Wholesaling in Texas: When You Need a License and What You Must Disclose

What does wholesaling mean in Texas law?

People use the word wholesaling for a simple move. An investor signs a contract to buy a house, then sells that contract, or an option to buy, to someone else before closing. The investor never takes title. The profit is the gap between the two prices.

Texas law does not use the word wholesaling in the rule itself. It talks about an equitable interest. That is the right you hold under a purchase contract or an option, before you own the property. Texas Occupations Code section 1101.0045 and TREC rule 535.6 are the two places to read.

This guide explains those rules in plain words. It is education only, not legal, tax or financial advice. Confirm licensing rules with TREC, and ask a Texas attorney about your own contract.

When can someone wholesale without a license?

Both the statute and the TREC rule give the same two conditions. A person may acquire an option or enter a contract to buy real property, and then sell it or assign it, without a license if both of these are true.

• The person does not use the option or contract to engage in real estate brokerage.
• The person discloses the nature of the equitable interest in writing to any seller or potential buyer.

What happens if you do not disclose?

Rule 535.6 and the statute say the same thing. Selling an option or assigning a contract interest without the required written disclosure counts as engaging in real estate brokerage. Brokerage is the activity Texas reserves for license holders.

So the disclosure is not a courtesy. It is the line between a lawful sale of your own contract and unlicensed activity. The sections do not list a penalty amount. The stated result is that the conduct is brokerage. Consequences beyond that are a question for TREC or an attorney.

When did the written disclosure rule change?

Senate Bill 1577 changed the rule. The Act takes effect January 1, 2024, and it requires the disclosure in writing. TREC repeated this in its November 8, 2023 news article, which says that starting January 1, 2024, a person who engages in wholesaling must disclose in writing the nature of the equitable interest.

The same bill moved an older disclosure to Property Code section 5.0205. Before entering a contract to sell an option or assign an interest in a contract, the person must disclose in writing to two people. One is any potential buyer. That notice says the person is selling only an option or a contract interest and does not have legal title. The other is the owner of the property. That notice says the person intends to sell an option or assign an interest in the contract.

Read the current text yourself before you rely on this summary. Laws change, and this page shows what we read on the dates listed in the sources.

What does the disclosure need to say?

Rule 535.6 does not give exact wording for people without a license. It asks for the nature of the equitable interest. For license holders, it names two points to state. Those two points are a good checklist for anyone.

• That you are selling an option or assigning an interest in a contract.
• That you do not have legal title to the property.
• Which contract or option you hold, so there is no confusion about what is being sold.
• That the notice is given in writing, before the other side commits.

Does having a license change the rules?

Yes. A license holder who sells an option or assigns a contract has to give the same written disclosure when acting on their own behalf. The rule also covers a license holder acting in a capacity described in rule 535.144(a), which includes acquiring or disposing of their own property or property of a spouse, parent or child.

TREC has a related FAQ. A license holder who deals in property in their own name must give the other party written notice of the license before entering a contract, including a lease. TREC says this applies even when the license is inactive. The rule also says a license holder must not use their expertise to the disadvantage of the person they deal with.

This is one reason some investors decide to get licensed. It does not remove the duty to disclose. It adds duties that come with the license.

What does a compliant wholesale look like step by step?

This is a planning outline built from the rule text. It is not legal advice, and a Texas attorney should read your actual contract.

• Sign a purchase contract or option with the owner. Make sure it lets you assign it or sell it.
• Before you sign, give the owner written notice that you intend to sell an option or assign the contract.
• When you offer the deal to a buyer, give written notice that you hold only an option or contract interest and do not have legal title.
• Describe the equitable interest in the same document, in plain words.
• Keep copies of every notice and the date each one went out.
• Do not market yourself as a broker, and do not arrange deals for other people as a business.
• Let a title company and an attorney review the paperwork before closing.

What are common mistakes?

Most problems come from treating the notice as optional or oral.

• Telling the buyer by phone and never putting it in writing.
• Calling yourself the owner in ads or messages when you hold only a contract.
• Skipping the notice to the property owner.
• Doing this as a regular business for other people and calling it wholesaling.
• Assuming an old checklist still works after the January 1, 2024 change.

How do four examples compare?

These are made-up examples to show the idea. They are not real people or deals.

Should an investor get a license instead?

That is a personal choice. A license lets you represent others for pay. It also brings TREC rules, continuing education and duties to clients. A license does not replace the written disclosure.

If you wholesale only your own contracts and follow the two conditions, the rules let you do it without a license. If you want to help other owners or buyers for pay, you are moving toward brokerage. See our guide on how to get a Texas real estate license and the license requirements.

What should agents watch for when a client mentions a wholesaler?

Agents meet wholesalers often. The buyer may be dealing with someone who holds only a contract. Ask who holds title. Ask to see the written disclosure. If it is missing, say so to your broker before you go further.

Also remember your own advertising rules. Our guide on TREC advertising rules for new agents covers how to name your broker, and what TREC is explains who sets the rules.

How does this connect to choosing a brokerage?

Agents who also invest should tell their broker. Telling your broker about deals you do in your own name keeps everyone clear on what is brokerage activity and what is not. Our guide on how to choose a brokerage in Texas lists questions to ask.

The Bauer Group is a Frisco brokerage that welcomes licensed DFW agents. You can start the conversation on the join page. Opportunities are earned, not guaranteed.

Education only, not legal, tax or financial advice. Confirm licensing rules with TREC.