Earlier this month, Governor DeWine signed Ohio Senate Bill 155 into law. The legislation regulates the growing residential real estate wholesaling market and updates certain disclosure requirements in residential real estate transactions. Specifically, wholesalers must now provide required disclosures or face consequences such as contract cancellation, potential legal claims, and enforcement under the Consumer Sales Practices Act. The newly enacted Section 5301.95 of the Ohio Revised Code requires specific disclosure language, formatted in bold and 12-point font, to ensure sellers and prospective buyers understand their rights.

To understand these changes, it is important to understand how wholesaler transactions operate. The law applies to “a wholesaler acting as a grantee” who contracts for the right to purchase residential property and then assigns or resells that interest. In many cases, the wholesaler never takes title to the property themselves, often acting as intermediaries, connecting sellers with buyers in exchange for a fee or profit.

It is important for sellers and buyers to understand that a wholesaler is not a licensed real estate agent and does not represent either party’s interests. The wholesaler’s objective is to assign the contract for a profit, which may involve purchasing the property below market value and reselling it at a higher price.

SB 155 requires wholesalers to provide specific written disclosures from the statute before any contract is signed. These disclosures must inform the seller, among other things, that:

• The wholesaler may assign the contract to another buyer for a profit;
• The wholesaler is not a licensed real estate agent and does not represent the seller;
• The seller may seek legal counsel before signing the contract; and
• The seller has the right to cancel the contract without penalty prior to closing if the required disclosures are not properly provided.

If the required disclosures are not provided and signed by the seller before entering into the contract to convey an interest in the property:

• The contract may be voidable or unenforceable;
• The seller may have a cause of action against the wholesaler;
• The seller may cancel the contract at any time before closing without penalty; and
• The wholesaler may be subject to enforcement by the Ohio Attorney General under the Consumer Sales Practices Act.

The goal of SB 155 is to regulate the wholesaling market by clarifying the relationships between parties and clearly specifying their rights in the transaction, including the right to seek legal counsel. The law applies only to residential properties, including single-family homes and properties with up to four units, and does not affect larger commercial real estate transactions.

If you have questions about how SB 155 may affect a residential real estate transaction, or if you would like assistance reviewing contracts or disclosures, please contact Mansour Gavin’s Real Estate Law Group.