Assigning a Real Estate Contract in Tennessee: Wholesaling, Disclosure, and Licensing Risk

In a typical wholesale deal, an investor signs a contract to buy a property and, before closing, assigns that contract to an end buyer who pays the investor a fee and closes with the seller. Assigning a purchase contract is, in general, an ordinary contract transfer under Tennessee law. What changed in 2025 is that Tennessee now regulates wholesaling directly, with disclosure rules that sit alongside, but do not resolve, the older question of when this activity requires a real estate license.

What the law calls wholesaling

In 2025 the General Assembly added a new part to the chapter on contracts to convey real property (2025 Tenn. Pub. Acts ch. 72, codified at Tenn. Code Ann. § 66-4-401 et seq.). It took effect upon becoming law.

• Equitable interest: the buyer's right to benefit or profit from real property after signing a purchase contract with the seller, but before legal title passes to the buyer (§ 66-4-401).
• Wholesaling: a buyer under contract wholesales the property when it assigns its equitable interest to a later purchaser for a higher price than the buyer paid (§ 66-4-402).

The definition is built around assignment. A deal in which the investor takes title first and then resells, often called a double closing, is a different structure, and the statute does not say whether it reaches that kind of transaction.

The disclosure requirements

A buyer under contract may wholesale the property if it discloses the following in writing (§ 66-4-403(a)(1)):

1. To a potential subsequent purchaser or assignee: the nature of the buyer's equitable interest in the property.
2. To the seller: the buyer's intent to market its equitable interest, before the contract is signed.
3. To the seller: the effective date of any assignment, at least three business days before that date, if the contract allows assignment.

The disclosures must be in bold, large font print and included in the written agreement (§ 66-4-403(a)(2)). An action for a violation must be commenced within two years after the purchase contract is signed (§ 66-4-403(b)), and the part applies only to transactions involving real property (§ 66-4-403(c)).

The part is new, and the text leaves real questions open. It does not define "large font." It is also not entirely clear which "written agreement" must contain the disclosures, or how a notice given days before an assignment can be "included in" an agreement signed earlier. It sets a deadline for an action but does not spell out the remedy or who may sue. It does not say whether a contract signed without the disclosures can be enforced or undone. And its phrase "if the contract allows for such assignment" suggests that the statute does not override the seller's contract; it appears to assume assignment is permitted there.

The licensing question

Tennessee's broker licensing act defines a broker as a person who, for a fee or other valuable consideration, or expecting one from another, solicits or negotiates, or attempts to solicit or negotiate, the sale or purchase of real estate, or who advertises or holds out as doing so (Tenn. Code Ann. § 62-13-102(4)(A)). "Real estate" includes any interest or estate in land (§ 62-13-102(14)). A person who performs even a single such act for another, expecting compensation, is treated as a broker (§ 62-13-103). The Tennessee Supreme Court has described the act as drafted broadly to maximize its deterrent effect (Business Brokerage Centre v. Dixon, Tenn. 1994).

The act does not apply to an owner of real estate with respect to property the owner owns or leases (§ 62-13-104(a)(1)(A)). A wholesaler's position is that it markets its own contract rights, not someone else's property. The opposing view is that marketing a house the wholesaler does not own, to the public, for a fee, looks like brokerage activity. The 2025 wholesaling law amended Title 66, not the licensing act, and it does not say that a wholesaler who makes the disclosures is exempt from licensing. The broker definition itself has not been amended to address wholesaling. How these provisions fit together is not settled in Tennessee.

The stakes are real if the activity is brokerage:

• Acting as a broker without a license is unlawful (§ 62-13-301) and is a Class B misdemeanor (§ 62-13-110(a)), which carries up to six months in jail, a fine of up to $500, or both (Tenn. Code Ann. § 40-35-111).
• An unlicensed person who received a fee or profit from the violation is also liable for a penalty of at least the amount received and up to three times that amount, recoverable by any person aggrieved (§ 62-13-110(b)).
• An unlicensed person cannot sue to collect compensation for acts that require a license (§ 62-13-105).
• The Real Estate Commission can ask a circuit or chancery court to enjoin a violation, whether or not the person holds a license (§ 62-13-109).

A more cautious posture follows from the statutes themselves. Market the contract or the equitable interest as exactly that, not the property as if you own it, make the disclosures the 2025 law requires, and do not take a fee from the seller or the end buyer for bringing the two together.

Anti-assignment and consent clauses

Contract rights are generally assignable. In Tennessee, a claim arising from a contract can be assigned unless it is purely personal in nature, and the Court of Appeals applied that rule in a case that began when a buyer assigned his land purchase contract to a limited liability company owned by him and his wife, which then closed the purchase; the court held that the company's later claims over an undisclosed landfill on the property were validly assigned to a second company (Denley Rentals, LLC v. Etheridge, Tenn. Ct. App. 2001). But the contract controls. A clause that prohibits assignment, or that requires the seller's consent, has to be dealt with before the contract is marketed.

When a contract allows assignment only with consent and is silent on the standard for withholding it, the Tennessee Supreme Court has held that the implied covenant of good faith and fair dealing applies: consent must be decided in good faith and in a commercially reasonable manner (Dick Broadcasting Co. v. Oak Ridge FM, Inc., Tenn. 2013). The court also recognized that parties can agree to a different standard, such as consent in one party's sole discretion, but they must say so explicitly. The case involved a right of first refusal on radio station assets, not land, but the rule is one of general contract law, and the exact words of the clause matter.

What the end buyer actually takes

After an effective assignment, the assignee stands in the shoes of the assignor and has all of its rights and is subject to all of its obligations (Collier v. Greenbrier Developers, LLC, Tenn. Ct. App. 2009). For an end buyer, that means the original contract's closing date, inspection and financing deadlines, and earnest money terms all carry over. An end buyer who has not read the original contract does not know what it bought. The court in Collier also relied on authority that a person who assigns a right for value generally gives implied warranties, including that the right actually exists as assigned and that the assignor will do nothing to defeat or impair it.

Practical points for the end buyer:

• Get the full original contract, every amendment, and any disclosures the seller signed.
• Confirm whether the contract permits assignment and whether any required consent was obtained.
• Know where your money goes: who holds the original earnest money, whether your deposit is held in escrow or paid to the wholesaler, and what happens to the assignment fee if the seller does not close.
• Check your financing. A mortgage insured by FHA requires that the property be purchased from the owner of record, and the transaction may not involve any sale or assignment of the sales contract. If the resale contract is signed 90 days or less after the seller acquired the property, the property is not eligible for FHA insurance, subject to limited listed exceptions (24 C.F.R. § 203.37a). An FHA end buyer generally cannot close on an assigned contract, and a quick double closing can run into the 90-day rule.

For sellers who signed with a wholesaler

A seller can use the 2025 law as a checklist. Did the buyer disclose, before the contract was signed, that it intended to market its interest? Is that disclosure in bold, large print in the agreement? Did the seller receive written notice of the assignment's effective date at least three business days ahead? Remember the two-year deadline for any action under the statute, measured from the date the contract was signed (§ 66-4-403).

Watch the public record, too. Agreements for the conveyance of real estate may be registered with the register of deeds (Tenn. Code Ann. § 66-24-101), and a registered instrument is notice to all the world from the time it is noted for registration (§ 66-26-102). Some buyers record a memorandum of contract or an affidavit of interest for exactly that reason. Since April 27, 2026, a contract, memorandum, abstract, or affidavit for the sale of real property must carry the authenticated signatures of the owner and the proposed purchaser and state its expiration date by day, month, and year, and an affidavit generally must be sworn before a notary public, to be registered (2026 Tenn. Pub. Acts ch. 865). Once the contract ends, though, that recorded document can cloud the seller's title and stall a sale to someone else. See how title defects get fixed in Tennessee.

A false recorded claim can support a slander of title action, which requires an interest in the property, a false statement about the title published maliciously, and a financial loss caused by it (F.W. White & Associates, LLC v. Chilton, Tenn. Ct. App. 2024). That case involved a recorded memorandum of contract asserting an interest in the property, and it shows the limit: a good-faith but mistaken claim is not enough, and the court there upheld the finding that the party who had the document recorded had not acted maliciously.

If a seller was misled about who the buyer was, what the property was worth, or whether the buyer could close, the usual fraud and misrepresentation rules apply. See real estate fraud and misrepresentation in Tennessee. The Tennessee Consumer Protection Act may also be raised, but a private claim under it must fit one of the specific practices listed in § 47-18-104(b) (Tenn. Code Ann. § 47-18-109(a)(1)), and how the Act applies to a seller's dealings with a wholesaler is not settled.

Every assignment turns on the original contract, the assignment documents, and the disclosures. If you are wholesaling, buying an assigned contract, or selling to a wholesaler in Middle Tennessee, my office can review the contract and the assignment before it closes.

Educational disclaimer: This article provides general Tennessee educational information only and is not legal advice for any specific contract or transaction.