Compliance Guide
Texas Wholesaling Compliance
A practical overview of the laws, disclosures, and best practices that govern real estate wholesaling in Texas — including SB 1577, TREC guidance on equitable interests, and what it all means for your deals.
Not legal advice. Flat Rate Wholesale is not a law firm and does not provide legal services. This content is for informational purposes only and should not be relied upon as legal advice. Laws and regulations change frequently. Consult a licensed real estate attorney in your state and contact your local regulatory agency for guidance specific to your transactions.
Is Wholesaling Legal in Texas?
Yes. Texas has long been one of the most active real estate wholesaling markets in the country, and it remains so today. Wholesaling — the practice of contracting to purchase a property and then assigning that contract or reselling the property to an end buyer — is a lawful transaction structure in Texas.
There is a common misconception that Texas Senate Bill 1577, which went into effect on January 1, 2024, banned or severely restricted wholesaling. That is not accurate. What SB 1577 did was add specific disclosure requirements for assignment transactions — deals where the wholesaler sells their equitable interest (their contract rights) rather than taking title to the property and reselling it. The bill was designed to protect sellers and buyers by ensuring they understand they are dealing with someone who holds a contract, not someone who owns the property.
Double closing — where the wholesaler actually takes title to the property and then resells it in a second, separate transaction — is a different structure entirely. In a double close, you own the property at the time of sale, which makes it a standard sale. SB 1577's disclosure requirements are specifically aimed at assignment transactions where the wholesaler is selling contract rights, not property they hold title to.
Wholesaling through contract assignment is a recognized practice in Texas. SB 1577 made the rules clearer by adding specific disclosure requirements for assignment transactions. If you operate transparently and follow the disclosure requirements, you are on solid ground.
What Is SB 1577?
Senate Bill 1577 was passed during the 88th Texas Legislature in 2023 and took effect on January 1, 2024. It creates Texas Property Code §5.0205 (redesignated from §5.086 during the legislative session) and requires specific disclosures when a person sells or offers to sell an interest in a real property purchase contract — covering all property types including residential, commercial, unimproved land, and ranch properties. In plain language, it sets rules for how assignment deals are disclosed to both the original property seller and the end buyer.
The bill was introduced in response to concerns about transparency in wholesale transactions. In many cases, sellers were entering into purchase contracts without fully understanding that the buyer intended to assign the contract to someone else for a profit, and end buyers were sometimes unaware that the person selling them the deal did not actually own the property. SB 1577 addresses both of these information gaps.
Key Provisions
Written disclosure to BOTH parties. The wholesaler must provide a written disclosure to the original property seller AND the end buyer. This is not optional and cannot be satisfied verbally.
Disclose that you hold equitable interest, not title. The disclosure must clearly state that the person selling or offering to sell the contract holds an equitable interest — meaning contract rights — and does NOT hold title to the property.
Disclosure must be provided before execution. The required disclosures must be provided before the assignment is executed, not after. Timing matters.
Applies to all property types. SB 1577 covers all real property purchase contracts — residential, commercial, unimproved land, and ranch properties. It is not limited to residential transactions.
Notification, not consent. The law requires that the seller be notified of the assignment, but it does not require the seller to consent to or approve it. However, the underlying purchase contract itself may contain terms that restrict or require seller approval for assignment.
Assignment fee disclosure not required. SB 1577 does not require disclosure of the assignment price or terms. You must disclose that you hold equitable interest and intend to assign, but the law does not mandate that you reveal how much you are making on the deal.
Applies specifically to assignment transactions. If you take title to the property through a double close, you are selling property you own. SB 1577's requirements target the sale of contract rights, not the sale of owned property.
Read the bill: The full text of SB 1577 is available at capitol.texas.gov. It is relatively short and written in accessible language compared to many legislative texts.
TREC Guidance on Equitable Interests
The Texas Real Estate Commission (TREC) published guidance to clarify how existing real estate licensing law intersects with the sale of equitable interests in purchase contracts. This guidance is important because it draws a line between what you can and cannot do when marketing an assignment deal without a real estate license.
The central point is this: if you are not a licensed real estate agent, you cannot market or advertise the property for sale. What you can do is market your contract rights — your equitable interest in the purchase agreement. This distinction sounds like semantics, but it has real practical implications for how you create marketing materials, write listing descriptions, and communicate with potential buyers.
What This Means in Practice
When you send out an email blast or post a deal on a platform, the way you describe what you are selling matters. Saying "3BR/2BA in Katy, TX — $120,000" implies you are selling a house. Saying "Assignment of contract: 3BR/2BA in Katy, TX — contract price $120,000" more accurately describes what is actually being offered. The first version could be interpreted as marketing property you do not own. The second version makes it clear you are selling your position in a contract.
This applies across all marketing channels: email, social media, deal platforms, text messages, and any printed materials. The requirement is not about using magic words — it is about accurately representing the nature of the transaction. You hold a contract, not a deed.
TREC's guidance also reinforces that you must have equitable interest (a signed purchase contract) before marketing the deal. You cannot market a property you do not yet have under contract, regardless of how you describe it.
Read the TREC guidance: TREC's article on the sale of equitable interests is available at trec.texas.gov.
License holder note: According to the Texas Real Estate Research Center at Texas A&M, licensed real estate agents (license holders) cannot draft assignment provisions or disclosure documents for their clients. If you are working with a licensed agent and need these provisions added to your contracts, consult a real estate attorney.
Disclosure Requirements
Understanding what must be disclosed, to whom, and when is the core of Texas wholesaling compliance for assignment transactions. The requirements are not complicated, but they must be followed carefully.
Notification to the Seller
SB 1577 requires that the seller be notified of the intent to assign, but it does not require the seller to consent to or approve the assignment. This is an important distinction — the requirement is notification, not permission. However, the underlying purchase contract itself may contain terms that restrict or require approval for assignment, so always review the contract language.
There are three ways to satisfy the seller notification requirement under the law:
- 1. Add "and/or assigns" to the buyer's name in the original purchase contract. This puts the seller on notice at contract execution that the buyer may assign the contract.
- 2. Include an explicit assignment provision in the underlying purchase contract. This is a clause that specifically addresses the buyer's right to assign and notifies the seller of that intent.
- 3. Send a written statement to the seller after the original contract is executed but before the assignment contract is signed. This is a standalone notification delivered separately from the purchase contract.
Using more than one of these methods provides additional protection. Having it in multiple locations removes ambiguity and strengthens your compliance position.
Disclosure to the Buyer
Before the assignment is executed, you must disclose to the end buyer that you hold equitable interest only — meaning you have contract rights but do not own the property. The buyer needs to understand they are purchasing an assignment of contract, not the property directly from an owner.
This disclosure should be provided in writing and acknowledged by the buyer before they sign the assignment agreement. Include it in your deal package materials so the buyer sees it early in the process, not as a surprise at the closing table.
Format and Timing
SB 1577 requires the disclosures to be in writing. There is no specific form mandated by the state, but the language must be clear and conspicuous — meaning it cannot be buried in fine print or obscured by other contract language. The disclosure should be easy to find and easy to understand.
The timing requirement is important: disclosures to the seller should be made before or at the time of contract execution, and disclosures to the buyer must be made before the assignment is executed. Providing disclosures after the fact does not satisfy the requirement.
As a best practice, include disclosure language in four places:
- • In the purchase contract itself (assignment clause with disclosure)
- • In a separate standalone disclosure document signed by the seller
- • In the assignment agreement provided to the end buyer
- • In the marketing materials sent to potential buyers
This belt-and-suspenders approach ensures compliance even if one document is overlooked or misplaced.
Marketing Rules for Assignment Deals
How you market an assignment deal in Texas is as important as the disclosures you provide. The rules flow directly from TREC's guidance: if you do not hold title to a property, you should not market it as though you do. Your marketing should accurately represent what you are selling — your contract rights.
Do
- + State that you are selling "contract rights" or "assignment of contract"
- + Include your status as contract holder, not property owner, in all materials
- + Use language like "Assignment available" or "Contract for sale" in subject lines and headers
- + Include the property details (beds, baths, sqft, location) alongside clear assignment language
- + Ensure you have a signed purchase contract before sending any marketing
Don't
- − Advertise as if you own the property ("I'm selling this house" or "My property at...")
- − Use language that implies property ownership when you only hold a contract
- − Market a property before you have a signed purchase contract with the seller
- − Omit disclosure of your role as contract assignor in marketing emails, texts, or listings
- − List the property on the MLS unless you are a licensed agent or have one acting on your behalf
Double close alternative: If you take title to the property through a double close, you ARE the owner at the time of the second sale. In that case, you can market the property as the owner would, because you hold the deed. This is one reason some wholesalers choose double closing despite the additional cost — it simplifies marketing compliance. However, it adds approximately 3% in extra closing costs and is often used primarily to hide the spread from both parties, which creates its own set of transparency issues.
Assignment vs Double Close in Texas
Both assignment and double closing are valid transaction structures in Texas, but they carry different compliance requirements, cost profiles, and transparency implications. Understanding the trade-offs helps you choose the right structure for each deal.
Assignment
You assign your purchase contract to the end buyer. One closing takes place between the original seller and the end buyer. Your assignment fee is paid from closing proceeds and is visible on the closing statement.
- + One set of closing costs (saves ~3%)
- + Faster and simpler to execute
- + No transactional funding required
- → Must comply with SB 1577 disclosure requirements
- → Must market contract rights, not the property
- → Fee is visible to all parties on the HUD
Double Close
You close on the property first (A-to-B), taking title. You then sell the property to the end buyer in a second closing (B-to-C), often the same day. You briefly own the property between the two transactions.
- + You own the property at time of sale — standard sale rules apply
- + Can market the property as the owner
- + SB 1577 assignment disclosures not directly applicable
- − Two sets of closing costs (~3% additional)
- − May require transactional funding (additional cost)
- − Often used to conceal the spread from both parties
From a pure compliance perspective, double closing has fewer disclosure requirements because you own the property at the time of the second sale. From a cost and transparency perspective, assignment is more efficient and more transparent. The right choice depends on the deal specifics, but in a model built on transparency like ours, assignment is the default because there is nothing to hide.
Some deals genuinely work better as double closes — for example, when the seller's contract prohibits assignment, when the spread is large enough that both parties would benefit from privacy, or when the title company has specific requirements. In those cases, we coordinate both closings with full transparency to the deal source, including access to both closing statements.
Important timing distinction: The compliance advantage of a double close only applies if you market the property after taking title. In a simultaneous close — where you market while still under contract to purchase — you hold equitable interest only, the same legal position as an assignment. Your disclosure obligations at the time of marketing may be identical regardless of your intended closing structure. Oklahoma's SB 1075 (effective November 2025) explicitly includes simultaneous double closings in its wholesaling definition. The trend is toward closing this perceived loophole. Structure your compliance around what you hold at the time you market, not what you plan to hold at closing.
Penalties for Non-Compliance
Failing to comply with SB 1577's disclosure requirements or TREC's guidance on marketing equitable interests is not a minor oversight. The potential consequences are significant enough that compliance should be treated as a non-negotiable part of every Texas assignment transaction.
Texas Deceptive Trade Practices Act (DTPA) Violation
Selling or offering to sell an interest in a real property purchase contract without the required disclosures can constitute a violation of the DTPA. The DTPA is one of the strongest consumer protection statutes in the country, and violations carry serious consequences including treble (triple) damages in some cases.
Texas Attorney General Enforcement
The Texas Attorney General has the authority to pursue enforcement actions against individuals or companies who violate the disclosure requirements. This can result in civil penalties, injunctions, and mandatory corrective actions. The AG's office has shown increasing interest in real estate transaction transparency in recent years.
Private Cause of Action
Both the original seller and the end buyer have standing to bring a private civil lawsuit if they were not properly informed about the nature of the transaction. This means if a seller later discovers that their buyer was actually an assignor who never disclosed that fact, the seller can sue for damages. Similarly, a buyer who was not told they were purchasing an assignment rather than property from an owner can take legal action.
Contract Rescission
In the most severe cases, failure to disclose can lead to the assignment or underlying purchase contract being rescinded entirely. This means the deal unwinds — the seller gets the property back, the buyer gets their money back, and the wholesaler loses their fee plus any costs incurred. Rescission is the nuclear option, but it is available to an aggrieved party who was not properly informed.
The practical takeaway: The disclosure requirements under SB 1577 are not burdensome. They require a few additional sentences in your contracts and marketing materials. The cost of compliance is measured in minutes. The cost of non-compliance is measured in lawsuits, lost deals, and reputational damage. There is no good reason to cut corners.
How We Handle It
How Flat Rate Wholesale Handles Texas Compliance
Compliance is built into our disposition process. When you submit a Texas deal, here is what we work to include as part of every transaction.
SB 1577 Disclosures Included
Our process includes the required SB 1577 disclosures in Texas deal packages. We work to include disclosure language in the assignment agreement, in a standalone disclosure document, and in our marketing materials so you do not need to draft these yourself.
Compliant Marketing Language
Our marketing materials for assignment deals always clearly state that we are selling contract rights, not the property itself. Email blasts, deal pages, and buyer communications include the appropriate language identifying the transaction as an assignment of contract. This protects both you and us.
Disclosure Delivery Tracking
We track when disclosures are delivered to both the seller and the buyer, creating a paper trail that protects everyone involved in the transaction. You can see in your dashboard that disclosures were sent, received, and acknowledged.
Built-In Assignment Contracts
Our assignment contracts include built-in disclosure language that satisfies SB 1577 requirements. The contracts clearly identify the assignor as holding equitable interest, disclose the intent to assign, and ensure the end buyer understands the nature of the transaction before signing.
Double Close Coordination When Needed
For deals where a double close makes more sense — whether due to contract restrictions, title company requirements, or deal structure — we coordinate both closings with full transparency to the deal source. You see both sides of the transaction, both closing statements, and every dollar that changes hands.
Why this matters for deal sources: When you work with a disposition partner that handles compliance correctly, you are protected. If disclosures are missed or marketing language is wrong, the liability can flow to everyone involved in the transaction. By working with us, you are not just getting better pricing and transparency — you are getting a process that protects you from regulatory and legal exposure.
Common Questions
Texas Wholesaling Compliance FAQ
Do I need a real estate license to wholesale in Texas?
Not necessarily. Texas does not require a license to assign your own purchase contract. However, if you are marketing the property itself (rather than your contract rights) or acting as a middleman without equitable interest, you may be crossing into activity that requires a license. The safest approach is to always have a signed purchase contract before marketing, and to clearly state that you are selling your contract rights, not the property.
Does SB 1577 apply to double closings?
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 actually purchase the property and take title before reselling it, so you are selling property you own rather than selling contract rights. The disclosure requirements of SB 1577 are aimed at assignment transactions. That said, you should still operate transparently in any transaction structure, and consult with a Texas real estate attorney if you have questions about a specific deal.
What happens if I do not provide the required disclosures?
Failure to provide the disclosures required under SB 1577 can constitute a violation of the Texas Deceptive Trade Practices Act. This means the original seller or end buyer could bring a private cause of action against you, and the Texas Attorney General could pursue enforcement. Potential consequences include civil liability, damages, and the possibility of the contract being rescinded. The disclosures are straightforward to provide, so there is no reason to skip them.
Can I still wholesale in Texas after SB 1577?
Absolutely. SB 1577 did not ban wholesaling in Texas. It added disclosure requirements to assignment transactions to protect sellers and buyers. Wholesalers who were already operating transparently may not have needed to change much. The bill brings the state into alignment with a growing national trend toward requiring disclosure of equitable interest in real estate transactions. Texas remains one of the most active wholesaling markets in the country.
Have a Texas Deal? We Handle the Compliance.
Submit your deal and let us handle the disclosures, marketing language, and documentation. You focus on finding deals — we make sure everything is done right.