Short version: plenty of flip deals come from wholesalers, who put a property under contract and then sell you their position instead of the property itself. Financing one of these with a fix and flip loan is completely doable, but the paperwork is different from a normal purchase, and the two ways it gets done, an assignment or a double close, change what the lender sees and what you pay. Get the structure right and the wholesale deal funds like any other flip. Get it wrong, or spring it on the lender at the last minute, and the assignment fee or the double-close mechanics can stall your closing.
We are a Pittsburgh-based mortgage brokerage, NMLS #1840537, and we finance fix and flip and bridge loans for real estate investors across Pennsylvania and additional states. A lot of good rehab inventory moves through wholesalers, and the investors who buy it cleanly are the ones who understand how the financing has to be structured before they get to the closing table. Here is how a fix and flip loan works on a wholesale deal, both ways it can be papered, and what it costs.
What a wholesale deal actually is
A wholesaler is a middleman. They find a motivated seller, put the property under a purchase contract at a low price, and then sell that contract, or the property, to an end buyer like you at a markup. The difference between the price the wholesaler locked with the seller and the price you pay is the wholesaler’s fee, and it is the whole point of the transaction for them. You are buying a property you did not source, at a price above what the seller originally agreed to, and the extra is the cost of the wholesaler having found the deal.
None of that is a problem for a fix and flip loan by itself. The lender is financing a property you are buying to renovate and resell, which is exactly what a fix and flip loan is for. What the lender cares about is the after-repair value, the as-is value, the rehab budget, and your purchase price, the same inputs on any flip. The wrinkle is purely structural, it is about how your name ends up on the deed and how the wholesaler gets paid, and there are two ways to do it.
Structure one, the assignment of contract
In an assignment, the wholesaler does not buy the property at all. They assign their purchase contract to you, and you step into their shoes and close directly with the original seller. You pay the seller the contract price, and you pay the wholesaler a separate assignment fee for handing you the contract. There is one closing, one deed, and it goes straight from the seller to you.
For a fix and flip loan, the assignment is usually the cleaner structure, because you are the direct buyer of record and the lender is financing a straightforward purchase. The thing the lender has to account for is the assignment fee. Say the wholesaler locked the property at one hundred twenty thousand dollars and is assigning it to you with a fifteen thousand dollar assignment fee. Your all-in acquisition cost is one hundred thirty-five thousand dollars, but the deed reflects the one hundred twenty thousand dollar contract price plus a separately documented fee. Lenders differ on how they treat that fee. Some base the loan on the total acquisition cost including the fee, some base it only on the contract price and make you cover the fee in cash, and some cap how large an assignment fee they will recognize. That treatment directly changes your day-one cash, so it is the first thing to nail down.
Structure two, the double close
In a double close, there are two separate transactions back to back. The wholesaler actually buys the property from the seller, the A-to-B closing, and then immediately sells it to you, the B-to-C closing, often on the same day at the same title company. The wholesaler’s profit is the spread between the two prices, and because they took title, even for a moment, there is no assignment fee shown on your side, just a purchase price that already includes the markup.
Double closes are used when the wholesaler does not want the assignment fee disclosed, or when the original contract prohibits assignment. For your fix and flip loan, the double close is a little more involved, because your purchase, the B-to-C leg, has to fund, and the wholesaler often needs the A-to-B leg funded too. Historically wholesalers used transactional funding or their own cash to cover the first leg, but the key point for you is that your lender is financing the B-to-C purchase at your contract price, which already bakes in the wholesaler’s spread. As long as your purchase price supports the deal against the after-repair value, the double close finances cleanly, but you must tell your lender it is a double close up front, because some lenders restrict or price these differently, and a surprise at closing is how deals die.
The math that decides whether the wholesale deal works
The wholesaler’s fee is real money on top of your purchase, so it has to survive the same screen any flip does. Take the deal above, an after-repair value of two hundred thousand dollars, a contract price of one hundred twenty thousand dollars, a fifteen thousand dollar wholesale fee, and a fifty thousand dollar rehab. Run it through the seventy percent screen. Seventy percent of the two hundred thousand dollar after-repair value is one hundred forty thousand dollars, minus the fifty thousand dollar rehab, leaves a maximum allowable offer of ninety thousand dollars. Your all-in acquisition is one hundred thirty-five thousand dollars, well above that ninety thousand dollar ceiling, which tells you this particular wholesale deal is priced too high to flip profitably.
Now flip the numbers to a deal that works. Same two hundred thousand dollar after-repair value and fifty thousand dollar rehab, but a contract price of seventy thousand dollars and a ten thousand dollar wholesale fee, for an eighty thousand dollar all-in acquisition. That lands under the ninety thousand dollar ceiling with room to spare. The lesson is that the wholesale fee is not free money for the wholesaler, it comes straight out of your margin, and you have to run the deal at your true all-in cost including the fee, not at the contract price the wholesaler quotes you. The seventy percent rule is the fast filter, and our guide to the seventy percent rule for fix and flips shows exactly how to set the ceiling.
What the lender will want to see
On any wholesale deal, expect the lender to want the assignment agreement or the two purchase contracts, clear documentation of the wholesale fee or the double-close spread, and an appraisal establishing the after-repair value, because the lender is sizing the loan off that number regardless of what you paid. The appraisal is the check on an inflated purchase, if the wholesaler’s markup pushes your price above what the finished house supports, the appraised value will show it and the loan will be sized down. Because the loan proceeds fund the purchase and the rehab draws while you carry the interest, budget for the financing carry too, which our guide to interest reserves on fix and flip loans lays out. And the total closing cost on a wholesale purchase includes the normal flip closing costs on top of the fee, which our guide to fix and flip closing costs itemizes.
Structuring it through your entity
Most investors take title to a wholesale flip in an LLC rather than their own name, which keeps the flip inside the business and simplifies how the loan is written. The assignment or the B-to-C contract should name your entity as the buyer, and the fix and flip loan is written to the entity. The mechanics of financing a flip through an LLC do not change because the deal came from a wholesaler, but they do add a step at closing, and our guide to fix and flip loans for LLCs covers how the entity, the operating agreement, and the personal guaranty fit together. Get the entity named correctly on the assignment from the start, because fixing the buyer name late is one more thing that can slow a wholesale closing.
Read the offer the lender sends back
Once the lender has your wholesale deal, the term sheet is where the structure shows up, the purchase price it recognizes, whether it counted the assignment fee, the loan amount against the after-repair value, and the rehab holdback. Read it against your all-in cost, because the gap between what the lender finances and what you actually owe, contract price plus fee plus closing costs, is the cash you bring day one. Our guide to how to read a fix and flip loan term sheet walks through every line, and it is worth reading before you commit to a wholesale deal, because that document tells you whether the numbers the wholesaler pitched actually hold up once a lender underwrites them. Run your version on our deal calculator first.
Where FMC fits
Part of our job is telling you, before you commit to a wholesaler’s deal, whether the price plus the fee leaves room to flip, and structuring the financing so the assignment or double close funds cleanly instead of stalling at the table. We finance fix and flip and bridge loans for investors across Pennsylvania and additional states, and we are a Pittsburgh-based brokerage serving that whole footprint. Send us the deal through our contact page or call 412-990-2941, see the terms on our fix and flip and bridge loan product page, and run the numbers on our deal calculator.
FMC Capital is a Pittsburgh-based mortgage brokerage, NMLS #1840537, serving real estate investors across Pennsylvania and additional states. This article is for educational purposes only and is not a commitment to lend, an offer of credit, or financial advice. Loan terms, treatment of assignment fees, after-repair-value and loan-to-cost limits, and closing structure vary by lender, property, borrower, and market, and are subject to change.