Wholesale Real Estate Contract: Template & FREE PDF Download

Do you want to know the biggest reason most people fail in real estate wholesaling? It’s that they don’t understand how a wholesale real estate contract actually works.

What if you lock up a deal, but you can’t find a buyer? Are you stuck buying it yourself? Can you get your earnest money deposit back? Or are you just out of luck?

In this article, we’ll break down exactly how a wholesale real estate contract works, how to fill it out, and how to use it to protect yourself and get paid even if the deal doesn’t go as planned.

You can also download our Free Wholesale Real Estate Contract Templates & PDFs. These are the exact contracts we use in our business, and that thousands of my students have used to wholesale deals profitably all across the country.

• What Is A Wholesale Real Estate Contract?
• How To Fill Out Purchase & Sale Agreements for Wholesaling
• How To Use An Assignment Contract for Wholesaling
• Assignment of Contract vs. Double Close
• Do You Need A Real Estate License To Write A Wholesale Contract?
• Advantages Of Wholesale Real Estate Contracts
• Wholesale Real Estate Contracts: FAQs

What Is A Wholesale Real Estate Contract?

Wholesale real estate contracts are legal agreements between a seller of a property and a wholesaler that give the wholesaler the right to purchase the property through a Purchase and Sale Agreement (PSA), and the ability to assign those rights to another buyer through an Assignment Agreement or "Assignment Addendum." 

In simple terms, they allow the wholesaler to act as a middleman who finds and negotiates deals. Wholesalers later connect the seller with a new buyer and get paid in the process. This payment is known as the "assignment fee."

Here’s an overview of the two contracts typically used in a wholesale deal:

1. Purchase & Sale Agreement
2. Assignment of Contract

1) Purchase & Sale Agreement

A real estate purchase and sale agreement is a written agreement that obligates the seller to sell the property to you according to the contract terms, so that they cannot sell the property to anybody else.

Without a contract, you don’t have control over the deal, and the property owner can go ahead and sell it to anybody else. It’s also necessary for a title company to open escrow and move the transaction forward.

2) Assignment of Contract

An assignment contract in real estate is what transfers your interest in that deal to your cash buyer in exchange for your wholesale fee or "assignment fee." 

This is how you get paid as a wholesaler.

That assignment fee might be $10,000, $20,000, $30,000, or sometimes even a six-figure assignment fee that we’re able to procure for them.

Master these two documents, and you’ll be well on your way to start wholesaling real estate with confidence.

Next, we’ll walk you through the key sections of each wholesale contract so that you can fill it out with confidence and avoid costly mistakes.

Read Also: Wholesaling Real Estate For Beginners: How To Get Started In 8 Steps

How To Fill Out A Purchase & Sale Agreement (PSA) For Wholesaling

The first wholesale contract we’ll review is the primary contract used in all residential real estate transactions.

This is called the Purchase and Sale Agreement (also referred to as the PSA, the purchase contract, the sales contract, the offer contract, or simply “the agreement”).

*Your local Realtor contract likely has a different name that you should get familiar with.

The purchase and sale agreement is the most important document in any real estate transaction, whether you’re going to be wholesaling it, fixing and flipping, or simply acquiring a property for long-term use.

When pursuing properties on the MLS, you’ll have the luxury of working with a professional real estate agent who can provide you with the purchase agreement, write up the contract for you, and present it to the seller.

However, when you have an opportunity to buy a property directly from the seller, you’ll want to use an investor-friendly contract like the one you can download here.

Now, here's a detailed breakdown of each line of our standard Purchase & Sale Agreement for wholesaling, what they mean, and how to fill them out:

• Section 1: Parties to the Agreement
• Section 2: Subject Property Information
• Section 3: Included in Sales Price
• Section 4: Purchase Price
• Section 5: Where the Earnest Money Goes
• Section 6: Financing Contingency
• Section 7: Condition of Premises
• Section 8: Inspection Contingency
• Section 9: Lead-Based Paint Disclosure
• Section 10: Closing Date, Walkthrough, & Title Company
• Section 11 & 12: Warranty Deed & Clean Title
• Section 13: Prorations & Adjustments
• Section 14: Buyer Default & Liquidated Damages
• Section 15: Risk of Loss or Damage
• Sections 16 to 24: Standard Disclosures and Boilerplate
• Section 25: The Marketing Clause
• Sections 26 to 30: Short Sale, License Acknowledgement, Offer Deadline, Signatures

Section 1: Parties to the Agreement

Starting at section one, this is where you’re going to put the "parties to the agreement."

This is where we identify the parties in the agreement.

The Seller

First and foremost is the seller. This might not just be one seller. There might be multiple sellers, like husband and wife, business partners, or other entities.

You’d write the seller’s name, the seller’s address, and optionally the social security number. The purpose is to identify exactly who is selling the property.

You want to make sure you’ve done some title research, spoken with a title officer/title company, or looked online to make sure you understand who truly owns the property. If you’re missing a signature, and only one of multiple sellers signed, then your contract is going to be void. This is ultra important.

The Buyer

Then, you will identify the buyer of the property. As a wholesaler, this is where you put your name (as an individual) or your business entity.

You list your buying entity, tax ID or social security number (optional), and your address.

Keep in mind that the address in this section is your mailing address. It is not the property address.

The Key Assignment Language (“Successors and/or Assigns”)

Right underneath the buyer line, it says something like: “and his/her/their entities, successors, and/or assigns.”

This is language that allows you to seamlessly assign the contract to another entity. It makes it ultra clear that both parties agree to a potential assignment in the future.

Real estate contracts are assignable by default, but this makes it crystal clear. If the seller asks about it, your rationale can be:

• You might be closing on a different entity you have (multiple LLCs, depending on exit strategy)

• You might be converting it to a rental property

• You might be fixing and flipping

• You might be bringing in a financial partner to fund the property (and they may close in their entity name)

This happens all the time and is a very reasonable and sophisticated way to respond.

Section 2: Subject Property Information

This is the subject property information for the property that you’re purchasing, including street address, city/town, county, state, and zip code.

*In 2C (“described as”), you put whether it’s single-family, multi-family, land, etc.

Simply put the address as well as the assessor’s parcel number or the APN. This can be found on the tax assessor's website, the MLS, the county tax website, or simply on Redfin.

Section 3: Included in Sales Price

This section includes all of the fixtures attached to the property, the appliances, and really all permanently attached items are included in the sales price.

Personal property is not usually included in a real estate sale. So if you wanted to include anything that is not considered real property, you would go ahead and list that in the lines provided here.

Section 4: Purchase Price

This is where you state the purchase price, and then break down how it will be paid.

• 4A and 4B relate to the initial deposit or earnest money deposit. Many markets submit the deposit when the seller accepts the offer, so it often goes in 4B

• 4C is financing (typically blank for wholesaling)

• 4D is “subject to” the seller’s existing financing (sub-to deals)

• 4E emphasizes this is a cash offer (one of the biggest benefits of working with wholesalers/investors)

For the deposit amount, you might write anything from $100 to $1,000, but generally you want to use 1% of the purchase price to make a competitive initial deposit.

Section 5: Where the Earnest Money Goes

Section 5 states that the seller is not going to be directly receiving your earnest money deposit.

The earnest money deposit is going to be sent to a title company or the escrow company or even an attorney if they’re handling your transaction.

How Much Earnest Money Should You Put Down?

You might be asking, "How much do I need to put as my earnest money deposit?"

I recommend putting anywhere from 1% to 3% of the purchase price.

Just keep in mind, the stronger offer is going to have a higher earnest money deposit, but it favors you as the buyer, as well as your investor, to have as little of an EMD as possible. It’s all up to negotiation.

If you’re not sure what to put and you have a low relative purchase price, put about $1,000 or go up to 1% of the purchase price.

Section 6: Financing Contingency

Most of our offers as wholesalers are cash offers. So you can leave this section out to emphasize that you’re not offering a financing contingency. This strengthens your offer as an investor. A financing contingency can ruin a deal for a seller because it gives the buyer permission to cancel if they can’t qualify.

If you do use it, you’d list the loan amount, interest rate, term, and the commitment date (when the contingency expires).

Section 7: Condition of Premises

This is a liability release clause, stating the buyer has examined the property and is satisfied with the physical condition, subject to the inspection contingency.

Section 8: Inspection Contingency

This is one of the most important clauses for wholesalers and investors. You rarely want to enter into agreements without a strong inspection contingency.

This clause allows you to inspect the physical condition of the property within a timeframe, and it also allows you (as a wholesaler) to get your cash buyers into the property and shop it around.

An inspection contingency is really your protection clause.

This allows you time to inspect the property for any defects or deficiencies. And really, as a wholesaler, this is your time to market the deal to cash buyers, right?

You want to schedule a walkthrough with your buyers during this time.

Inspection Timeline (7 to 14 Days)

You want to list your inspection contingency timeline right here on this first line.

I usually recommend anywhere from 7 to 14 days as a competitive but also realistic inspection contingency period.

Whatever date your contract is formed and accepted, list a date here that’s 7 to 14 days after that.

If you can negotiate a longer inspection contingency, that is going to give you more time to shop the deal around, to inspect the property, and ultimately just get your ducks in a row before you’re formally committed to buying the deal.

This is ultimately a point of negotiation. The shorter your inspection contingency, the stronger your offer is going to be because it’s more certain for the seller.

Extra Time to Negotiate After Inspection

You can add an additional time period after your inspection period is over, so that you can negotiate with the seller after the inspection contingency.

Give yourself another 5 days. I would say 5 to 7 days at the most. You shouldn’t really need more than that to negotiate your findings from your inspection contingency.

Waiving Inspection (8C)

If you wanted to officially waive your right to an inspection, you can initial here, which would waive your contingency.

That is not something I would recommend doing unless you’re certain about buying this property. It’s a way to strengthen your offer, but don’t do that unless you’re certain that you’re going to be buying the property.

Section 9: Lead-Based Paint Disclosure

This is a standard disclosure for properties built before 1978. Nothing special to do here.

Section 10: Closing Date, Walkthrough, & Title Company

Section 10 states the closing date. A common recommendation when wholesaling is at least a 14-day closing period from contract to close.

Longer closing dates can serve you better (more time to find the perfect cash buyer), but a 14-day close can make you more competitive versus financed offers that need 30 to 45 days.

This section also gives the buyer the right to do a walkthrough inspection within 48 hours of the closing date.

It also lets you specify the title/escrow company. If you’re unsure, you can insert “buyer choice” so you have flexibility, or you can use the cash buyer’s preferred title company.

Section 11 & 12: Warranty Deed & Clean Title

Section 11 says the title is "conveyed using a warranty deed." This is generally favorable to the buyer.

Section 12 states that the seller is responsible for delivering a clean, marketable title to you at closing. Otherwise, you can cancel the contract and get your earnest money deposit back.

This acts as if it’s a title contingency and means that the title isn’t encumbered.

There are no liens and no claims by creditors at closing.

You’ll get a free and clear title, which is what you want and what your cash buyer is also going to want.

Section 13: Prorations & Adjustments

This covers prorated expenses and income due at closing (taxes, water/sewer, insurance adjustments, etc.). Title/escrow handles this.

If the property is tenant-occupied, it also addresses prorated rent and security deposits, transferring appropriately.

Section 14: Buyer Default & Liquidated Damages

Section 14 is about the buyer’s default. We include what’s called a "liquidated damages clause," which limits your financial risk in this entire deal to your earnest money deposit amount.

So the seller can’t come after you for anything besides just holding on to your earnest money deposit.

So it’s really there to protect you as a buyer, to protect you as a wholesaler, and just to protect all parties in the transaction.

For example, if the deposit is $1,000, and you default outside your contingencies, the seller’s recourse is typically to keep that $1,000.

Without that protection, sellers could potentially pursue legal action with a much higher ceiling.

This is why having a liquidated damages clause is so important. Understand buyer default so you can move forward with confidence, knowing there is a limit to your liability.

Section 15: Risk of Loss or Damage

Protects the buyer if the property is damaged while under contract (flood, fire, etc.). It gives the buyer the right to terminate and get the earnest money back, even if the inspection contingency was removed.

It can also give the buyer the option to move forward and potentially receive insurance proceeds.

Sections 16 to 24: Standard Disclosures and Boilerplate

These sections of the PSA cover common interest community disclosures, including:

• HOA/condo
• Listing broker disclosures
• Mandatory seller disclosures (varies by state)
• Equal housing,
• Addenda and advisories
• Additional terms and conditions
• Email/fax binding
• Complete agreement language
• How notices must be delivered (in writing, to addresses listed)

In section 17, if you’re a licensed real estate agent or you’re a licensed broker or if you’re working with one in the transaction, then you’d simply put their information right here.

A lot of you using this contract won’t have real estate agents in the transaction, but this is a spot to acknowledge them and list their license number and contact information as well.

Section 25: The Marketing Clause 

This is an extremely important clause to have in your wholesale contract. It states that the seller acknowledges the buyer has the right to market the property and/or the contractual interest in the property in any way before closing.

The seller understands upon signing that the buyer will possess a contractual interest in the property.

This matters because it supports what wholesalers do: finding a buyer and marketing the deal. It can also be relevant if you plan to market the home for rent.

Sections 26 to 30: Short Sale, License Acknowledgement, Offer Deadline, Signatures

• Section 26 covers short sale cooperation (if applicable)
• Section 27 is a license acknowledgement (if buyer/seller is a licensed Realtor)
• Section 28 confirms that both parties can enter into the agreement and understand it
• Section 29 can set a time limit for the seller to accept the offer (24 to 72 hours, for example)
• Section 30 is signatures and initials (make sure all sellers sign and initial every page)

Once you fill it out completely and get seller signatures, you have a legally binding agreement, and you can move to the next stage of the wholesale contract!

What Is A Wholesale Real Estate Assignment Contract?

A Wholesale Real Estate Assignment Contract is the legal document that allows a wholesaler to transfer their equitable interest in a property to another buyer.

Instead of purchasing the property themselves, the wholesaler signs a Purchase & Sale Agreement with the seller, then “assigns” their rights to an end buyer for an agreed-upon assignment fee.

Understanding this distinction is crucial: you are not selling the property, you are selling your contractual right to purchase it.

This makes the assignment contract the key instrument that legally connects the original seller, the wholesaler (assignor), and the end buyer (assignee).

For an assignment to be valid, the underlying wholesale real estate contract must be assignable.

Some purchase agreements include anti-assignment clauses or require written permission from the seller.

Because of this, wholesalers should always review (or have an attorney review) contract language to ensure it clearly permits assignment and outlines any restrictions.

A strong assignment contract should spell out:

• Exact rights are being transferred to the end buyer
• Assignment fee amount owed to the wholesaler
• Deadlines and closing specifics for the final transaction
• Earnest money requirements and who deposits them
• Whether the wholesaler remains liable if the end buyer defaults

The Doctrine of Equitable Conversion plays a crucial role in this process. Once a real estate purchase agreement is signed, the buyer becomes the equitable owner, and the seller holds the legal title to the property.

Therefore, when a wholesaler sells the contract, they're selling their equitable interest or rights within the contract terms to another buyer.

Now, let's go line-by-line and fill out the Assignment Contract for wholesaling. Again, you can get these wholesale contract templates for free by clicking here.

How to Fill Out the Assignment Addendum

The first thing to keep in mind is that you, the wholesaler, are the "assignor," and the "assignee" is your cash buyer or end buyer:

• Assignor = You (the wholesaler, the buyer on the original contract)

• Assignee = Your cash buyer

So step one is to put your name as the assignor and then your end buyer as the assignee. Very simple.

Match the Date, Seller, and Property Address

The date filled out here is going to be the date that your purchase agreement was formed.

Whatever date is on your agreement needs to match what’s on this assignment addendum.

Next, input your seller’s name here, then write the property address right in the appropriate section.

Make sure that the seller, the date, and the property address match what’s on your purchase agreement.

And of course, you're buying the entity name as the assignor.

Add Your Assignment Fee (How You Get Paid)

Here’s where you can list your assignment fee. This is how you get paid as a wholesaler.

Write it out in letters first, then next to it in parentheses, you’re going to write that out in numbers. This will make it ultra clear what your wholesale fee is.

Optional Non-Refundable Deposit (Highly Recommended)

The next space on this contract is where we can charge a non-refundable deposit.

This is optional, but I highly recommend it because at the time of assigning the contract to your buyer, this allows you to have the buyer put their money where their mouth is, especially if you’ve put in any money into the deal for an earnest money deposit or any fees for surveys or appraisals.

This is a time when you can actually recoup that money and maybe even have this fee be in excess of what you’ve put down.

For example, let’s say you put a $2,000 earnest money deposit into escrow, and this allows you to collect a $5,000 non-refundable deposit from your buyer.

Then, even if the buyer doesn’t perform, you will still make the difference, which is $3,000.

So, this is how you get paid on a wholesale deal, even if the transaction doesn’t go through and your buyer doesn’t perform.

Closing Date (Must Match the Purchase Agreement)

This requires the assignee to close on the same close date as in your purchase agreement. So just make sure that those two dates match.

Protection if the Buyer Doesn’t Close

The language in this contract also holds you harmless in case the buyer doesn’t close. And it does make the buyer responsible for closing regardless.

It also allows you to reassign the contract if the buyer doesn’t perform.

So, let’s say they don’t close on this date that you have listed here, then you will actually have the right to reassign to a different buyer and they’ll lose their deposit.

All that you have to do besides that is sign and date your entity or your name, as well as your end buyer’s name.

Finalizing & Sending Wholesale Contracts

After you have a fully executed assignment contract, send a copy to your attorney, title company, or escrow company so they can start moving the transaction forward.

At this point, your job is to make sure everybody is on the same page, stay in touch with your buyer, stay in touch with the title company, and help facilitate the closing.

On the closing date, you’ll receive a check or a wire from the title with your assignment fee as stated in the assignment contract.

And congratulations, that’s one of the most exciting parts of wholesale real estate: getting paid as a wholesaler!

Assignment Contract Vs. Double Close

Remember, an Assignment Contract happens when a wholesaler secures a deal with a seller and then assigns their contract rights to a buyer. This way, the wholesaler makes money without officially owning the property.

On the other hand, a Double Closing involves the wholesaler both buying the property from the seller and then selling it to a buyer. In this situation, the wholesaler briefly owns the property before selling it off. This process involves two separate transactions, each with its own costs and fees.

The wholesaler appears on the title and must cover all costs associated with buying and selling properties.

To help you wholesale LEGALLY in any state using the right contracts, please watch our in-depth guide below:

Things to consider when choosing between assignment contracts and double closings include potential profit, the buyer's financing plans, and how quickly the buyer can access funds. By weighing these factors, investors can make the best choice for their situation.

No one strategy is better than the other; it all depends on the specifics of the deal and the investor's circumstances. Today, some state laws require a double close or other strategy for wholesaling real estate. Be sure to read up on your state's laws before moving forward.

Read Also: Double Closing: The Ultimate Guide

Do You Need A Real Estate License To Write A Wholesale Real Estate Contract?

No, you do not need to be a licensed real estate agent to write a wholesale real estate contract. Remember, wholesaling involves selling contractual rights, not representing a seller or buyer as an agent.

As long as these key elements are included, your contract will be valid, legally enforceable, and ready for assignment.

Remember: many states require specific disclosures or contract wording, so always have an attorney review your wholesale contract template, especially when creating one from scratch.

With the right structure in place, these templates make your wholesaling business faster, smoother, and legally protected.

Wholesale Real Estate Contract Template

If you're searching for a wholesale real estate contract template you can confidently use (or model your own after), this section breaks down every clause your contract must include.

It also gives you a visually formatted sample layout so you know exactly what it should look like.

👉 Click here to download your own Wholesale Real Estate Contract Template!

Use the styled example below as a guide:

Quick filled-out example:

Seller: John & Jane Seller
Buyer/Wholesaler: ABC Home Buyers, LLC
Address: 123 Main St, Anytown, ST 12345
Purchase Price: $120,000
Earnest Money: $100
Closing Date: On or before 30 days from acceptance
Assignment: Buyer may assign this Agreement to another party without further consent from Seller.

Read Also: Wholesale Real Estate: Step-By-Step Guide & Deal Calculator

Advantages of Wholesale Contracts

A wholesale real estate assignment contract offers some of the biggest advantages in the entire real estate investing world, especially for beginners.

Here are the most powerful benefits of using assignment contracts:

• Quick Profits & Fast Turnaround: Most assignment deals close in 30 days or less. Skilled wholesalers who consistently submit offers can complete 5–10 assignment deals per month. Once you understand how to find motivated sellers and pair them with eager buyers, you can build a consistent, repeatable deal pipeline.
• No Credit or Income Requirements: Because you're assigning your contractual rights not buying the property, you don’t need a mortgage, proof of funds, or lender approval. The end buyer handles all financing and underwriting, making this an ideal entry point for investors with limited credit or capital.
• Lower Financial Risk: You never take title, so you avoid the holding costs, repairs, property taxes, and risks that traditional investors face. Your only responsibility is securing the contract and assigning it, dramatically reducing your exposure.
• Accelerated Real Estate Education: Wholesaling forces you to learn the fundamentals quickly: evaluating deals, analyzing ARV, estimating rehab costs, understanding contract clauses, negotiating with sellers, and marketing to buyers. You’re learning the entire real estate investing process at high speed, without needing to buy the property.
• Builds a Valuable Buyers List: Every assignment deal expands your network. You’ll naturally build relationships with cash buyers, flippers, landlords, agents, contractors, and lenders. These contacts create long-term opportunities far beyond wholesaling, JV deals, flips, rentals, and private capital partnerships.
• Deep Local Market Knowledge: When you evaluate dozens of properties every week, you quickly learn neighborhood trends, price points, rental numbers, buyer demand, and what makes a property desirable. This knowledge gives you a competitive advantage in any future investment strategy.

For beginners, mastering wholesale real estate assignment contracts is one of the fastest ways to gain real-world investing experience. You’re learning how to analyze deals, negotiate with sellers, and structure contracts, all without needing to own the property yourself.

Just remember: your success will come from consistency, submitting offers daily, and building a strong buyers list. With the right education and strategic effort, wholesaling can become the foundation of your entire real estate investment journey.

Read Also: 17 Best Cities To Wholesale Real Estate

Wholesale Contracts: FAQs & Common Misconceptions

Wholesaling brings with it a multitude of questions, particularly surrounding the pivotal tool of the trade: contracts.

As essential as they are, these contracts often come shrouded in misunderstandings, especially for new investors. Real Estate Skills aims to provide you with concise answers to your most pressing questions, going as far as giving you a wholesale real estate contract PDF to work with.

What Is Wholesaling?

Wholesaling is a strategy where a middleman, or wholesaler, secures under-market-value properties and finds end buyers for those properties. Usually, these properties are distressed and purchased from motivated sellers, but they can also be fully renovated, move-in-ready homes.

A common method is an assignment of contract, where the wholesaler makes an agreement to buy a property and then assigns that real estate wholesale contract to an end buyer before closing. This transfers the right to purchase to another party, who will then renovate the property and sell it for a profit. The wholesaler's profit comes from the difference between the price they set in their contract and the higher price paid by the end buyer.

This method is popular because it doesn't need any capital investment from the wholesaler, there are no closing costs, and payment can be quick.

Other variations of wholesaling include double closings and wholetail deals, which require the wholesaler to fund and close the property.

Why Should You Wholesale Real Estate?

Wholesaling real estate might seem overwhelming, but it offers significant benefits for both new and seasoned investors:

• It presents minimal risk as you're not directly exposed to market fluctuations or property liabilities, unlike traditional homeownership.
• It allows you to capitalize on all leads, turning potential property listings that you might not have time for into profitable contracts.
• Wholesaling requires little to no personal investment as profits are made from selling the contracts, not the properties themselves.
• As a wholesaler, you're not responsible for property repairs; the condition of the property is a factor for the investor to consider.
• The process isn't geographically bound; you can operate your wholesaling business virtually, making it a versatile strategy in competitive markets.
• Wholesaling doesn't require a real estate license, providing an alternative entry point into the property market.

Is A Wholesale Contract Legal?

Wholesale real estate contracts are legal and are a common real estate practice.

Despite the legitimacy of the contracts and process, it is crucial that you are aware of the rules and regulations when it comes to the state the property is in. Similarly, it is widely important for both parties to communicate, agree, and clarify all terms to avoid any conflicts or misconceptions regarding the contract.

Furthermore, according to Restatement Second of Contracts § 317, assignments are allowed in contracts unless it's precluded in the contract.

If there is no assignment clause or a clear prohibition of assignment, it is automatically allowed. However, watch out for clauses in purchase contracts that prohibit assignment. This can be true with forms that Realtors use during the wholesaling process.

For added legal protection, make sure you use a proven wholesaling contract template for your specific state.

What If You Can’t Assign A Property To A Wholesale Contract?

If the wholesale real estate contract prohibits assignment, there are two options you can consider: a standard Contract Assignment Addendum or a double closing.

• Contract Assignment Addendum: A standard Contract Assignment Addendum amends the initial contract that prohibited assignment. Most real estate brokers or attorneys will have access to a similar form. In short, a Contract Assignment Addendum explains certain conditions between the seller, the assignor, and the assignee relating to the property at hand. When dealing with purchase contracts that are not assignable, an assignment contract is a strong option to consider.
• Double Closing: In a double closing, an investor buys a property and then resells it swiftly without making any repairs. This process involves two separate transactions. The first is between the investor and the seller, and the second is when the investor sells the property to a new buyer. This can be ideal for contracts that are unassignable to third parties, such as with some REO properties or bank-owned homes.

Do You Get Paid From A Wholesale Real Estate Contract?

One of the great benefits of being a wholesaler is the profit you can earn while putting in little money of your own.

The main way a wholesaler gets paid is from a wholesale fee. The wholesale fee, or assignment fee, is earned when the wholesaler sells an active purchase contract (or lease option contract) and transfers the contractual rights to the buyer/investor.

Another profit center for wholesalers occurs when the wholesaler buys the property and then quickly resells the property to another party at a higher price. This requires the wholesaler to actually close on the piece of real estate. The net profit from "buying low and selling high" is the wholesaler's profit. Since two real estate transactions occur using this wholesaling method, closing costs may be added.

Typically, the amount and logistics of how a wholesaler will get paid are described in the wholesale assignment contract. It may also specify whether or not the wholesaler will be getting paid in escrow or outside of escrow.

What Is Escrow & Why Is It Important For Wholesale Contracts?

According to Rocket Mortgage, “Escrow is a legal arrangement in which a third party temporarily holds money or property until a particular condition has been met (such as the fulfillment of a purchase agreement). It’s used in real estate transactions to protect both the buyer and the seller throughout the home-buying process. Throughout the term of the mortgage, an escrow account will hold funds for taxes and homeowner’s insurance.”

In short, escrow will hold your earnest money and will be applied appropriately throughout your home-buying process.

Nonetheless, if you are getting your wholesale assignment fee paid through escrow, you may receive a check from the title company itself. The money that was put into that account may have included the price that would be used to pay the wholesale fee. On the flip side, being paid outside of escrow entails that the end buyer will pay the wholesaler directly.

Who Buys Wholesale Real Estate Contracts?

As we have discussed these contracts in terms of a seller, wholesaler, and buyer, who falls into the category of being a buyer? Who buys wholesale real estate contracts?

• Rental Property Investors: Rental property investors are a large portion of those who buy wholesale contracts. For example, landlords look for discounted properties that can be fixed up and rented out. These deals must meet their criteria of gaining adequate profit from leasing the home to tenants for passive rental income.
• House Flippers: Fix and flip investors purchase these contracts as they can flip the house, especially those in distressed and dilapidated conditions.
• Property Developers: Property developers purchase these contracts, hoping to find land that can be developed. The property is then torn down or scraped, and then used to build on. An assemblage of contiguous properties is also a possibility for property developers from these contracts. This is when an investor owns a large area of properties, which results in a larger site to develop a larger, more valuable structure, such as an apartment complex or business.

Additionally, wholesalers themselves participate and purchase these contracts. Depending on the property and profit they get from it, they may choose to buy contracts to sell to other investors in their network or keep it as an income-producing rental property.

Can You Get Out Of A Wholesale Real Estate Contract?

A contract is a legally binding document, so don’t hold your breath if you think it’s easy to get out of it. As you sign a contract, you agree to the terms and conditions that are listed within that document. You also take on any consequences that may occur with it if you breach the contract.

Wholesale real estate contracts contain contingency clauses that allow a party to terminate the agreement without repercussions when certain terms aren't met. This part of the contract clarifies any conditions that need to be met in order for the contract to be legally binding. Once the conditions are met, the contract then becomes binding.

A specific contingency to be aware of is the inspection contingency, also called the due diligence contingency. This states a specific time period for the buyer to have the home inspected. With this contingency, the buyer is able to cancel the contract or negotiate certain actions for the seller to take if appropriate for the home.

It is important to note that not all contracts will have an inspection contingency clause. New investors can lose money, even in a low-risk wholesale deal, without the right training and guidance. This contingency clause may be overlooked, so it is important to be aware of it.

Here's an example of a basic due diligence contingency in a contract:

“Closing will take place on or before: ____ at _____ or TBD, Subject to a 45-day period in which the buyer/seller shall be permitted to do necessary due diligence and to clear any title problems.”

So, how do I get out of this contract? There are two options, one good and the other not so much.

The first option is the situation you would typically want. This is when you ask to cancel the contract within the contingency time period. This will typically permit the cancellation of the contract, and your earnest money deposit will be refunded to you.

However, as you have committed earnest money, the situation may not look so hopeful for you if you are outside the contingency period. The earnest money becomes non-refundable when the contingencies in the contract are removed or expire. This will result in the loss of your earnest money deposit if you cancel the contract.

Final Thoughts On Wholesale Real Estate Contracts

We've introduced you to the world of wholesale contracts and examined the wholesaling process in its entirety. It's clear to see how these contracts play a key role and what you need to be mindful of throughout the process.

Wholesaling provides both wealth creation and educational benefits for anyone interested in the real estate business. Remember, your drive and determination will yield benefits far beyond financial gain. The rewards will be clear and tangible.

Legal contracts are critical to wholesaling and demand your serious attention. Read every contract thoroughly.

Knowledge is power when it comes to negotiating outstanding wholesale deals.

---

---

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.