Texas Wholesaling Laws: SB 1577 Compliance Guide

Texas is one of the most active wholesaling markets in the country, and contract assignments are a recognized real estate practice in the state. Senate Bill 1577, effective January 1, 2024, added formal disclosure requirements for assignment transactions. If you wholesale in Texas, here is exactly what the law requires and how to comply.

This guide is structured as a practical checklist. Each section tells you what to do, when to do it, and what language to use. If you are looking for the broader national picture, see our state-by-state wholesaling legal guide.

What SB 1577 Actually Says

SB 1577 creates Texas Property Code §5.0205 (redesignated from §5.086 during the 88th Legislative Session) to regulate the sale of equitable interests in real estate purchase contracts. The law covers all property types: residential, commercial, unimproved land, and ranch properties. In plain English: if you sign a contract to buy a property and then assign that contract to someone else, you must make specific written disclosures to both the original seller and the end buyer.

The law targets one specific transaction structure: assignment of contract. You enter into a purchase agreement with a seller. Before closing, you transfer your contractual position to an end buyer for a fee. The end buyer steps into your shoes and closes directly with the seller. Your assignment fee is paid from closing proceeds.

SB 1577 does not prohibit contract assignments, nor does it cap assignment fees. Notably, the law does not require disclosure of the assignment price or terms — only that the assignment itself is disclosed. Texas does not currently require a real estate license to assign your own purchase contracts. What SB 1577 does is mandate transparency: both sides of the transaction must understand what is happening and who holds what. However, the law does impose specific written disclosure obligations, and failure to comply carries penalties under the Texas Deceptive Trade Practices Act.

The full text of the bill is available at capitol.texas.gov. It is short enough to read in five minutes, and every Texas wholesaler should read it at least once.

Assignment vs Double Close — Which Rules Apply

This is the single most important distinction for compliance. The transaction structure you choose determines which rules apply to your deal.

Assignment of contract: You sell your equitable interest — the contractual right to purchase the property. You never take title. One closing occurs between the original seller and your end buyer. Your assignment fee appears on the settlement statement. SB 1577 disclosure requirements apply in full.

Double close (simultaneous close): You actually purchase the property at one closing, take title in your name or your entity's name, then sell it to the end buyer at a second closing. You own the property at the time of sale. Because you are selling property you hold title to — not assigning a contract — SB 1577's assignment-specific disclosure requirements do not apply.

Why this matters: some wholesalers assume all deals require the same paperwork. They do not. An assignment requires SB 1577 disclosures. A double close does not, because you are the owner at the time of the second sale and standard real estate sale rules govern the transaction. However, double closes carry roughly 3% in additional closing costs and require either cash or transactional funding to complete.

Know your transaction structure before you start your compliance workflow. The rest of this guide focuses on assignment deals, since that is where SB 1577 applies.

Required Disclosures for Assignment Deals

If you are assigning your purchase contract, SB 1577 requires written disclosures to two parties. Here is exactly what each disclosure must communicate and when it must be delivered.

Disclosure to the seller (property owner)

What to disclose: The seller must be notified that you intend to assign the contract to a third party and that you hold equitable interest in the purchase contract — not title to the property.

Important: The law requires notification, not consent. The seller does not have to agree to the assignment — they only need to be informed. There are three ways to satisfy this notification requirement under Texas Property Code §5.0205:

1. Add "and/or assigns" to the buyer's name in the original purchase contract. This language in the contract itself puts the seller on notice that assignment is contemplated.
2. Include an explicit assignment provision in the underlying purchase contract. A clause stating that the buyer may assign the contract to a third party satisfies the disclosure obligation.
3. Send a separate written statement to the seller after the original contract is executed but before the assignment contract is signed. This is the standalone disclosure approach — a separate document delivered between contract execution and assignment.

Best practice: Use more than one method. Include "and/or assigns" in the buyer name field AND include an assignment provision in the contract AND provide a separate signed disclosure. Redundancy eliminates any argument that the seller did not understand the transaction structure.

Note for license holders: Licensed real estate agents cannot draft these contract provisions. If you hold a license, your clients should consult an attorney to prepare assignment language and disclosure documents.

Disclosure to the end buyer (assignee)

• What to disclose: Written statement that you hold equitable interest only — you do not own the property and do not hold title. The buyer is purchasing your contract rights, not buying property directly from the owner.
• When to deliver: Before the assignment agreement is executed. The end buyer must understand the nature of the transaction before they sign anything.
• Best practice: Include the disclosure in your deal package materials so the buyer sees it early in the process. Do not save it for the closing table. By the time the buyer is reviewing the assignment agreement, this should already be old news to them.
• Get it signed: Same as the seller disclosure — have the buyer acknowledge receipt in writing.

Both disclosures must be in writing. Verbal disclosures do not satisfy the statute. There is no state-mandated form, but the language must be clear and conspicuous — not buried in fine print or hidden inside boilerplate paragraphs.

TREC Guidance on Marketing Equitable Interests

The Texas Real Estate Commission published a separate clarification that goes beyond SB 1577 and directly affects how you market your deals. This guidance addresses the intersection of wholesaling and real estate licensing law.

The core rule: if you are not a licensed real estate agent, you cannot market the property for sale. You can market your contract rights for sale. The distinction is about what you are advertising.

• Problematic: "3/2 in Katy, $150K" — this implies you are selling a house.
• Better: "Contract rights to purchase 3/2 in Katy, assignment fee $10K" — this accurately describes what you are offering.
• Problematic: "My property at 123 Main St is available" — you do not own the property.
• Better: "Assignment of contract available — 123 Main St, contract price $120K" — this identifies the transaction correctly.

The question TREC asks is straightforward: are you advertising a property or advertising a contract position? If you hold a contract and not a deed, your marketing should reflect that. This applies across every channel — email blasts, social media posts, text messages, investor platforms, and printed materials.

You must also have a signed purchase contract before any marketing begins. Marketing a property you do not yet have under contract is unlicensed brokerage activity regardless of what language you use.

TREC's full article is available at trec.texas.gov.

Marketing Compliance Checklist

Use this checklist for every Texas assignment deal before you send a single email or post a single listing.

For assignment deals

1. Confirm you have a fully executed purchase contract with the seller before creating any marketing materials.
2. Include "assignment of contract" or "contract rights" language in all marketing — email subject lines, body copy, social media posts, deal platform listings.
3. Do not use language implying you own the property. Avoid "selling my house," "my property," "home for sale." Use "contract for assignment," "assignment opportunity," "contract rights available."
4. Include your name or entity name as the contract holder in marketing materials.
5. Disclose that the property is under contract and you are offering assignment rights, not selling the property itself.
6. Apply the same disclosure standards on social media and investor platforms as you would in a formal email blast. The channel does not change the requirement.
7. Keep a copy of every piece of marketing you send, with dates. If compliance is ever questioned, your documentation is your defense.

For double close deals

1. Once you take title at the first closing, you own the property. Standard marketing rules apply from that point forward.
2. No special wholesaling disclosures are required for the second sale because you are selling property you hold title to.
3. Document both closings and retain copies of both settlement statements.

Penalties for Non-Compliance

SB 1577 has teeth. The enforcement mechanism is the Texas Deceptive Trade Practices Act (DTPA), which is one of the strongest consumer protection statutes in the country. Here is what you are exposed to if you skip the required disclosures.

• DTPA violation: Selling or offering to sell an interest in a real property purchase contract without the required disclosures constitutes a deceptive trade practice under Texas law. DTPA violations can carry statutory damages, and in some cases treble (triple) damages.
• Texas Attorney General enforcement: The AG's office has the authority to pursue enforcement actions, including civil penalties, injunctions, and mandatory corrective actions.
• Private cause of action: Both the seller and the end buyer can sue you directly. If a seller discovers after the fact that you assigned their contract without disclosure, or if a buyer learns they purchased an assignment without being told, they have standing to bring a civil lawsuit for damages.
• Contract rescission: In severe cases, the assignment or underlying purchase contract can be voided entirely. The deal unwinds, the seller gets the property back, the buyer gets their money back, and you lose your fee plus any costs you incurred.
• TREC enforcement: If you hold a real estate license and violate the marketing or disclosure rules, TREC can take disciplinary action against your license — including suspension or revocation.
• No criminal penalties: SB 1577 does not create criminal liability. The consequences are civil and regulatory. But DTPA damages and contract rescission are serious enough that criminal penalties are not necessary to make non-compliance expensive.

The cost of compliance is measured in minutes — a few additional sentences in your contracts and marketing materials. The cost of non-compliance is measured in lawsuits, lost deals, and reputational damage. There is no scenario where skipping disclosures is worth the risk.

Practical Steps to Stay Compliant

Here is the step-by-step workflow for a compliant Texas assignment deal, from contract to close.

1. Before you sign the purchase contract: Decide how you will satisfy the seller notification requirement. The three options are: (a) add "and/or assigns" to the buyer name in the contract, (b) include an explicit assignment provision in the contract, or (c) plan to deliver a separate written statement after contract execution but before assignment. Best practice is to use all three. Prepare your disclosure documents before you meet with the seller.
2. At contract signing: Make sure "and/or assigns" appears in the buyer name field. Include your assignment provision in the contract. If you are also using a standalone disclosure document, present it alongside the purchase contract. Walk the seller through the assignment language so they understand you may transfer the contract to a third party.
3. Before you market: Review your marketing materials against the checklist above. Make sure every email, text, post, and listing uses contract rights language and identifies you as the contract holder.
4. Before you assign: Prepare the buyer disclosure. This states that you hold equitable interest only and do not own the property. Provide it to the end buyer before they sign the assignment agreement.
5. At assignment signing: Have the buyer sign the disclosure acknowledging they understand the transaction structure. Then execute the assignment agreement.
6. File everything: Keep signed copies of all disclosures, the purchase contract, the assignment agreement, and samples of your marketing materials. Store them with your deal file. If a question arises months or years later, you need to be able to produce documentation.
7. If you are doing a double close instead: Document both closings separately. Retain copies of both settlement statements. Since you take title before the second sale, the assignment-specific disclosures under SB 1577 do not apply — but maintain clean records of the two-transaction structure.

Frequently Asked Questions

Do I need a real estate license to wholesale in Texas?

No. Texas does not require a license to assign your own purchase contract. You are acting as a principal in the transaction — a party to the contract — not as a broker representing someone else. However, TREC's guidance makes clear that without a license, you can only market your contract rights, not the property itself. If your marketing consistently advertises properties rather than contract positions, you risk being characterized as an unlicensed broker.

Does SB 1577 apply to double closings?

No. SB 1577 specifically addresses the sale or offer to sell an interest in a real property purchase contract — which describes an assignment transaction. In a double close, you purchase the property and take title at the first closing, then sell property you own at the second closing. You are not selling contract rights. You are selling real estate you hold title to. The assignment disclosure requirements do not apply to that structure.

What if the seller objects to the assignment?

SB 1577 requires notification, not consent. The seller does not have to agree to or sign off on the assignment — they only need to be informed. You can satisfy the notification requirement by including "and/or assigns" in the buyer name, adding an assignment clause to the contract, or delivering a separate written statement before the assignment is executed. None of these require the seller's affirmative consent.

That said, if a seller actively objects to assignment after being notified, walking away or switching to a double close structure is often the prudent move. A hostile seller can create complications at closing — refusing to cooperate with the title company, contesting the transaction, or raising other objections that delay or kill the deal. The legal requirement is notification only, but the practical reality is that a seller who opposes the assignment can make the deal difficult regardless of what the statute says.

Can I still use "for sale" in my marketing?

Be precise about what is for sale. "House for sale at 123 Main St" implies you are the owner selling a property. "Contract rights for sale — 123 Main St under contract" accurately describes what you are offering. The safest approach is to lead with the transaction type: "Assignment of contract," "Contract position available," or "Wholesale assignment opportunity." Include the property details — beds, baths, square footage, location — but frame them as describing the property that is the subject of the contract, not as a property listing.

Does SB 1577 apply to commercial properties?

Yes. Texas Property Code §5.0205 applies to all real property types — residential, commercial, unimproved land, and ranch properties. If you are assigning a purchase contract on any type of real property in Texas, the disclosure requirements apply. This is a common misconception. The law governs the sale of equitable interests in real property purchase contracts broadly, not just residential transactions.

What about virtual wholesaling — operating from out of state?

Texas law applies to Texas properties regardless of where you are physically located. If you are assigning a purchase contract on any property in Texas, SB 1577's disclosure requirements apply to that transaction. It does not matter if you are sitting in California, Florida, or anywhere else. The property is in Texas, the contract is governed by Texas law, and the disclosures are required. Virtual wholesalers targeting Texas markets need to build these disclosures into their standard workflow just like any local operator.

Disclaimer

This guide is for informational purposes only and does not constitute legal advice. Laws and regulations change, and the application of any statute depends on the specific facts of your situation. Consult a licensed Texas real estate attorney before relying on this information for any particular transaction. Deal Run provides tools and information to help wholesalers operate more effectively — we are not a law firm and do not provide legal services.