Key Takeaways
- Assignment is the simplest structure—one closing, minimal capital, transparent fee.
- Double closes hide fee amounts but require transactional funding and two sets of closing costs.
- The four-step deal analysis framework ensures consistent, reliable deal evaluation.
- Minimum viable spread on residential wholesale deals is typically $10,000.
Wholesaling encompasses several distinct deal structures, each with different legal, financial, and operational implications. This lesson provides frameworks for choosing the right structure based on deal characteristics and introduces the step-by-step workflow for each approach.
The Assignment Framework
The standard assignment is the simplest wholesale structure. The wholesaler executes a purchase contract with the seller using an assignable contract (containing language such as "Buyer and/or Assigns"). After securing the contract, the wholesaler markets the deal to their buyer list, negotiates an assignment fee, and executes an Assignment of Contract Agreement with the end buyer. The end buyer then closes directly with the seller, paying the contract price plus the assignment fee at closing. The title company or closing attorney distributes funds—the seller receives the contract price, and the wholesaler receives the assignment fee. This structure requires no capital beyond the EMD, involves only one closing, and keeps the wholesaler's role transparent.
The Double-Close Framework
A double close (also called a simultaneous close or back-to-back close) involves two separate transactions: the wholesaler buys from the seller (A-to-B closing) and immediately sells to the end buyer (B-to-C closing). This structure is used when the assignment fee is disproportionately large relative to the purchase price, when the seller's contract prohibits assignment, or when the wholesaler wants to keep the fee amount private. Double closes require either transactional funding (short-term lending for hours or days at 1-2% of the loan amount) or using the end buyer's funds to close the first transaction (where state law permits). Double closes involve two sets of closing costs, making them more expensive than assignments.
| Structure | Capital Needed | Closings | Fee Visibility | Best For |
|---|---|---|---|---|
| Assignment | EMD only ($500-$2K) | 1 | Visible to all parties | Standard deals, moderate fees |
| Double Close | Transactional funding | 2 | Hidden from seller/buyer | Large fees, non-assignable contracts |
| Wholesale to Retail | Full purchase price | 2 (delayed) | N/A | When buyer is retail/owner-occupant |
Comparison of wholesale deal structures
The Four-Step Deal Analysis Framework
Every potential wholesale deal should be analyzed using a four-step framework. Step 1: Estimate ARV using at least three comparable sales within 0.5 miles and 90 days. Step 2: Estimate repair costs by walking the property or using per-square-foot estimates ($15-$25/sqft for cosmetic, $40-$65/sqft for moderate, $80-$120/sqft for full gut renovation). Step 3: Calculate MAO using the formula MAO = ARV × 70% − Repairs − Wholesale Fee. Step 4: Evaluate the spread—the difference between your target contract price and the assignment price must leave enough margin for your fee and closing costs. If the spread is less than $10,000 on a residential deal, the deal may not be worth pursuing given the time and effort involved.
Key Takeaways
- ✓Assignment is the simplest structure—one closing, minimal capital, transparent fee.
- ✓Double closes hide fee amounts but require transactional funding and two sets of closing costs.
- ✓The four-step deal analysis framework ensures consistent, reliable deal evaluation.
- ✓Minimum viable spread on residential wholesale deals is typically $10,000.
Sources
- RSMeans/Gordian — Construction Cost Data(2025-01-15)
- NAHB — Cost of Construction Survey(2025-01-15)
Common Mistakes to Avoid
Using only per-square-foot estimates without considering specific property conditions
Consequence: Repair estimates can be off by 30-50%, making deals unprofitable for end buyers
Correction: Use per-sqft as a quick screen, then perform component-based estimation for serious deals.
Choosing a double close without understanding the additional closing costs
Consequence: Two sets of closing costs reduce the effective assignment fee by $2,000-$5,000
Correction: Factor in double closing costs when deciding between assignment and double close structures.
Test Your Knowledge
1.What is the minimum viable spread for a residential wholesale deal?
2.What per-square-foot range represents a moderate rehab estimate?
3.How many steps are in the deal analysis framework?