Key Takeaways
- "And/or assigns" clauses are legally valid but do not prevent seller disputes or title company refusal.
- Double closings with transactional funding provide a reliable alternative when assignments are blocked.
- Transactional funding costs (1-3%) should be budgeted as a contingency in every wholesale deal analysis.
- Ethical obligations when working with distressed or elderly sellers require thorough documentation of informed consent.
This case study follows a wholesaler through a transaction that encounters legal challenges — a seller's attorney contesting the assignment, a title company refusing to close, and the pivot to a double closing with transactional funding. The scenario illustrates the real-world complications that arise when wholesale transactions move from theory to practice.
The Deal and the Dispute
Jake, an experienced wholesaler operating in a mid-size Southeastern market, identifies a distressed property through direct mail — a 3BR/2BA ranch home owned by an elderly couple relocating to assisted living. The property needs approximately $30,000 in updates (kitchen, bathrooms, flooring, paint) and is valued at $205,000-$215,000 in renovated condition based on comparable sales. Jake contracts the property at $150,000 with a 30-day closing, $3,000 earnest money, and an "and/or assigns" clause in the buyer name line.
Jake markets the property to his buyer list and secures an end buyer — a fix-and-flip investor — at $175,000, yielding a $25,000 assignment fee. Jake prepares the Assignment of Contract and submits it to the title company. On day 18, the sellers' adult daughter (who holds their power of attorney) retains an attorney who sends a letter objecting to the assignment. The attorney argues that: (1) the elderly sellers did not understand the assignment clause, (2) the $25,000 assignment fee is "unconscionable" given the sellers' situation, and (3) the transaction should be voided due to potential elder exploitation.
Jake's contract is legally valid — the "and/or assigns" clause was clearly printed in the buyer name field, and both sellers signed with proper capacity (confirmed by the notary). However, the title company, facing potential litigation risk, sends notice that it will not insure the transaction with the disputed assignment. Without title insurance, neither the end buyer's lender nor the end buyer will proceed.
The Pivot: Double Closing with Transactional Funding
Jake's attorney advises that while the assignment contract is legally enforceable, litigating the seller's attorney's objection would take months and cost $10,000-$15,000 in legal fees — far exceeding the practical benefit. Instead, Jake pivots to a double closing strategy that eliminates the assignment entirely.
Jake secures transactional funding for $150,000 (the A→B purchase price) at a cost of 2% ($3,000) for same-day turnaround. He uses a different title company that specializes in investor transactions and has no objection to same-day double closings. On closing day, the A→B transaction closes first: Jake purchases the property from the sellers at $150,000 using the transactional funding. Two hours later, the B→C transaction closes: Jake sells to the end buyer at $175,000. The transactional loan is repaid from the B→C proceeds.
Jake's revised economics: Gross assignment fee equivalent: $25,000. Less transactional funding cost: $3,000 (2%). Less additional closing costs (two HUDs): $2,400. Less attorney fees for dispute: $1,200. Net profit: $18,400. While lower than the original $25,000 assignment fee, the double closing resolved the dispute, preserved the deal, and established a replicable process for future transactions where assignment faces resistance.
Key lessons from the case: (1) "And/or assigns" clauses do not guarantee smooth assignments — seller resistance and title company refusal are real risks. (2) Double closings provide a reliable backup when assignments are blocked. (3) Transactional funding costs (1-3%) are a reasonable insurance policy against assignment complications. (4) Working with distressed or elderly sellers requires extra attention to ethical obligations and documentation of informed consent.
Watch Out For
Relying solely on assignment as a wholesale exit strategy without a backup plan for double closing.
When sellers, their attorneys, or title companies object to assignments (which happens more frequently than beginners expect), the wholesaler has no alternative and may lose both the deal and their earnest money.
Fix: Always prepare for a double closing as a backup: identify a transactional funding source, establish relationships with investor-friendly title companies, and budget the additional 1-3% transactional cost in your deal analysis.
Failing to document informed consent when contracting with distressed or elderly sellers.
Lack of documentation opens the door to elder exploitation claims, contract voidability arguments, and potential legal liability that far exceeds the deal's profit potential.
Fix: Use a third-party notary, ensure the seller has independent legal counsel (or documented opportunity to obtain it), clearly explain the "and/or assigns" clause in plain language, and keep detailed records of all communications and disclosures.
Key Takeaways
- ✓"And/or assigns" clauses are legally valid but do not prevent seller disputes or title company refusal.
- ✓Double closings with transactional funding provide a reliable alternative when assignments are blocked.
- ✓Transactional funding costs (1-3%) should be budgeted as a contingency in every wholesale deal analysis.
- ✓Ethical obligations when working with distressed or elderly sellers require thorough documentation of informed consent.
Sources
- NAR — Wholesaling and Assignment of Contract Issues(2025-01-15)
- ALTA — Title Insurance Claims and Coverage(2025-01-15)
Common Mistakes to Avoid
Relying solely on assignment as a wholesale exit strategy without a backup plan for double closing.
Consequence: When sellers, their attorneys, or title companies object to assignments (which happens more frequently than beginners expect), the wholesaler has no alternative and may lose both the deal and their earnest money.
Correction: Always prepare for a double closing as a backup: identify a transactional funding source, establish relationships with investor-friendly title companies, and budget the additional 1-3% transactional cost in your deal analysis.
Failing to document informed consent when contracting with distressed or elderly sellers.
Consequence: Lack of documentation opens the door to elder exploitation claims, contract voidability arguments, and potential legal liability that far exceeds the deal's profit potential.
Correction: Use a third-party notary, ensure the seller has independent legal counsel (or documented opportunity to obtain it), clearly explain the "and/or assigns" clause in plain language, and keep detailed records of all communications and disclosures.
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Test Your Knowledge
1.In the Jake case study, why did the title company refuse to insure the assignment transaction?
2.What was Jake's net profit after pivoting from assignment to double closing?
3.What is the typical cost of transactional funding for a same-day double closing?