling could be your golden opportunity, offering a low-barrier entry into the market with high potential returns. Yet, despite its appeal, many hesitate to pursue wholesaling in New Mexico, unsure of its legality.

Fear not, as the answer to the burning question, "Is wholesaling real estate legal in New Mexico?" is a resounding yes. In this illuminating article, we dispel uncertainties and navigate the legal landscape surrounding wholesaling in the Land of Enchantment. Join us as we uncover why wholesaling is not only a legitimate but also a lucrative strategy for aspiring real estate investors in New Mexico.

• What Do You Need To Know About Wholesaling Houses In New Mexico?
• Is Wholesaling Real Estate Legal In New Mexico?
• What Are The Wholesaling Laws In New Mexico?
• Do You Need A License To Wholesale Real Estate in New Mexico?
• Final Thoughts

*Before we begin our guide on whether wholesaling real estate in New Mexico is legal, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!

What Do You Need To Know About Wholesaling Houses In New Mexico?

Aspiring investors must grasp key essentials before diving into wholesaling houses in New Mexico. Firstly, answering the question "Is wholesaling real estate legal in New Mexico?"—yes, it is, provided investors adhere to state laws. Understanding the legal framework is crucial to avoid pitfalls. Additionally, mastering market dynamics, networking, and identifying properties and exit strategies are vital. Developing a solid foundation of knowledge and skills ensures a smooth entry into the world of wholesaling, setting the stage for success in the dynamic New Mexico real estate market.

An Introduction To New Mexico

At more than 121,000 square miles, New Mexico ranks fifth among all states in total land area. About 2.1 million people call New Mexico home, with about 40% of all residents concentrated in Albuquerque and the surrounding Bernalillo County. Santa Fe, the state's capital, was founded in 1610 and is North America's oldest continuously used seat of government.

In 1821, Mexico won independence from Spain and established the Mexican Empire in New Mexico. However, the United States invaded New Mexico in 1846, and New Mexico was ceded to the U.S. in 1848 as part of the Treaty of Guadalupe Hidalgo. New Mexico didn't achieve statehood until much later, when it became the 47th state in 1912.

New Mexico owes part of its historical legacy to cattle drives across its sweeping plains, clashes between pioneers and Native Americans, and a distinctly frontier flavor reflected in its art and culture.

The state is a land of extreme contrasts. Some parts are dotted with pine forests, meadows, and abundant wildlife, while others are so arid that even cacti struggle to survive. Temperatures are extreme and can range from 120 degrees to as low as -50 degrees in some parts of the state.

Most of these climate extremes are due to elevation. The average elevation ranges from 5,000 to 8,000 feet in the northwest of the state, and more than 80% is higher than 4,000 feet above sea level.

Two of the more famous geographic attractions in New Mexico are Carlsbad Caverns and White Sands National Monument.

For many decades, this blending of cultural and geographic extremes has made New Mexico a favorite destination for artists and creative types. Taos, Santa Fe, and Albuquerque have vibrant cultural arts communities.

Key Demographics, Housing & Economic Data

Albuquerque is far away and the state's largest and most densely populated urban area. While it has experienced modest growth over the past decade, Rio Rancho and Hobbs has led the way with double-digit growth.

About 80% of the state's population is of European or Hispanic descent; about 10% is Native American. There is a large Navajo reservation in northwestern New Mexico. Utes, Pueblo, and Mescalero Apaches live on about 2 million acres of land grants scattered throughout the state.

The median household income is $58,722, about $17,000 less than the national average.

Due to the low average individual income and 3.8% unemployment rate, New Mexico's state government receives more federal funding than any other state.

The federal government is the state's biggest employee and maintains several military and research institutions, including three strategic Air Force bases; this falls in line with the fact that the federal government protects more than one-third of New Mexico's land, and agencies such as the National Park Service maintain a sizable presence in the state. Government spending accounts for nearly one-quarter of the state's economy.

New Mexico is also known as a leader in the high-technology industries due partly to nuclear weapons and energy research at the Los Alamos National Laboratory and the Sandia National Laboratories in Albuquerque.

Tourism is a significant employer, serving 30 million visitors each year. About half of the state's economy is based on the service sector.

The oil and gas industries are also large employers. The Permian Basin has more than 25,000 oil wells, including two of the nation's 100 largest oil fields. Exporting raw materials is a critical component of the state's economy.

Excavation of gold, silver, and copper is also a significant part of the state's mining efforts. In addition, New Mexico produces more than 80% of U.S. potash and is the country's leading producer of natural glass called perlite.

According to recent U.S. Census statistics, there are close to 1 million housing units in the state with a median value of $216,000

The median home value in New Mexico is $300,227, making entry into the market for wholesalers more attractive than in other places in the United States.

According to Neighborhood Scout, the top 10 highest appreciating New Mexico cities since 2000 are:

1. Rio Communities
2. Belen
3. Jarales
4. Jemez Pueblo
5. Cuba
6. Bernalillo
7. Jemez Springs
8. Algodnes
9. McIntosh
10. Vado

Overall, the real estate market in New Mexico has been on a healthy upswing for owners for the past several years.

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Important Trade Organizations and Government Agencies

The New Mexico Association of Realtors (NMAR) is the largest real estate trade association in New Mexico. It has over 7000 members involved in all aspects of residential and commercial real estate and serves as a public policy advocate for its members and consumers.

There are also 16 local member boards throughout the state. NMAR is the liaison between these local boards And the National Association of Realtors (NAR). When you join a local board, membership automatically extends to the state board and the national board.

Some of the key local boards include:

• Greater Albuquerque Association of Realtors (GAAR)
• Carlsbad Board of Realtors
• Las Cruces Association of Realtors (LCAR)
• Las Vegas Board of Realtors (LVBR)
• Santa Fe Association of Realtors (SFAR)
• Sierra County Board of Realtors (SCBOR)
• Taos County Association of Realtors (TCAR)

Under the direction of the New Mexico Regulation & Licensing Department, the New Mexico Real Estate Commission exists to protect the public and enhance the professional competence of real estate brokers. It enforces New Mexico's Real Estate License Law and the Real Estate Commission Rules.

The Commission accomplishes this by issuing and renewing real estate licenses, establishing and enforcing education requirements, investigating and adjudicating complaints, and educating consumers about real estate licensing laws in New Mexico.

Is Wholesaling Real Estate Legal In New Mexico?

Yes, wholesaling real estate is legal in New Mexico, but you must follow state laws, or you could get in trouble.

For example, effective July 1, 2011, it is a fourth-degree felony punishable by a $5,000 fine and up to 18 months imprisonment to practice real estate without a license.

However, you do not need a real estate license to buy, sell, rent, or lease your own property.

When wholesalers enter into a purchase agreement with a property owner, the ownership is redefined under the legal principle of equitable conversion. The law gives wholesalers equitable title in the property once an enforceable contract of sale is executed, thus conveying a beneficial interest in the property before a sale is closed.

If you want to invest in real estate by structuring wholesaling deals, you must do your homework on what's appropriate and what is not. A good place to start is with the three primary strategies wholesalers use: assignment of contract, double closing, and wholetailing.

One of the most misunderstood parts of wholesaling with the assignment of contract strategy is that you can only market the contract rights to a piece of real estate after securing an agreement with the current owner. You can't market or attempt to execute a purchase agreement on the home itself unless you have a real estate license.

Since most wholesalers use the assignment of contract as an initial way to break into a wholesaling career, this is the most common misstep that wholesalers make.

It's essential to understand that you are not conducting a real estate investment transaction on the property itself using this method.

You're entering into a contractual agreement with the homeowner to market the rights to the contract to a real estate investor. When the contract is assigned, you collect an assignment fee. Only licensed real estate professionals can collect a commission when they complete a sale.

The upside to using an assignment of contract strategy is that it requires little or no capital resources to complete a deal, making it attractive for wholesaling newcomers.

With a double closing and wholetailing, a wholesaler engages in two separate transactions. Often, these transactions occur on the same day, although the escrow period may take a bit longer in some cases. However, to facilitate the deal, a wholesaler may have to come up with an earnest money deposit and a lender's down payment.

Essentially, you are buying the property outright and flipping your property almost immediately to an end buyer for the biggest profit you can secure.

The key to using these two methods is that you can't publicly advertise the property for sale unless you have a real estate license. You must use a private buyer's list you've created or find people interested in investment properties and cash buyers through other similar means.

That's why some people who wholesale properties see value in getting a real estate license, which we'll discuss in greater detail below.

Read Also: New Mexico Real Estate Contract: Purchase & Sale Agreement In NM

What Are The Wholesaling Laws In New Mexico?

There do not appear to be any laws specifically related to wholesale deals in New Mexico. However, there are several parts of the New Mexico Real Estate License Law that you should understand.

Unlicensed Activity

Chapter 61, article 29-1, addresses acting in the capacity of a broker without a license. Specifically, it states:

Prohibition. It is unlawful for a person to engage in the business or act in the capacity of real estate associate broker or qualifying broker within New Mexico without a license issued by the Commission. A person who engages in the business or acts in the capacity of an associate broker or a qualifying broker in New Mexico, except as otherwise provided in Section 61-29-2 NMSA 1978, with or without a New Mexico real estate broker's license, has thereby submitted to the jurisdiction of the state and to the administrative jurisdiction of the Commission and is subject to all penalties and remedies available for a violation of any provision of Chapter 61, Article 29 NMSA 1978.

61-29-9 states the specific qualifications for a license, which are discussed in a limited manner in the section below.

61-29-10.1 details brokerage relationships and the need for full disclosure. This section states:

For all regulated real estate transactions first executed on or after January 1, 2000, no agency relationship between a buyer, seller, landlord or tenant, and a brokerage shall exist unless the buyer, seller, landlord or tenant, and the brokerage agree, in writing, to the agency relationship. No type of agency relationship may be assumed by a buyer, seller, landlord, tenant or licensee, or created orally or by implication.

A brokerage may provide real estate services to a client pursuant to an express written agreement that does not create an agency relationship, and no agency duties will be imposed on the brokerage.

A brokerage may provide real estate services to a customer without entering into an express written agreement and without creating an agency relationship, and no agency duties will be imposed on the brokerage.

The Commission shall promulgate rules governing the rights of clients or customers and the rights, responsibilities, and duties of a brokerage in those brokerage relationships that are subject to the jurisdiction of the Commission.

Further, 61-29-10.2 defines a licensee's disclosure duties:

Prior to the time a licensee generates or presents any written document that has the potential to become an express written agreement, the licensee shall give a prospective buyer, seller, landlord, or tenant a list of the licensee's duties that are in accordance with requirements established by the Commission.

Licensees shall perform all duties that are established for licensees by the Commission.

Another key provision that wholesalers must understand is 61-29-17.2 regarding Unlicensed activity; civil penalty; and administrative costs:

The Commission may impose a civil penalty on any person who is found, through a court or administrative proceeding, to have acted in violation of Chapter 61, Article 29 NMSA 1978 in an amount not to exceed one thousand dollars ($1,000) for each violation or, if the Commission can so determine, in the amount of the total commissions received by the person for the unlicensed activity. The Commission may assess administrative costs for any investigation and administrative or other proceedings against any such person.

Advertising

Wholesalers must also be aware of 16-61-32.8. Advertisements. Only licensed real estate professionals can publicly advertise a property for sale. The specifics of how a property can be advertised are as follows:

New Mexico real estate professionals who engage in property management should have some degree of knowledge about this law, which provides essential rights to customers and denotes the responsibilities of residential landlords and their agents in the state. It is the judicial standard used by the courts to determine the outcome of claims.

Disclosures

The New Mexico Real Estate Disclosure Act mandates that anyone engaged in real estate transactions is subject to several disclosures they must provide to buyers as part of the transaction.

Sellers are required to complete a standardized disclosure form when conveying real property. Here’s an example of the Realtors Association of New Mexico Seller’s Property Disclosure - residential form.

Also, be aware that you must adhere to the New Mexico Real Estate Disclosure Act and Federal laws as part of the disclosure process.

For example, homes built before 1978 must abide by the Residential Lead-Based Paint Hazard Reduction Act of 1992, also known as Title X.

Read Also: How To Wholesale Real Estate In New Mexico: Step-By-Step

Do You Need A License To Wholesale Real Estate In New Mexico?

You don't need a license, but many wholesalers find value in becoming licensed real estate agents to better protect their interests. It's important to understand that different rules govern licensed and unlicensed real estate practitioners in New Mexico.

You need to spend some time familiarizing yourself with these differences. Many wholesalers also find it valuable to retain the services of an experienced real estate attorney to assist with the legalities of real estate contracts and deal negotiations and to have as a resource for a variety of questions that may come up in the course of doing business.

The New Mexico Real Estate Commission oversees licensing in the state and issues two types of licenses: an associate broker's license and a qualifying broker's license.

The associate's license is the equivalent of a salesperson's license, so let's examine the requirements more closely.

• You must be at least 18 years old, a legal U.S. citizen or lawfully admitted alien, and have a high school diploma or equivalent.
• Complete 90 hours of New Mexico Real Estate Commission-approved real estate courses. These classes include Real Estate Law (30 hours), Real Estate Principles and Practice (30 hours), and Broker Basics (30 hours).
• Applicants with current broker's licenses in other states can submit a written request to waive the Real Estate Principles and Practice and Real Estate Law courses and the national portion of the real estate broker's examination. However, the 30-hour Broker Basics course cannot be waived.
• Take the New Mexico Associate Broker Licensing Exam and pass both portions with at least a 75% score. The fee to take the exam is $95.
• If you pass, you must be fingerprinted and obtain Errors and Omissions Insurance. All persons applying for a license must submit proof of completing a live fingerprint scan. Fingerprinting must be completed no earlier than 21 days before submitting documents to apply for a license. A Fingerprint Source List for New Mexico residents on the Commission's website.
• Apply for Your Associate Broker License. After passing the exam, you have six months to apply. Otherwise, you'll have to retake it. A non-refundable license application fee of $270 is payable when you submit your application.

Final Thoughts

Is wholesaling real estate legal in New Mexico? Yes, it is legal to wholesale properties in New Mexico. Although the state has some economic challenges, many people find it desirable to live there or own a second home. Tourism and a stable economy fueled by desirable weather in many parts of the state have attracted many buyers over the past several years.

Wholesalers should be able to find plenty of real estate deals based on low median sale prices, a steady inventory of foreclosure properties, a healthy infusion of government spending, and other key variables that continue to propel New Mexico's real estate market.

Keeping within the legal bounds of state laws of New Mexico in wholesaling the right way and seeking proper training can give them the edge in setting themselves up for success in the industry.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs