When a wholesaler signs a contract with a seller, the wholesaler has to leave a deposit to the seller.
Later, when the wholesaler ASSIGNS the contract to the end buyer, the buyer pays the wholesaler an assignment fee, to take over the contract.

Now that the wholesaler is out of the transaction, legally, how does the wholesaler get his deposit back?
1. If the deposit equals to the assignment fee, no problem.
2. What if the deposit is larger than the assignment fee.
3. What if the buyer doesn't close, for any reason, and the time for escape clauses has passed. In this case the seller is in his right to keep the wholesaler's deposit. And the wholesaler loses, EVEN THOUGH he is legally out of the transaction.

I would appreciate the answer.

Most would consider it foolish to ever consider placing Escrow funds with the seller.... it is always a realllllllly bad idea. Escrow funds should always be placed in an Escrow Account of a Real Estate Company, Closing company or Attorney... NEVER with the seller. Each of the recommended placement points had state mandated standards on how to handle the funds and are responsible for them... the Seller has none... they could go out and buy a boat then they would have no money to refund if the deal fell through and other problems in accounting could occur even if the deal did go through...

Just Never do it.

To "Realty Check":
The core of the question was NOT whether the deposit was left physically with the original seller, or escrow, or even attorney. By saying "seller" I meant it versus "buyer". Of course it is left with the escrow or attorney.
The emphasis was on what to do if the end buyer, who bought from the wholesaler, NOT FROM THE ORIGINAL SELLER, would not close. In this case the original seller is probably entitled to the deposit, because, as he is concerned, it was the wholesaler's fault. After all, his deal was with the wholesaler. Any opinion, anybody?

Depends on the wording of the contract. Many state's approved REALTOR contracts have the specific language about disposition of escrow depending on what the cause of non- closing was. If failure to close was covered by the contract such as a clause for financing... then the buyer who placed the funds in escrow would normally get them returned. If they simply walked away for no reason then the seller may have a claim on funds. These are all covered subjects in the basic real estate license course... pull it and re read the chapters... if you're not a licensed agent... then you are probably in violation of the law if you are not a primary to the sale. While you may get away with it once or twice... try making a business of it and you will probably have problems of the larger kind.