Understanding Daisy Chains in Real Estate Wholesale Deals
What is Real Estate Wholesale?
Before we dive into daisy chains in real estate, it helps to understand real estate (RE) wholesaling.
In wholesaling, an investor (the wholesaler) enters a contract to purchase a property and then assigns that contract to another buyer, usually a cash investor, for a fee.
The wholesaler typically does not close on the property themselves—their role is to connect motivated sellers with buyers and earn a profit for facilitating the deal.
It’s important to note that wholesalers are not inherently real estate agents, although some agents do wholesale. The key difference is that wholesaling focuses on contract assignments and deal facilitation, not listing properties or earning commissions through traditional brokerage services.
The Daisy Chain Concept
A daisy chain in wholesale real estate is a sequence where a property contract gets assigned multiple times before reaching the end buyer. Think of it like linking daisies together: the longer the chain, the more complex and risky it becomes.
Example of a Long Daisy Chain:
Seller → Investor A → Investor B → Investor C → End Buyer
Each link may involve assignment fees, communication gaps, and potential ethical issues.
Example of a Short (Safer) Chain:
Seller → Wholesaler → Investor (End Buyer)
Short chains are simpler, more transparent, and generally considered ethical.
When Daisy Chains Are Acceptable
Some daisy chains might be okay (or increase their likeliness) if:
- The chain is short (1–2 assignments max).
- All parties are fully aware of who owns the contract.
- Everyone adds value to the transaction, not just flipping it for extra fees.
- The deal is legally compliant, and contracts allow assignments.
When Daisy Chains Are Problematic
Long, opaque chains can create:
- Inflated costs due to stacked assignment fees.
- Confusion or disputes over ownership of the contract.
- Ethical or legal risks, especially if sellers or end buyers are unaware of multiple assignments.
Bottom Line for Wholesalers and Investors
Keep it short and transparent: Ideally, assign a contract directly from the seller to the investor.
Avoid speculative flipping: Each assignment should add real value.
Communicate openly: Make sure everyone in the chain understands their role and fees.
By following these guidelines, you can operate ethically, protect all parties, and keep your wholesale deals smooth and profitable—without getting tangled in long daisy chains.
The best time to invest in Texas real estate was five years ago. The second-best time is today.
Contact Lauren Byington
Hill Country Real Estate Specialist
📧 lauren@hillcountryinsider.com
📱 830-556-1091
🌐 HillCountryInsider.com
Disclaimer: The information provided is for educational and general informational purposes only and should not be construed as financial, legal, or tax advice. Real estate markets, lending guidelines, and property values can change rapidly, and past performance is not indicative of future results. All figures, examples, and projections are estimates only. Investors and buyers should independently verify all information and conduct thorough due diligence, including but not limited to: professional inspections, contractor evaluations, surveys, appraisals, title research, and consultation with qualified legal, tax, and financial professionals. Local regulations, zoning, municipal services, and property tax rates may change based on state or local government decisions and can materially affect property performance. You are solely responsible for all investment decisions and outcomes.
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