A wholesale real estate contract in Texas works by letting you sign a purchase agreement with a seller, then assign that agreement to an end buyer for a fee, all without ever taking title to the property. The arrangement is legal without a real estate license, but only if you follow the written disclosure rule in Occupations Code Section 1101.0045. Two documents drive the whole deal: the original purchase agreement between you and the seller, and a separate assignment agreement between you and your end buyer.
The Equitable Interest You’re Actually Selling
When you sign a purchase agreement with a seller, you create an equitable interest in the property. You don’t own it. You hold a contractual right to buy it at the agreed price, and Texas law lets you sell or assign that right to someone else. The difference between your contract price and what your end buyer pays is your assignment fee.
You never fund the purchase or take title. Your end buyer steps into your position, closes directly with the seller, and the title company pays your assignment fee out of closing proceeds. For that to work, two things have to be true: the purchase contract has to allow assignment, and you have to make the disclosures Texas law requires.
Which Purchase Agreement to Use
Most Texas wholesalers start with the TREC “One to Four Family Residential Contract (Resale),” a standardized form published by the Texas Real Estate Commission.1Texas Real Estate Commission. Contracts Licensed agents must use TREC promulgated forms, but wholesaling doesn’t require a license, and TREC has confirmed that non-license holders may use the forms at their own risk.2Texas Real Estate Commission. Can a Non-License Holder Use the Promulgated Contract Forms Some wholesalers prefer custom contracts drafted by an attorney with wholesaling-specific language the TREC form lacks.
Whichever form you use, the contract needs to include:
- Full legal names of every seller and buyer
- A legal description of the property with lot, block, and subdivision from county tax records, not just a street address
- The purchase price and earnest money amount, typically between $500 and $5,000 depending on the property’s value
- A closing deadline that gives you enough time to find an end buyer and complete the assignment
In the buyer field, enter your name or your entity’s name. Many wholesalers add “and/or assigns” after their name to signal the contract may be transferred, though that shorthand alone doesn’t guarantee a smooth assignment.
Making the Contract Assignable
This is where a lot of Texas wholesale deals quietly fall apart. The standard TREC residential contract wasn’t drafted with wholesaling in mind and contains no built-in assignment clause. Contracts in Texas are generally assignable unless they say otherwise, but relying on that default is risky. If the seller or the title company pushes back, you need explicit language to point to.
The TREC form includes Paragraph 11, “Special Provisions,” which is reserved for factual statements that complete blanks, disclose information, or give instructions.3Texas Real Estate Commission. One to Four Family Residential Contract (Resale) You can use it to state that the buyer retains the right to assign the contract before closing. For more detailed wholesaling provisions, attach an addendum drafted by your attorney.
Even with an assignability clause in the contract, get a signed consent from the seller acknowledging the assignment and attach it as an exhibit to the assignment agreement. This eliminates any argument later that the seller didn’t know the deal was being transferred. Skipping the step doesn’t necessarily kill the deal, but it creates avoidable friction at closing.
The Disclosure That Keeps You Legal
Texas Occupations Code Section 1101.0045 is the statute that makes wholesaling legal without a license, and it comes with a hard condition: you must disclose in writing the nature of your equitable interest to both the seller and any potential buyer.4State of Texas. Texas Occupations Code 1101.0045 – Equitable Interests in Real Property Plainly, you have to tell everyone involved that you don’t own the property and are assigning a contract, not selling real estate.
The statute is blunt about what happens if you skip that disclosure: you are legally considered to be engaging in real estate brokerage.4State of Texas. Texas Occupations Code 1101.0045 – Equitable Interests in Real Property Acting as a broker without a license is a Class A misdemeanor in Texas, carrying up to one year in jail and a fine of up to $4,000. The transaction itself can also face legal challenge if a party claims they were misled about your role.
Put the disclosure prominently in both the purchase contract and the assignment agreement. A single buried sentence isn’t enough when a dispute arises. The disclosure should make clear that you hold a contractual right to purchase the property, that you intend to assign that right to a third party, and that you are not acting as a licensed real estate agent or broker.
Separately, the seller must give the end buyer a Seller’s Disclosure Notice under Texas Property Code Section 5.008, covering the property’s condition, known defects, and other material facts.5State of Texas. Texas Property Code 5.008 – Sellers Disclosure of Property Condition That obligation is on the seller, not you, but if the disclosure hasn’t been delivered by the time your end buyer enters the picture, the buyer can terminate the contract within seven days of receiving it. Make sure the seller has completed the form before you start marketing the deal.
What Goes in the Assignment Agreement
The assignment agreement transfers your contractual position to the end buyer. It’s separate from the purchase agreement and does one thing: put the end buyer in your shoes so they can close with the seller. A workable assignment agreement includes:
- Your name as assignor and the end buyer’s name as assignee
- The effective date of the original purchase agreement, tying the two documents together
- The assignment fee as a specific dollar amount, not a vague reference to “consideration”
- A statement that all rights and obligations under the original purchase agreement transfer to the assignee
- The Section 1101.0045 disclosure confirming you hold an equitable interest, not title
The assignment fee is your profit. It’s usually paid at closing from the end buyer’s funds, and the title company disburses it alongside the seller’s proceeds. State the fee explicitly, because title companies need a clear number to build the settlement statement. Ambiguity here delays closings.
Earnest Money and What You Can Lose
Earnest money is your skin in the game. When you sign the purchase agreement, you deposit money into escrow to show good faith. If you can’t find an end buyer and fail to close, the seller is typically entitled to keep that deposit as liquidated damages for breach of contract.
Most wholesale deals use earnest money between $500 and $5,000. Keeping the deposit low limits your downside if the deal falls through, but some sellers and their agents view a small deposit as a sign you’re not serious. Where you land depends on the property’s value and how competitive the situation is.
You won’t forfeit earnest money if you back out during a valid contingency period. The TREC form includes an option period, which gives you an agreed-upon number of days to inspect the property and terminate for any reason. The option period requires a separate, non-refundable fee paid directly to the seller. Terminate inside that window and your earnest money comes back. Miss the deadline and walking away costs you the deposit. If a dispute arises over who gets the earnest money, the escrow holder cannot release the funds without written agreement from both parties or a court order.
When a Double Closing Makes More Sense
Not every deal works as a straight assignment. If the seller won’t allow assignment, if the price spread is large enough to cause friction, or if you’d rather keep your profit private, a double closing is the alternative.
In a double closing, two transactions happen back-to-back. First you close with the seller and take title. Then you immediately close with the end buyer, transferring title to them. You briefly own the property, sometimes for only a few hours, and the title company handles both closings in sequence.
The catch is funding. A double closing requires you to actually purchase the property in the first transaction. Some wholesalers use short-term transactional lenders who provide funds specifically for same-day closings. Others use their own capital. Texas title companies will not close a deal without properly funded transactions, and trying to use the end buyer’s funds to close the first transaction without proper structuring creates serious legal exposure.
Double closings also cost more because you pay closing fees twice, once as buyer and once as seller. The upside is privacy: the end buyer sees only their purchase price, not what you paid.
FHA Timing Rules That Can Kill a Double Closing
If your end buyer plans to use FHA financing, federal rules impose timing restrictions that can wreck a double closing. Under 24 CFR 203.37a, a property is not eligible for FHA mortgage insurance if the seller has owned it for 90 days or less.6eCFR. 24 CFR 203.37a – Sale of Property Take title in a double closing and try to resell to an FHA buyer the same day, and the loan won’t go through.
These restrictions don’t apply to straight contract assignments because you never take title. The seller is still the original owner selling directly to the end buyer, so no “resale” happens. That’s one practical reason to prefer assignments when FHA buyers are in the mix. Exceptions to the 90-day rule exist for inherited properties, HUD and government agency sales, new construction, and properties in presidentially declared disaster areas.
Taxes on Your Assignment Fee
Assignment fees are ordinary income, not capital gains. You aren’t selling an investment property; you’re earning a fee for facilitating a transaction. The IRS treats it the same as any other active business income.7Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Because wholesaling is an active business, assignment fees are subject to self-employment tax at 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare) on top of your regular income tax.8Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) If you’re wholesaling regularly, make quarterly estimated tax payments to avoid penalties at filing time.
If the title company or end buyer pays you $600 or more in assignment fees during the year, expect a Form 1099-NEC. Report the income on Schedule C. Expenses tied directly to your wholesaling activity, including marketing costs, earnest money you forfeited on deals that fell through, and attorney fees for contract drafting, are deductible against that income.
Getting to Closing
Once you have signed copies of both the purchase agreement and the assignment agreement, deliver them to a Texas title company. The title company opens escrow and starts a title search, checking public records for clear ownership and any liens, judgments, or encumbrances on the property. The search usually takes one to two weeks.
The title company collects the earnest money from the original contract and coordinates a closing date. On closing day, the seller signs the deed transferring the property to the end buyer, and the title company distributes funds per the settlement statement: the seller gets the purchase price, you get your assignment fee, and any lien holders get their payoffs. The deed is then recorded with the county clerk.
Closing costs include title insurance premiums, escrow and settlement fees, and county recording fees. In a straight assignment the end buyer typically pays these, since they’re the one taking title. Spell out in the assignment agreement who bears which closing expenses. Assumptions here lead to last-minute disputes that stall or kill a deal.