Wholesaling Contracts Explained
There are two primary methods for closing a wholesale transaction: assignment of contract and double closing. Each has specific mechanics, costs, and use cases. Understanding both is essential before you write your first offer.
Method 1: Assignment of Contract
An assignment of contract is the simpler and more common wholesale closing method. When you sign a purchase agreement with a seller, that agreement includes an assignability clause — language that gives you the right to transfer your contractual position to another buyer. You then sign a separate assignment agreement with your cash buyer, who pays you an assignment fee and steps into your position in the original purchase agreement.
The seller and the cash buyer close directly. Your assignment fee is typically paid at closing by the title company out of the buyer's funds.
Advantages of Assignment
- Simple — one closing, minimal paperwork
- Low cost — no double closing fees
- Fast — title only needs to process one transaction
Limitations of Assignment
- Your assignment fee is visible to both the seller and the buyer on the HUD/closing statement
- Some sellers object when they see how much profit you're making
- Some title companies and REO/bank-owned properties prohibit assignment
- Some buyers don't want their purchase price visible to the original seller
Method 2: Double Closing (Simultaneous Close)
A double closing involves two separate transactions: first, you close on the purchase from the seller (A-to-B transaction), and then immediately close on the sale to your cash buyer (B-to-C transaction). You briefly hold title to the property — sometimes for only minutes — between the two closings.
Modern double closings often use transactional funding — short-term loans of 24-48 hours that fund the A-to-B purchase, repaid immediately when the B-to-C sale closes. Transactional funders typically charge 1-2% of the transaction amount.
Advantages of Double Closing
- Your profit is not visible to either the seller or the buyer
- Works on properties that prohibit assignment (REO, certain MLS listings)
- Creates a cleaner paper trail for large assignment fees
Limitations of Double Closing
- More expensive — two sets of closing costs plus transactional funding fees
- More complex — requires a title company experienced with double closings
- Takes longer to coordinate
Rule of thumb: Use assignment for straightforward deals where your fee is under $15,000–$20,000 and the seller relationship is solid. Use double closing for large assignment fees, REO properties, or any situation where transparency about your profit creates deal risk.
What Goes in a Purchase Agreement
Your purchase agreement with the seller should include: the property address and legal description, the purchase price, the earnest money deposit amount and where it is held, the closing date, the inspection period (your due diligence window), and critically — an assignability clause. Without the assignability clause, you cannot legally assign the contract to a buyer. Have a real estate attorney in your state review your template purchase agreement before you use it.