Is Wholesaling Real Estate Legal in Texas? Disclosures & FHA Rule

Wholesaling real estate is legal in Texas. A 2017 statute, Texas Occupations Code Section 1101.0045, lets you buy an option or a contract interest in real property and then sell or assign that interest without a real estate license, provided you don’t engage in brokerage activity and you give written disclosures to both the seller and any potential buyer.¹ A 2023 amendment made those disclosures the fulcrum of the whole scheme: skip them, and the law presumes you were brokering without a license.²

What the Statute Actually Allows

Section 1101.0045 treats a wholesaler as a principal rather than a broker. When you sign a purchase contract, you hold an equitable interest — the right to buy that property under the terms of your contract. Selling or assigning that right is different from marketing someone else’s property for a commission, and the Legislature recognized that distinction when it passed Senate Bill 2212 in 2017.¹

Senate Bill 1577, effective January 1, 2024, kept that protection in place but added teeth. If you sell or offer to sell a contract interest without providing the required written disclosure, you are legally presumed to be engaging in real estate brokerage.² The license-exempt lane only exists if you stay inside the disclosure rules.

The Disclosures You Must Give

Two statutes work together, and you have to satisfy both.

The Occupations Code requires you to disclose the nature of your equitable interest in writing to any seller or potential buyer.¹

Texas Property Code Section 5.0205, added by SB 1577, spells the content out. Before you enter into a contract to sell your option or assign your interest, you must tell any potential buyer that you are selling only an option or assigning a contract interest and that you do not hold legal title to the property. You must also tell the property owner that you intend to sell the option or assign the contract.³

Many wholesalers write these disclosures into the Special Provisions paragraph of the standard TREC One to Four Family Residential Contract,⁴ or attach a dedicated addendum when marketing the contract to end buyers. The form doesn’t matter as much as the timing: both sides need the information in writing before signing anything binding.

What Happens If You Skip the Disclosures

Three exposures stack up.

First, the brokerage presumption kicks in. Once you’re treated as having engaged in brokerage, practicing real estate without an active license is a Class A misdemeanor in Texas, carrying up to one year in county jail and a fine of up to $4,000.⁵

Second, the Texas Real Estate Commission can pursue administrative penalties of up to $5,000 per violation, and each day a violation continues can be treated as a separate offense.⁵

Third, a buyer or seller who was not properly informed may bring a claim under the Texas Deceptive Trade Practices Act, which treats intentional failure to disclose material information as an unlawful practice. A successful DTPA claim can recover actual economic damages, and a court that finds the conduct knowing or intentional may award up to three times those damages.⁶

Assignment vs. Double Closing

Texas wholesalers typically exit a deal one of two ways, and each has its own legal footprint.

Assignment of Contract

You transfer your rights under the original purchase contract to an end buyer using a secondary document, usually called an Assignment Agreement, that identifies the original contract, names the new buyer, and states your assignment fee. The end buyer closes directly with the original seller, and you step out. The title company handles the closing and documents the assignment fee as a line item on the settlement statement.

Before you can assign, the original contract has to permit it. A buyer’s interest in a Texas real estate contract is generally assignable unless the contract expressly prohibits it, but the standard TREC residential contract contains no assignment clause. Relying on that silence is risky. The safer path is an explicit assignability provision — either listing the buyer as your entity “and/or assigns” or adding an addendum that spells out the right to assign, the assignment fee structure, and the equitable interest disclosures required by the Property Code.

One tradeoff: both the original seller and the end buyer can see your assignment fee on the closing documents. A wide spread can create friction at the table.

Double Closing

In a double closing, two separate transactions happen in rapid succession. You buy the property from the original seller and take legal title (the A-to-B transaction), then immediately resell to your end buyer (the B-to-C transaction). Two deeds get recorded, and each leg carries its own closing costs.

Because you briefly hold title, your purchase price and sale price land on separate closing documents, so your margin stays private. You also don’t need an assignment clause in the original contract. The cost is cash: you need funds to close the first leg. Many wholesalers use transactional lenders — short-term funding sources whose fees typically range from 1% to 4% of the loan amount, or a flat fee — to bridge the two closings on the same day.

The FHA 90-Day Rule That Blocks Many Double Closings

If your end buyer plans to use FHA financing, federal rules impose a timing restriction that directly affects double closings. Under 24 CFR 203.37a, a property resold within 90 days of the seller’s acquisition date is not eligible for FHA financing. The 90-day clock starts on the date you acquired legal title and runs to the date all parties sign the new sales contract.⁷

A few categories are exempt:

Sales of inherited properties.
HUD Real Estate-Owned sales.
Sales by federal, state, or local government agencies and government-sponsored enterprises.
Properties bought by an employer or relocation agency in connection with an employee move.
Properties in presidentially declared federal disaster areas when HUD issues a notice activating the exception.

A standard wholesale double closing fits none of these. If your end buyer needs FHA, you’ll need to hold the property longer than 90 days before signing the resale contract, or steer toward conventional or cash buyers.⁷ Assignments aren’t affected, because you never take title; the original seller’s ownership timeline is what the FHA rule measures.

Marketing Rules Apply to You

Wholesalers who use phone calls, texts, or email to find owners or market deals have to comply with federal solicitation laws. The Telephone Consumer Protection Act requires prior express consent before you send automated texts or make robocalls. A 2025 FCC rule tightened this with a one-to-one consent requirement, meaning you need permission directly from each consumer rather than through a lead generator or third-party list. TCPA statutory damages run $500 per unauthorized call or text, rising to $1,500 per violation if the conduct was willful. A single sloppy campaign can generate serious liability.

For email, the CAN-SPAM Act requires every commercial message to include a valid physical mailing address and a clear opt-out mechanism. You must honor opt-out requests within 10 business days, and you cannot sell or transfer an address after someone opts out.⁸

How the IRS Treats Your Profit

Assignment fees and double-closing profits are ordinary income, not capital gains. Section 1221 of the Internal Revenue Code excludes from “capital asset” treatment any property held primarily for sale to customers in the ordinary course of a trade or business,⁹ which is exactly what a wholesaler does.¹⁰

You’ll also owe self-employment tax on net wholesale earnings over $400 in a tax year. The rate is 15.3% (12.4% Social Security plus 2.9% Medicare), applied to 92.35% of your net earnings, and you can deduct half of the self-employment tax when calculating adjusted gross income. The computation goes on Schedule SE with your Form 1040.¹¹ Ordinary and necessary business expenses — marketing costs, earnest money forfeited on failed deals, transactional lending fees, title and closing costs — come off the top and reduce both income tax and self-employment tax, so detailed records matter.

1
State of Texas. Texas Occupations Code 1101.0045 – Equitable Interests in Real Property
2
Texas Legislature. 88th Legislature SB 1577 – Senate Committee Report
3
State of Texas. Texas Property Code 5.0205 – Equitable Interest Disclosure
4
Texas Real Estate Commission. One to Four Family Residential Contract (Resale) TREC No. 20-17
5
Texas Real Estate Commission. What Are the Penalties for Unlicensed Brokerage Activity?
6
State of Texas. Texas Business and Commerce Code Chapter 17 – Deceptive Trade Practices
7
eCFR. 24 CFR 203.37a – Sale of Property
8
Federal Trade Commission. CAN-SPAM Act: A Compliance Guide for Business
9
Office of the Law Revision Counsel. 26 U.S. Code 1221 – Capital Asset Defined
10
Internal Revenue Service. Publication 544 – Sales and Other Dispositions of Assets
11
Internal Revenue Service. Topic No. 554 – Self-Employment Tax