Alabama Wholesaling Law: SB 228 (Act 2023-201)

State: Alabama | Bill: SB 228 (2023), enacted as Act 2023-201, Code of Alabama 1975, Sections 8-42-1 to 8-42-3 | Effective: August 1, 2023 (in effect now) | Applies to: single-family residential property (the assignment-disclosure rules); one-to-four-unit residential real estate (the recorded-agreement ban) | Bottom line: You can still assign contracts in Alabama. Disclose to the seller and your buyer in writing, give the seller a 3 business day heads-up before the assignment takes effect, and do not record long-term agreements that cloud title. There is no licensing law for wholesalers.

What the Law Says (Plain English)

Alabama has one wholesaling statute: SB 228 (2023), enacted as Act 2023-201 and codified at Code of Alabama 1975, Sections 8-42-1 to 8-42-3. It is a disclosure law, not a licensing law. It does two separate things: it regulates how you assign a single-family purchase contract, and it bans a specific predatory recorded document.

The assignment-disclosure rules (Section 8-42-2). The law triggers when you acquire an "equitable interest" in a single-family residential property (signing a purchase contract gives you that interest, which just means the legal right to buy the house) and then assign or offer to assign it for a fee. When you do, Section 8-42-2(a) requires three written disclosures:

1. To your end buyer (any subsequent purchaser or assignee): the nature of your equitable interest, so they understand they are buying your contract position, not a guaranteed transfer of title. (Section 8-42-2(a)(1))
2. To the seller, before you market: that you intend to market your equitable interest, given before you commence any marketing of the property. (Section 8-42-2(a)(2))
3. To the seller, the 3 business day assignment notice: the effective date of the assignment, given at least three business days before that effective date. Note the wording: it is 3 business days before the assignment takes effect, not before closing. (Section 8-42-2(a)(3))

The requirement covers transferring your equitable interest "whether by assignment, novation, or other similar method" (Section 8-42-2(b)), so relabeling an assignment as a novation does not dodge it. (A "novation" means swapping in a new contract between the seller and your end buyer.) These disclosure duties apply only to single-family residential property; the statute says so expressly (Section 8-42-2(d)).

The recorded-agreement ban (Section 8-42-3). Separately, Alabama made "unfair service agreements" unenforceable and illegal to record. These are listing-style contracts that are not performed within one year and that purport to run with the land or bind future owners, allow assignment of the service right without the owner's consent, or create a lien or encumbrance (Section 8-42-3(a)(5)). This part of the law reaches all residential real estate of one to four dwelling units (Section 8-42-3(a)(2)), a wider scope than the single-family disclosure rules. Investors sometimes call these "NTRAP" agreements; the statute's own term is "unfair service agreement."

What You CANNOT Do

• Assign or offer to assign a single-family contract for a fee without telling the seller in writing, before you market, that you intend to market your equitable interest
• Make an assignment effective without giving the seller written notice of the effective date at least 3 business days beforehand
• Assign to an end buyer without disclosing in writing the nature of your equitable interest (that they are buying your contract position, not guaranteed title)
• Relabel the assignment as a "novation" or "similar method" to skip the disclosures (the statute names novations, Section 8-42-2(b))
• Record a long-term unfair service agreement, or a notice or memorandum of one, against any one-to-four-unit residential property (Section 8-42-3(f))
• Leave a memorandum on title after a deal dies, or file one to pressure a seller

What You CAN Still Do

• Assign contracts. SB 228 regulates assignments, it does not ban them. Disclose, give the 3 day notice, close.
• Double close. Take title and resell. The 3 day assignment notice attaches to an assignment, so a true double close (you take title, nothing is assigned) has nothing to notice.
• Wholesale outside single-family residential. The disclosure duties apply "only to transactions involving single-family residential property and shall not apply to any other property" (Section 8-42-2(d)), so vacant land, commercial, and multifamily contracts sit outside them. (The separate recorded-agreement ban still reaches one-to-four-unit residential.)
• Record a clean, short-term memorandum tied to a valid purchase agreement and released immediately if the deal dies. The ban targets long-term agreements not performed within a year that cloud title; a legitimate short-term memo is not an "unfair service agreement."

The Loopholes

1. The compliant assignment (Clean)

The trigger words are "at least three business days prior to the effective date of any assignment" (Section 8-42-2(a)(3)). That is a notice requirement, not a waiting period on your purchase contract and not a ban. Build the clock into your process: the moment you have an end buyer, send the seller the written notice and date the assignment's effective date 3 or more business days out. On a normal deal timeline this costs you nothing. Cost: one extra document and a calendar check.

2. Double close (Clean for the notice; give the disclosures anyway if you market first)

The 3 day notice and the marketing disclosure both attach to transferring an equitable interest (Section 8-42-2(a), (b)). On the plain text, a true double close, where you take title and resell, transfers title, not an equitable interest, so the section's trigger arguably is not met. The residual risk: Section 8-42-2(a) keys on acquiring an equitable interest and then assigning it for a fee, and a regulator could argue your intent at signing, read from your track record, was to move the equitable interest. Because the disclosures cost nothing, give them anyway if there is any chance you market the contract before taking title. Cost: a second set of closing costs plus transactional funding fees.

3. Property type (Clean for the disclosure rules; mind the recorded-agreement ban)

The disclosure duties apply "only to transactions involving single-family residential property and shall not apply to any other property" (Section 8-42-2(d)). Vacant land, commercial, and larger multifamily contracts are outside the assignment-disclosure regime, and so is a 2-4 unit property. But watch the split: the separate recorded-agreement ban uses a broader scope, "one to four dwelling units" (Section 8-42-3(a)(2)). So a duplex through fourplex is outside the disclosure rules yet still inside the recorded-agreement ban. This scope question used to be unverified; the statute text resolves it, which is why this is now Clean for the disclosure rules rather than gray.

What is Closed

• Novation relabeling. The disclosure duty covers transfer "whether by assignment, novation, or other similar method" (Section 8-42-2(b)). Closed.
• Silent assignments. The entire point of the 3 day notice is to end assignments the seller learns about at closing. Closed.
• Long-term recorded service agreements (unfair service agreements / NTRAPs). Unenforceable and illegal to record (Section 8-42-3). Closed.

Penalties If You Violate It

• Class C misdemeanor for violating the disclosure section (Section 8-42-2(c)(1)). This is real statutory text, not commentary, so do not treat the disclosures as optional.
• Civil liability of three times the fee or amount you received from the assignment, owed to the person entitled to the disclosure (Section 8-42-2(c)(2)).
• For recording an unfair service agreement: $10,000 in statutory damages to each affected party (Section 8-42-3(f)(2)), plus actual damages, costs, and attorney fees, and a court order voiding the agreement (Section 8-42-3(g)). A recorded unfair agreement gives no notice against a bona fide purchaser or creditor (Section 8-42-3(f)(1)), and entering one with a consumer is a deceptive act under the Alabama Deceptive Trade Practices Act (Section 8-42-3(e), referencing Section 8-19-1).

Related Rules in the Same Bill

The unfair service agreement ban (Section 8-42-3, sometimes called the NTRAP ban). Alabama made "unfair service agreements" unenforceable: service contracts not performed within one year that purport to run with the land or bind future owners, allow assignment of the service right without the owner's consent, or create a lien or other real property security interest (Section 8-42-3(a)(5)). No one may record such an agreement, or a notice or memorandum of it, in the state (Section 8-42-3(f)). The practical spillover for wholesalers is memorandum practice. A memo is fine if it is short-term, tied to a valid purchase agreement, and released immediately when the deal ends. A memo filed without a valid contract, left on title after cancellation, or used to block a sale is the kind of instrument this section targets, exposing you to the $10,000 statutory damages, actual damages, and attorney fees above. Statutory carve-outs include options to purchase, HOA maintenance agreements, agreements to manage residential real estate, mortgages, and utility contracts (Section 8-42-3(b)).

Required Disclosure Language

Alabama mandates the content of your disclosures but does not prescribe exact wording, and it does not publish an official form (Section 8-42-2(a)). Do not copy a "form" from another state or a marketing packet as if it were required here. Just make sure your writing covers all three items:

1. To your end buyer (subsequent purchaser or assignee): the nature of your equitable interest, that is, that you hold a contract to buy the property and are assigning that contract position, not conveying guaranteed title (Section 8-42-2(a)(1)).
2. To the seller, before you market: that you intend to market your equitable interest, delivered before you commence any marketing (Section 8-42-2(a)(2)).
3. To the seller, the assignment effective-date notice: the effective date of the assignment, delivered at least three business days before that effective date (Section 8-42-2(a)(3)).

All three must be in writing (Section 8-42-2(a)). The first two can live inside your purchase and assignment agreements as clauses; the 3 business day notice is easiest to handle as a short, standalone, dated notice so the timing is provable. Because the exact wording is not mandated, plain, accurate language that a court could read as covering each item is enough. Do not rely on any "official Alabama form," because there is none.

What Almost Passed (and What to Watch)

Alabama's wholesaling statute is SB 228 only. Two 2026 bills tried to add more, and neither became law:

• SB 246 (2026 Regular Session). A consumer-protection bill that would have amended the Section 8-42 provisions to add opt-out and cancellation rights against unsolicited, investment-oriented property solicitations, enforced by the Alabama Securities Commission. It was Indefinitely Postponed (dead) and never enacted. Note: a widely circulated third-party report labeled this a passed "SB 246 (2025)" licensing law. That is a citation error. The 2025 bill numbered SB 246 was an unrelated food-assistance bill, and the 2026 SB 246 died in committee.
• HB 586 (2026 Regular Session), the "Alabama Property Deception Prevention Act." This is the bill that actually matched the "licensing" idea. It would have required real estate wholesalers to be licensed with the Alabama Real Estate Commission, defined "equitable interest" and "real estate wholesaling," required wholesaling disclosures, and given the Alabama Securities Commission concurrent enforcement jurisdiction. It passed the House and reportedly the Senate but then stalled ("Carried Over to the Call of the Chair"), never produced an enrolled version, and does not appear on the Real Estate Commission's own list of enacted statutory changes. It did not become law.

Bottom line for today: there is no Alabama licensing requirement for wholesalers, and no unsolicited-solicitation opt-out or cancellation law. If either idea returns in a future session it would change your outbound-marketing or licensing obligations, so watch the Real Estate Commission's statutory-changes page. Until then, comply with SB 228 and nothing more.

Quick Reference

This is analysis, not legal advice. Confirm your specific deal structure with an Alabama real estate attorney before relying on it.

Sources: the enrolled text of SB 228 (Act 2023-201, Code of Alabama 1975, Sections 8-42-1 to 8-42-3); official Alabama Legislature (ALISON) bill records and the Alabama Secretary of State act database; the Alabama Real Estate Commission statutory-changes page (used to confirm what did and did not become law); plus a third-party wholesaling regulation report and the Chico report, used for context and cross-checking.