What is a Wholesale Contract?
A wholesale real estate contract is a purchase agreement between the wholesaler and the property seller that includes provisions allowing the wholesaler to assign the contract to an end buyer. While the base document is typically a standard real estate purchase agreement (in Texas, the TREC 1-4 contract), wholesale contracts include specific language and clauses that facilitate the wholesale transaction.
Key clauses
Assignment clause: "Buyer may assign this contract to a third party without seller's consent." This is the most critical clause. Without it, assignment may be prohibited or require seller approval.
And/or assigns: The buyer is listed as "[Your Name or Entity] and/or assigns" to explicitly establish assignment rights in the buyer identification.
Option period: In Texas, an option period (typically 7-14 days) gives the buyer the right to terminate for any reason. This is your due diligence and disposition window.
Earnest money: Typically $100-$1,000 in wholesale deals. Kept low to minimize risk if the deal falls through.
Contract vs assignment
The wholesale contract is between you and the seller. The assignment of contract is a separate document between you and the end buyer, transferring your contractual rights. Both documents are needed for a complete wholesale transaction.
Common mistakes
Forgetting the assignment clause (some standard contracts prohibit assignment by default). Setting the option period too short (not enough time to find a buyer). Using too much earnest money (increases risk if you cannot assign). Not having an attorney review the contract for your state's specific requirements. Using a contract from another state that does not comply with local law.
State variations
Contract requirements and standard forms vary by state. Texas uses TREC promulgated forms. Other states may use state bar forms, local board forms, or custom contracts. Some states require specific disclosures when the buyer intends to assign. Always consult a local real estate attorney.