what does assignment of contract mean in real estate

What Is An Assignment Of Contract In Real Estate?

An assignment of contract is when one party (the “assignor”) has a contract to which they have certain obligations, and transfers those contractual rights to another party (known as the “assignee”).

In real estate, assigning contracts is an effective strategy to achieve an extremely high return on investment (ROI) for as little capital and risk as possible.

Click below and jump to your section of choice on the assignment of the contract:

What Is An Assignment In Real Estate?

How does assignment of contract work, is it legal to assign a real estate contract, why use a real estate assignment contract, what is an assignment fee in real estate, how to assign a contract in real estate.

• Assignment Of Contract Template

Assignment of Contract vs. Double Closing

Assignment of contract: pros & cons, common misconceptions about assigning real estate contracts.

An assignment of contract in real estate is when the original party who has a piece of real estate transfers their contractual obligations to that of a new party.

Assigning real estate contracts is a common way to “flip” real estate without having to come out of your pocket with any capital. Utilizing a real estate assignment contract to profit is also known as wholesaling houses , flipping contracts, selling contracts, and real estate day trading.

What Is Assignment Of Contract In Real Estate?

The real estate assignment contract is also known as the assignment of purchase and sale agreement. This is a separate legal document from the original contract. The real estate assignment contract has the terms of the assignment, such as who is the assignor/assignee, when the payment is taking place, and real estate closing terms.

What Is An Assignment Clause In Real Estate?

A real estate assignment clause is a legally binding service that offers a contracting party the right to assign responsibility or transfer ownership to another contracting party of choice. Some contracts have a real estate contract assignment clause built into them. Below is an example:

“Assignment of Contract: The parties to this Contract mutually agree that it is binding upon them, their heirs, executors, administrators, personal representatives, successors, and assigns. All parties agree that this Contract is assignable to any party for a profit.”

It is also a common practice for the original buyer of a contract to put “and/or assigns” next to their name. In addition to the real estate assignment clause, “and/or assigns” will make it even more clear that the contract may be assigned.

The assignment of contract is a straightforward method where an investor transfers their rights in a property contract to a buyer, profiting from the difference between their purchase price and the selling price. Essentially, this process involves securing a property under contract and then assigning that contract to an end buyer. Below are 6 simple steps on how to assign a real estate contract:

• Find the right investment property for sale: Begin by researching and identifying potential properties that offer good investment returns, ideally below market value.
• Obtain the contract: Once you've found a suitable property, negotiate and enter into a purchase agreement with the seller, ensuring the contract allows for assignment.
• Submit the contract: Ensure all the details of the contract are accurate and submit it as per local regulations or to relevant parties such as title companies or attorneys.
• Discover an end buyer: Using your network or marketing strategies, identify an end buyer interested in purchasing the property.
• Assign the contract: Draft an assignment agreement, clearly transferring your rights in the initial contract to the end buyer, with a clear mention of the assignment fee.
• Get paid: Once the end buyer completes the purchase, you'll receive your assignment fee, marking a successful contract assignment.

Read Also: Wholesale Contracts In Real Estate (2024): FREE PDF & Template

The biggest reason to use a real estate assignment contract is you can profit from a piece of real estate by solely transferring your contract rights. This process is called “wholesaling,” and is a great way to flip real estate while lowering your risk and using as little money as possible .

Many people see the house flipping shows  where investors buy, fix, and sell houses. This entire process can take months, and even longer than a year to effectively renovate and resell a property. 

Additionally, when you buy a property there is always risk that comes with it. Most real estate investors raise money and invest other people’s money into their real estate deals in order to work on multiple projects at one time. When a fix & flipper borrows this capital, there is usually an interest rate along with it.

What this means is, that every day a fix & flipper has a house that they have bought and are renovating is another day that they will pay more interest on the money they’ve borrowed.

When a real estate assignment contract is used where the goal is to wholesale    (“assignment of contract”) the property, then you virtually eliminate any risk. This is because you are assigning all contractual obligations to the new buyer of the property.

Yes, it is legal to assign real estate contracts. However, there are situations when assignments will not be enforced, such as:

• Solution: Get written consent from all parties.
• Solution: Modify the contract with the permission of all involved parties. If the parties involved are okay with it, then you can modify the contract from being non-assignable to assignable.
• Solution: Close the property and sell it after the restriction is over. Back out of the property if you have the appropriate contingencies. 

All in all, it is legal to assign real estate contracts . In fact, all contracts are assignable by default, unless specifically stated otherwise within the agreement. As with anything having to do with contracts, it is extremely important to read the contract you will be signing with any seller of a property.

It’s recommended you use a real estate attorney to review the agreement you plan on using for your real estate deals to make sure it is worded correctly.

In real estate, an assignment fee is a crucial concept, especially for those involved in wholesaling properties. Essentially, an assignment fee is the monetary compensation that an assignor, or the original party in a real estate contract, receives when they transfer their equitable interest in that contract to a different party, known as the assignee.

This transactional process allows the assignor to profit without actually having to finalize the property's purchase. Often, this fee is a reflection of the difference between the price the assignor agreed to pay the original seller and the price they've negotiated with the assignee.

Commonly referred to as a "wholesale fee," it serves as the primary revenue stream for real estate wholesalers and is indicative of the value they bring to the table by connecting sellers with suitable buyers.

Real estate wholesalers get paid when a successful assignment of contract takes place. Their terms of getting paid are to be stated in the Assignment of Real Estate Purchase and Sale Agreement. It is important to note that everything is negotiable and no payment terms are set in stone unless agreed upon and signed in writing.

As a real estate wholesaler, you can get a deposit when the Assignment of Real Estate Purchase and Sale Agreement is signed. Then, when the transaction closes the wholesaler can receive the rest of the profit.

For example, if you are looking to get a $20,000 wholesale fee for a house, then you may take a 50% deposit of $10,000 when the contract is assigned. Then, receive the remaining 50% of $10,000 when the property closes.

Who Buys Real Estate Contracts?

The primary candidates for buying real estate contracts are real estate investors, a diverse group with varied intentions for the property. Among the most prominent are fix & flippers, investors who specialize in buying properties in less than optimal conditions, only to renovate and refurbish them with the sole aim of reselling at a profit.

By acquiring real estate contracts from wholesalers, these investors streamline the property acquisition process, ensuring they have a consistent inflow of properties to work on. In essence, this relationship underscores the symbiotic nature of the real estate ecosystem, where wholesalers identify and secure potential deals, only to pass them on to investors keen on executing the vision and reaping the returns.

If you're keen on diving into this lucrative venture, ensure you're equipped with the right tools. Start by downloading our FREE Wholesale Real Estate Contracts to set your foundation strong.

Once you have a property under contract, then it is time to locate a buyer for the real estate contract. Make sure the first thing you do is ask for an earnest cash deposit to ensure that your earnest money will be paid upfront. This clause protects you from any breach of contract between you and the assignee. 

An assignment fee (“wholesale fee”) is then agreed upon between you and the buyer. You will then need to execute an Assignment of Real Estate Purchase and Sale agreement between you and the buyer. 

As the assignor you are assigning all of your duties and obligations that you agreed upon in the original purchase and sale agreement with the seller of the property. This means that the buyer must purchase the property at the original agreed-upon price between you and the seller as stated in the original contract.

Just because the assignor of the contract is not the one purchasing the property doesn’t mean there isn’t additional work to be completed to ensure the deal gets closed. Once a buyer is found to sell the contract to, it is time to make sure the buyer follows through and closes on the deal. 

This makes it important to have a great title company  or real estate attorney to handle the closing. Whether you use a title company or attorney is dependent upon which state you are in. Some states have title companies handle the closing, and some states have attorneys handle it.

Read Also:  Flipping Real Estate Contracts: A 6-Step Guide For Investors

Assignment of Contract Template

To give you a clearer perspective on its structure and contents, we provide an illustrative example of an assignment of a contract below:

The Assignment of Contract is not just a mere piece of paper, but a legally binding agreement that transfers the rights and obligations of one party to another.

As stated above, it allows the original party, typically the wholesaler, to pass on their position in a deal to an interested buyer, while receiving compensation in return. It's a mechanism that facilitates the smooth transition of interests, ensuring all parties' rights are protected and responsibilities are clearly laid out.

Here's another example of a real estate assignment contract PDF by The Judicial Title Insurance Company.

Beginner investors always tend to wonder whether a seller will have an issue with an assignment of rights taking place. It depends on the seller and your correspondence with them. If you communicate clearly, then this is typically not an issue.

This is because the seller has signed a legal and binding contract making them obligated to fulfill the terms of the contract. You have every right to perform an assignment of contract when everything has been done legally.

The majority of sellers you encounter will not have an issue with the assignment and having another party close on the transaction. Sellers are usually most concerned that 2 things take place:

• They receive the purchase price for the property that was originally agreed upon, and
• That the property closes on time at the date which was agreed upon.

Communicate clearly with the seller and fulfill the contract obligations, and you shouldn’t have an issue with assigning a real estate contract.

Double closing is when you close on the property (meaning you buy it), and then resell the property to the end buyer that you would have assigned the contract to originally and can take place when the seller has an issue with the assignment of contract.

The process of a double close is typically performed as soon as possible to reduce the risk to the wholesaler. If funds are needed to close on a property for this reason, then transactional funding  is a great resource to use for any investor.

Transactional funding lenders lend real estate investors short-term capital for double-closing transactions.

Assignment contracts can be profitable and well structured, but with anything, you may face obstacles when closing on a home. Always remember to research before doing anything and pick the best option for you in this process. Below we will unpack some pros and cons of assignment contracts

Advantages Of Assignment Contracts

• Potential quick profit : This is usually the most eye-catching benefit of all in wholesaling and what lures people into starting their wholesaling journey. Who doesn’t want the ability to profit off a property without the haggling of purchasing the property?
• Assignment contract is cheaper than double-closing : An assignment contract has one closing cost, making this a cheaper option than double closing.
• Possible repeat business : If done effectively, you could potentially establish a positive relationship with a buyer to then repeat business with in the future. Being transparent is essential in this process so that all parties acknowledge that you are adding value to the deal, not just making a profit off of them.
• Networking : Assignors, who were once real estate investors, can increase their network through the different individuals they do transactions with. This can gain you access to different investment opportunities, and remember, you never know who you are talking to or who they have connections with.

Disadvantages Of Assignment Contracts

• Owner rights are off limits at this time : Above we touched upon how a wholesaler doesn’t purchase the actual property, but more so acts as a middleman between the seller and end buyer. This being the case, assignors aren’t allowed to do any renovation or repairs to the property, because they technically don’t own it yet.
• Visibility of the assignment fee : One of the main components that turns buyers off is the assignment fee that appears on the contract. This means that all parties can see what profit the obligee makes on the transaction. Some people are not willing to go through with that, especially if the obligor is unfamiliar with the wholesaling process.
• Limited time frame : Assignment contracts have a limited time frame that they need to be signed by, which can be seen as the closing date on the original contract. It may be a hassle to find a reliable buyer between the time the contract starts to the close of the contract.
• Final buyer financing may be hard to come by : The price that the assignor and seller agreed on will need to be paid by the end buyer. This typically means the property needs to be sold to an all-cash buyer (all-cash buyers are generally harder to find), because most lenders will not fund deals on assignment contracts.
• Properties are not always assignable : Real estate properties like HUD homes and REOs have anti-assignment clauses. This restricts wholesalers from partaking in the use of assignment contracts for their properties.

In general, there are a lot of misconceptions about assigning real estate contracts and wholesaling real estate. There’s a good chance you will encounter agents, brokers , attorneys, and others with little contract law or property law experience leading them to think that assigning real estate contracts is illegal.

Why would these real estate professionals think it’s illegal? Because they are unfamiliar with the concept and think you are an unlicensed individual acting as an agent.

It’s important to understand that you are the principal buyer of the transaction and you are selling the equitable interest in the contract to another buyer. You are not selling the actual property itself for a commission like a real estate agent does.

It’s wise to be cognizant that you will most likely come across people who think that an assignment of contract is illegal. In these situations you’ll have to educate them on how real estate assignment contracts work.

This is another reason why you want to have a great real estate attorney on your team who can explain the legality of assigning and wholesaling to anyone you’re working with.

Final Thoughts On The Assignment of Contract

The assignment of contract stands out as a game-changing strategy in the real estate investment arena. For those uninterested or unequipped for the buy, renovate, and flip routine, wholesaling via contract assignment emerges as an enticing alternative.

One of its paramount benefits is the minimal capital requirement coupled with a speedy transaction process. Thus, if you're seeking to harness the potential of such strategies and amplify your returns, our FREE training course  is the perfect place to start. Delve deep into the intricacies of real estate and discover how to profit smartly and efficiently from your ventures.

Access Our Brand-New Free Training

Learn how to consistently find real estate deals for wholesaling & house flipping.

Author: Alex Martinez

Founder & CEO at Real Estate Skills

Alex Martinez, the founder of Real Estate Skills, is known for his strong, practical expertise in real estate, starting from a beginner with no family connections in the industry to completing over 50 real estate deals, including wholesale and flips, within his first year.

He has dedicated his career to providing cutting-edge education and resources for real estate professionals. He emphasizes the importance of self-taught knowledge through mentors, books, and hands-on experience.

His journey from earning a modest income to becoming a successful real estate entrepreneur and educator showcases his expertise and dedication to the field.

Read Alex's Full Bio >>

Editor: Ryan Zomorodi

Co-Founder & Chief Operating Officer

Ryan Zomorodi, co-founder and COO of Real Estate Skills, leverages his experience from a diverse background in real estate investment, construction management, and entrepreneurship to provide comprehensive education in the real estate sector.

His expertise is rooted in hands-on experience, extensive industry knowledge, and a commitment to empowering others through education.

Ryan's journey reflects a blend of practical experience and entrepreneurial success, contributing to his role in developing a platform that educates and supports aspiring real estate professionals.

We recommend Colibri Real Estate School for getting licensed. Click the button below to get started!

Browse Our Topics

→ Wholesale Real Estate

→  Flipping Houses

→  Real Estate Investing

→  Real Estate Business

→  Real Estate Software

→  Real Estate Marketing

→  Real Estate Terms

→  Real Estate Jobs

→  Real Estate Financing

→  Real Estate Markets

Unlock Our  FREE  Training!

Founder & CEO of Real Estate Skills, Alex Martinez, reveals the systems and processes used to wholesale and flip houses without doing any marketing!

• Completely  FREE  training video .
• No  prior experience is required to start.
• Begin investing with   no cost  for marketing.
• Learn to invest in   any  real estate market.
• Discover how you can close deals   consistently . 

Enter your information below to access the  FREE  training!

By providing my contact info, I give express written consent to Real Estate Skills to email, call, & send text messages for upcoming events & reminders. By opting in you agree to RealEstateSkills.com's Terms of Use and Privacy Policy .

Reviews & testimonials from students like you.

No matter where you start, you can become a successful real estate investor. Listen to these amazing stories from the students in our program!

Almost there!

Just enter your name & email below for real estate investing golden nuggets!

• Coaching Team
• Investor Tools
• Student Success

Real Estate Investing Strategies

• Real Estate Business
• Real Estate Markets
• Real Estate Financing
• REITs & Stock Investing

How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

Click the banner below to take a 90-minute online training class and get started learning how to invest in today’s real estate market!

What is an STR in Real Estate?

Wholetailing: a guide for real estate investors, what is chain of title in real estate investing, what is a real estate fund of funds (fof), reits vs real estate: which is the better investment, multi-family vs. single-family property investments: a comprehensive guide.

Real Estate Assignment of Contract Explained

In real estate, an assignment of contract is a strategy where one transfers his rights and obligations to another party. Read on to learn more.

Real estate investing is a great way to earn additional income. Are you planning to buy a property? If so, there are several real estate investment strategies available. These include purchasing a rental property, flipping houses, and buy-and-hold. Some investors also consider investing in real estate investment trusts (REITs). 

Table of Contents

What Is an Assignment Contract in Real Estate? 

Is an assignment of contract legal.

• How Does Assignment of Contract Real Estate Work?

Elements of an Assignment Contract

Wholesale real estate is another potentially lucrative strategy for making money in real estate. It involves finding real estate deals you don’t plan to buy but plan to transfer to an end buyer. This kind of transaction uses a principle called the assignment of contract. The real estate assignment of contract is a strategic act that offers several benefits to buyers and sellers.

The assignment of contract has gained prominence as a valuable tool in real estate transactions. It presents a great alternative to traditional buying and selling approaches. It opens doors to lucrative opportunities and flexible real estate transactions. Investors who invest in real estate wholesaling typically use this strategy. 

Wholesaling investors secure properties under contract. They intend to assign them to another buyer for a profit. They won’t assume ownership during the process or undertake the associated risks. It allows for a streamlined process and reduces the need for substantial financial investment. 

In general, the assignment of contract is a great option for those who want to enter the real estate market immediately. It is a powerful and versatile tool. It can unlock many opportunities for buyers, sellers, and investors alike.

Assignment of contract in real estate takes place when the original party (assignor) transfers the contractual rights and obligations to a new party (assignee). The assignee, who is the recipient of the assignment, assumes the rights and duties outlined in the contract. 

In an assignment of contract, the assignor essentially transfers their position in the contract to the assignee. The assignee will then become a party to the contract with the other original party. Note that the assignor does not necessarily absolve themselves entirely from the agreement. The assignor typically remains liable for any breaches that occurred prior to the assignment.

Related: 4 Types of Real Estate Contracts: A Beginner’s Guide

Benefits of Assignment of Contract in Real Estate

The assignment of contract real estate offers several benefits to buyers, sellers, and investors. It is one of the preferred ways to process real estate investments. 

Here are a few benefits of a real estate assignment contract :

Increased Flexibility

Assigning a contract allows for greater flexibility in real estate transactions. It provides an opportunity to transfer contractual rights and obligations to a new party. This enables the original buyer or seller to adapt their position without completely withdrawing from the deal. 

This flexibility can be valuable in situations where circumstances change. These include financial constraints or unexpected personal events.

Expedited Transactions

Assigning a contract can expedite the real estate transaction process. Rather than starting from scratch, a buyer can step into an existing contract. It saves time on negotiating terms, inspections, and other procedural aspects. This acceleration can benefit investors who aim to close deals quickly and efficiently.

Minimal Financial Investment

Assigning a contract lets investors take part in real estate with minimal financial investment. Instead of buying the property outright, investors can secure it under contract. Then, they can assign that contract to another buyer for a profit. 

This strategy, often used in real estate wholesaling, reduces the need for substantial upfront capital. Plus, it lowers the risks associated with a real estate purchase .

Profit Generation

For investors, an assignment of contract can be a lucrative profit-generating strategy. They acquire properties at favorable terms and assign the contracts to buyers. This lets them earn the difference between the contract price and the assignment fee. 

It allows investors to leverage their skills in finding attractive deals. It also helps them capitalize on market opportunities.

Related: How to Flip Real Estate Contracts: 8 Steps

Enhanced Collaboration

Real estate transactions are usually complex because they involve multiple parties. The assignment of contract facilitates collaboration and simplifies the negotiation process. 

It enables parties to allocate responsibilities and delegate rights. It also helps ensure the smooth execution of agreements involving various stakeholders. This cooperative approach can expedite the transaction. What’s more, it can lead to outcomes that are beneficial to all parties involved.

Risk Mitigation

Assigning a contract can help mitigate risks associated with real estate transactions. Market conditions and investment circumstances may change. In this case, the assignor can transfer the contract to another party. It lets them avoid potential losses or unfavorable outcomes. 

This risk management aspect provides a level of protection. It also offers adaptability in dynamic real estate environments.

Disadvantages of an Assignment of Contract

The assignment of contract real estate can offer numerous advantages. But, it also carries certain disadvantages. You need to know these drawbacks before deciding to use this strategy, such as:

Limited Time Frame

Assignments often need to be executed within a specified time frame outlined in the original contract. This can add pressure to find a suitable assignee and complete the process within the designated period. It can potentially lead to rushed decisions or inadequate due diligence.

Loss of Owner’s Rights

As the assignor, you transfer your contractual rights and obligations to the assignee. This means you no longer have control over the property. You also won’t be able to make decisions regarding its use, modifications, or other aspects associated with ownership.

Potential Buyer Disinterest

The presence of an assignment fee, which compensates the assignor, may deter some buyers. The additional cost can make the overall transaction less attractive. This may limit the pool of potential buyers. It also makes it more challenging to find a willing assignee.

Non-Assignable Properties

Not every property is assignable. Some purchase agreements contain clauses that prohibit or restrict assignments. In such cases, the assignor may face limitations or even be unable to assign the contract. It limits their options for exit strategies.

Difficulty Confirming Buyer Financing

When assigning a contract, the assignee may need to secure financing to fulfill their obligations. However, confirming buyer financing can be challenging. Lenders may require additional assessments or have specific criteria for accepting an assignment. This can cause delays or complications in finalizing the transaction.

What Is an Assignment Fee?

An assignment fee in real estate refers to monetary compensation for the assignor. The assignor charges the fee when assigning their contractual rights and obligations to an assignee. It represents the assignor’s profit for finding a deal and facilitating the assignment. The price is typically negotiated and agreed upon as part of the assignment agreement. 

The assignment fee is separate from the purchase price or consideration mentioned in the original contract. It serves as compensation for the assignor’s efforts in securing the deal. It is also a fee that the assignee must pay for assuming the position in the contract from the original buyer.

Example of Assignment Contracts Real Estate  

An assignment contract real estate is a great tool to use when an investor wants to transfer his rights and duties to another party. 

Here is a good example of an assignment of contract real estate:

John identifies an Airbnb house for sale in a good neighborhood. He negotiates a purchase agreement with the property owner, Mary. They then enter into a contract for the sale of the property. However, John realizes that he doesn’t have the financial resources to proceed with the real estate purchase . But he sees the potential for a profitable deal.

In this scenario, John decides to assign the contract to another investor, Sarah. Sarah has the necessary funds and is interested in acquiring properties for short term rentals. John and Sarah agree on an assignment fee, which compensates John for his efforts in securing the deal.

John transfers his contractual rights and responsibilities to Sarah. Sarah becomes the new buyer in the contract. She assumes the duty of buying the house from Mary at the agreed-upon terms and conditions.

By assigning the contract, John avoids the need to secure financing. Plus, it eliminates the risks associated with investing in short term rentals. Such risks include repairs, maintenance, seasonality, and market fluctuations.

For Sarah, the assignment of contract presents an opportunity to own a property without going through the entire process. It eliminates the need for negotiation and due diligence. She benefits from John’s efforts in securing the deal. Such efforts include identifying the property, negotiating favorable terms, and establishing a rapport with the seller.

Ultimately, Mary completes the transaction with Sarah, who steps into John’s position as the buyer. John then earns the assignment fee as his profit for getting the deal.

Yes, the assignment of contract in real estate is legal. However, real estate contract assignment will not be enforced in the following circumstances:

• There is no written consent . Before a real estate assignment contract takes effect, all parties must give written consent.
• The contract doesn’t allow assignments. Some contracts come with a non-assignment clause. It prohibits the original buyer from assigning the deal to another.
• The assignment violates public policy or the law. Some jurisdictions have laws that prohibit or limit assignments.
• The property has restrictions . Certain properties, such as HUD homes, REOs, and short sales, might have deed restrictions. These prohibit the assignment of real estate contracts within a specific period.

Overall, it’s legal to assign real estate contracts to another buyer. By default, all contracts are assignable. But make sure to check the agreement for any stipulations prohibiting contract assignments. 

How Does Assignment of Contract Real Estate Work? 

The assignment of contract is a straightforward exit strategy when it comes to real estate investing. But, a successful and efficient contract assignment requires careful adherence to a specific process. 

Here are a series of essential steps for assigning a contract:

1. Find an Investment Property for Sale

The first thing you need to do is find a motivated seller willing to sell their home at a price below market value. The main difference between motivated and regular sellers is the former’s sense of urgency. 

Motivated sellers want to sell fast due to several reasons. These include divorce, relocation, living out-of-state, delinquent taxes, or job transfers. This sense of urgency could work to your advantage during negotiation.

You can use the following strategies to find homeowners that want to sell fast:

Driving for Dollars  

As the name suggests, this involves driving or walking around neighborhoods looking for signs of distressed properties. Signs of distress include overgrown grass, overfill of newspapers or mail, broken windows, deferred maintenance, and code enforcement signs. Write down the addresses of such homes and use them to locate the homeowner. Then, ask them if they are willing to sell so you can make an offer.

Look for the County’s Delinquent Tax List

This list is a goldmine for finding motivated sellers in an area. Simply visit the county government’s website or offices to get the delinquent tax list. This will give you an idea of potential properties that you can buy.

Use Mashvisor’s Real Estate Tools

Mashvisor is an online real estate analytics platform that can help you find the perfect investment property in no time. It is the best place to find cheap houses, including short sales, foreclosed, bank-owned, and auctioned homes. You can use the following tools to help you search for a property for sale in your preferred location:

Property Finder

The Property Finder tool lets you narrow down your options by customizing filters. You can set your budget, property type, size, and investment strategy. Just type in the city or neighborhood of your choice, and the system will generate results based on your criteria.

Another great thing about the Property Finder tool is that you can search multiple cities and neighborhoods simultaneously. After you find a property you like, you can just click on it and see its details. This information will help you decide whether or not the property will make a good investment.

Mashvisor’s Property Finder tool makes finding suitable investment properties much easier with its filters.

Another tool that can help you find a good investment property is Mashvisor’s Heat Map . When doing a map search, you can set your custom filters to narrow down the results. You can filter by budget, property size, property type, or property status. You can also set preferred rental income, cap rate, and cash on cash return.

Select a property from the results; then, you’ll be taken to a page where you can find all the important real estate data. You will see the investment potential of the property. You can also use the Airbnb Calculator to determine if it will make a good short term rental investment.

Begin your real estate journey with Mashvisor! Start your 7-day free trial today to learn more about how Mashvisor works.

Airbnb Rental Calculator

2. perform due diligence.

After you find a profitable investment property, it’s crucial to perform due diligence. You should do this before signing any agreement with the seller. Work with a professional to inspect the property and perform a title search.

Property inspections are necessary. They ensure there are no major structural defects that may require costly repairs. Also, a title search is another important part of due diligence. It will look into the history of the home to ensure that there are no liens attached to the title.

3. Get the Purchase Contract

The next step is to get a purchase agreement from the seller. Make sure to have a real estate attorney read and approve the agreement. This will assure you that the contract is legally sound. It also gives you peace of mind that you will have a lawyer’s support in case of issues.

One crucial detail that needs to be included in the agreement is the “and/or assigns” next to your name. This clause authorizes you to transfer the contract to an interested buyer. Be sure to disclose this information to the seller. Explain the meaning of the clause if necessary. Give assurance that the seller will still get the agreed-upon purchase amount.

4. Find an End Buyer or Assignee

Finding buyers is an important step in the strategy of real estate assignment of contract.

Once everything is in order, you’ll need to find your assignee who will assume the purchase of the property. You can find potential buyers using methods such as cold calling, posters, signage, and newspaper ads. You can also use social media ads, Craigslist, or networking on real estate forums to find an assignee. Alternatively, you could solicit the help of a local real estate agent. 

Whatever strategies you choose, be sure to find a buyer before the contract expires. In fact, many investors who use this strategy work on putting together a buyers list before they even find a property for sale. Consider this approach as well.

5. Assign the Contract

You can easily download an assignment of contract template from the internet. You can use this to assign the contract to another buyer who will assume your duties and rights. Make sure to let your real estate attorney review the assignment of contract before letting your assignee sign it. 

Once you’ve located an interested buyer, the first thing you need to do is ask for an earnest cash deposit. Your contract should clearly mention that earnest money will be paid upfront. This clause will protect you from any breach of contract with the seller. Since the earnest money is nonrefundable, you are sure to make a profit whether the deal closes or not.

6. Get Paid

As the assignor, you will get paid once the end buyer closes the deal and pays the purchase price. The difference between the agreed-upon value and the price you reach with the buyer will be your profit. It refers to the assignment fee, which serves as your compensation for securing the deal.

There are two ways to earn profit or charge an assignment fee:

• Charge a Difference in the Selling Price. For example, your agreed purchase price with the seller is $170,000. Then you assigned the contract to the buyer for $200,000. The difference, which is essentially your assignment fee, is $30,000. It becomes your profit for the transaction.
• Charge a Fixed Assignment Fee. Let’s say you find a new buyer that can fulfill the original terms of the sale agreement—such as purchase price and closing date. You then assign the contract to the new buyer in exchange for a fixed assignment fee. It is usually a certain percentage of the purchase price.

Who Handles Assignment of Contract?

A real estate attorney is the ideal professional to handle an assignment of contract. These legal documents involve substantial sums of money, making it wise to have expert guidance. Do you require assistance with a real estate assignment contract ? Connect with trusted lawyers who can provide comprehensive advice throughout the entire process.

Who Buys Real Estate Contracts?

In general, real estate contracts are most common among real estate wholesalers. Real estate investors who venture into fix-and-flips usually buy real estate contracts from wholesalers. 

Since fix-and-flippers want a fast transaction, they typically don’t have time to do the necessary due diligence. So they rely on wholesalers to find properties they can renovate and resell.

The elements of real estate assignment contracts may differ from one another. When drafting your assignment of contract in real estate, here are the basic elements you should consider:

• Assignor. The assignor is the original party to the contract who transfers their rights and obligations to another party.
• Assignee. The assignee is the new party who receives the rights and obligations of the contract from the assignor.
• Original Contract. The assignment of contract refers to an existing valid and enforceable contract between the assignor and another party (the seller). It serves as the basis for the assignment.
• Assignment Agreement. The assignment agreement is a separate contract that outlines the terms and conditions of the assignment. It includes the rights being transferred, the assignment fee, and any additional provisions specific to the assignment.
• Assumed Obligations. The assignee typically assumes the obligations and responsibilities outlined in the original contract once the assignment is complete. This includes performing any required duties and fulfilling financial or performance obligations.
• Release of Assignor. Depending on the terms of the assignment agreement, the assignor may seek release from future liabilities. It releases them from any obligations under the original contract once the assignment is finalized.
• Consent (Optional). In some cases, obtaining the consent of the seller or other parties involved in the original contract may be necessary. It ensures the assignment is valid and enforceable.

The Bottom Line

Real estate assignment of contract takes less time to complete compared to other real estate investment strategies. It also requires little or no capital. However, working with sellers and buyers who are not conversant with the assignment of contract can be challenging. In addition, you might find a buyer that will want to back out at the last minute. 

If you want to flip a real estate contract, you should anticipate such scenarios and prepare accordingly. Make sure to understand the process before using this exit strategy. Further, working with a trusted real estate attorney can help lessen your risks. 

Are you ready to find the perfect investment property? Mashvisor can help you with this! Schedule a demo now to see how our platform works.

Presidential Election 2020: How Will It Impact Real Estate?

Return on investment and risk in real estate, related posts, how to make money in real estate in your twenties, minnesota housing market forecast 2022: the investor’s guide, how to invest in multifamily for sale: a beginner’s guide, median us home prices up 46% since start of pandemic, 7 property management lead generation tips, housing market data: the one thing you need to get started in real estate, 5 airbnb app alternatives for short-term rental investors, how to start an airbnb business in 2020, what is a good cash on cash return for a multi family investment, building a real estate empire: a step-by-step guide, why is cash flow analysis for investment in real estate crucial, everything real estate investors should know about tax season.

Assignment of Contract – Assignable Contract Basics for Real Estate Investors

What is assignment of contract? Learn about this wholesaling strategy and why assignment agreements are the preferred solution for flipping real estate contracts.

Beginners to investing in real estate and wholesaling must navigate a complex landscape littered with confusing terms and strategies. One of the first concepts to understand before wholesaling is assignment of contract, also known as assignment of agreement or “flipping real estate contracts.”  

An assignment contract is the most popular exit strategy for wholesalers, and it isn’t as complicated as it may seem. What does assignment of contract mean? How can it be used to get into wholesaling? Here’s what you need to know.

What Is Assignment of Contract?

How assignment of contract works in real estate wholesaling, what is an assignment fee in real estate, assignment of agreement pros & cons, assignable contract faqs.

• Transactly Saves Time. Learn How Now!

Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer.

This strategy is also known as flipping real estate contracts because that’s essentially how it works:

• The wholesaler finds a property that’s already discounted or represents a great deal and enters into a contract with the seller,
• The contract contains an assignment clause that allows the wholesaler to assign the contract to someone else (if they choose to!), then
• The wholesaler can assign the contract to another party and receive an assignment fee when the transaction closes.

Assignment of contract in real estate is a popular strategy for beginners in real estate investment because it requires very little or even no capital. As long as you can find an interested buyer, you do not need to come up with a large sum of money to buy and then resell the property – you are only selling your right to buy it .

An assignment contract passes along your purchase rights as well as your contract obligations. After the contract assignment, you are no longer involved in the transaction with no right to make claims or responsibilities to get the transaction to closing.

Until you assign contract to someone else, however, you are completely on the hook for all contract responsibilities and rights.

This means that you are in control of the deal until you decide to assign the contract, but if you aren’t able to get someone to take over the contract, you are legally obligated to follow through with the sale .

Assignment of Contract vs Double Closing

Double closing and assignment of agreement are the two main real estate wholesaling exit strategies. Unlike the double closing strategy, an assignment contract does not require the wholesaler to purchase the property.

Assignment of contract is usually the preferred option because it can be completed in hours and does not require you to fund the purchase . Double closings take twice as much work and require a great deal of coordination. They are also illegal in some states.

Ready to see how an assignment contract actually works? Even though it has a low barrier to entry for beginner investors, the challenges of completing an assignment of contract shouldn’t be underestimated. Here are the general steps involved in wholesaling.

Step #1. Find a seller/property

The process begins by finding a property that you think is a good deal or a good investment and entering into a purchase agreement with the seller. Of course, not just any property is suitable for this strategy. You need to find a motivated seller willing to accept an assignment agreement and a price that works with your strategy. Direct mail marketing, online marketing, and checking the county delinquent tax list are just a few possible lead generation strategies you can employ.

Step #2: Enter into an assignable contract

The contract with the seller will be almost the same as a standard purchase agreement except it will contain an assignment clause.

An important element in an assignable purchase contract is “ and/or assigns ” next to your name as the buyer . The term “assigns” is used here as a noun to refer to a potential assignee. This is a basic assignment clause authorizing you to transfer your position and rights in the contract to an assignee if you choose.

The contract must also follow local laws regulating contract language. In some jurisdictions, assignment of contract is not allowed. It’s becoming increasingly common for wholesalers to assign agreements to an LLC instead of an individual. In this case, the LLC would be under contract with the seller. This can potentially bypass lender objections and even anti-assignment clauses for distressed properties. Rather than assigning the contract to someone else, the investor can reassign their interest in the LLC through an “assignment of membership interest.”

Note: even the presence of an assignment clause can make some sellers nervous or unwilling to make a deal . The seller may be picky about whom they want to buy the property, or they may be suspicious or concerned about the concept of assigning a contract to an unknown third party who may or may not be able to complete the sale.

The assignment clause should always be disclosed and explained to the seller. If they are nervous, they can be assured that they will still get the agreed-upon amount.

Step #3. Submit the assignment contract for a title search

Once you are under contract, you must typically submit the contract to a title company to perform the title search. This ensures there are no liens attached to the property.

Step #4. Find an end buyer to assign the contract

Next is the most challenging step: finding a buyer who can fulfill the contract’s original terms including the closing date and purchase price.

Successful wholesalers build buyers lists and employ marketing campaigns, social media, and networking to find a good match for an assignable contract.

Once you locate an end buyer, your contract should include earnest money the buyer must pay upfront. This gives you some protection if the buyer breaches the contract and, potentially, causes you to breach your contract with the seller. With a non-refundable deposit, you can be sure your earnest money to the seller will be covered in a worst-case scenario.

You can see an assignment of contract example here between an assignor and assignee.

Step #5. Receive your assignment fee

The final step is receiving your assignment fee. This fee is your profit from the transaction, and it’s usually paid when the transaction closes.

The assignment fee is how the wholesaler makes money through an assignment contract. This fee is paid by the end buyer when they purchase the right to buy the property as compensation for being connected to the original seller. Assignment contracts should clearly spell out the assignment fee and how it will be paid.

An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer.

The standard real estate assignment fee is $5,000 . However, it varies by transaction and calculating the assignment fee may be higher or lower depending on whether the buyer is buying and holding the property or rehabbing and flipping.

The assignment fee is not always a flat amount. The difference between the agreed-upon price with the seller and the end buyer is the profit you stand to earn as the assignor. If you agreed to purchase the property for $150,000 from the seller and assign the contract to a buyer for $200,000, your assignment fee or profit would be $50,000.

In most cases, an investor receives a deposit when the Assignment of Purchase and Sale Agreement is signed with the rest paid at closing.

Be aware that assignment agreements can have a bad reputation . This is usually the case when the end buyer and seller are unsatisfied, realizing they could have sold higher or bought lower and essentially paid thousands to an investor who never even wanted to buy the property.

Opting for the standard, flat assignment fee is much more readily accepted by sellers and buyers as it’s comparable to a real estate agent’s commission or even much lower and the parties can avoid working with an agent.

Real estate investors enjoy many benefits of an assignment of contract:

• This strategy requires little or no capital which makes it a popular entry to wholesaling as investors learn the ropes.
• Investors are not added to the title chain and never own the property which reduces costs and the amount of time the deal takes.
• An assignment of agreement is easier and faster than double closing which requires two separate closings and two sets of fees and disclosures.
• Wholesaling can be a great tool to expand an investor’s network for future opportunities.

As with most things, there are important drawbacks to consider. Before jumping into wholesaling and flipping real estate contracts, consider the downsides .

• It can be difficult to work with sellers and buyers who are not familiar with wholesaling or assignment agreements.
• Some sellers avoid or decline assignment of contract offers because they are suspicious of the arrangement, think it is too risky, or want to know who they are selling to.
• There is a limited time to find an end buyer. Without a reliable buyer’s list, it can be very challenging to find a viable end buyer before the closing date.
• The end buyer may back out at the last minute. This may happen if they do not have owner’s rights until the contract is assigned or they do not want to pay an assignment fee.
• Not all properties are eligible for wholesaling like HUD and REO properties. There may be anti-assignment clauses or other hurdles. It is possible to get around this by purchasing the property with an LLC which can then be sold, but this is a level of complication that many wholesalers want to avoid.
• Assignors do not have owner’s rights. When the property is under contract, investors cannot make repairs or improvements. This makes it harder to assign a contract for a distressed property in poor condition.
• It can be hard to confirm an end buyer is qualified. The end buyer is responsible for paying the agreed upon price set by the seller and assignor. Many lenders do not handle assignment agreements which usually means turning to all-cash end buyers. Depending on the market, they can be hard to find.

In the worst-case scenario, if a wholesaling deal falls through because the end buyer backs out, the investor or assignor is still responsible for buying the property and must follow through with the purchase agreement. If you do not, you are in breach of contract and lose the earnest money you put down.

To avoid this worst-case scenario, be prepared with a good buyer’s list. You should only put properties under contract that you consider a good deal and you can market to other investors or homeowners. You may be able to get more time by asking for an extension to the assignment of contract while you find another buyer or even turn to other wholesalers to see if they have someone who would be a good fit.

What is the difference between assignor vs assignee?

In an assignment clause, the assignor is the buyer who then assigns the contract to an assignee. The assignee is the end buyer or final buyer who becomes the owner when the transaction closes. After the assignment, contract rights and obligations are transferred from the assignor to the assignee.

What Is an assignable contract?

An assignable contract in real estate is a purchase agreement that allows the buyer to assign their rights and obligations to another party before the contract expires. The assignee then becomes obligated to meet the terms of the contract and, at closing, get title to the property.

Is Assignment of Agreement Legal?

Assignment of contract is legal as long as state regulations are followed and it’s an assignable contract. The terms of your agreement with the seller must allow for the contract to be assumed. To be legal and enforceable, the following general requirements must be met.

• The assignment does not violate state law or public policy. In some states and jurisdictions, contract assignments are prohibited.
• There is no assignment clause prohibiting assignment.
• There is written consent between all parties.
• The property does not have restrictions prohibiting assignment. Some properties have deed restrictions or anti-assignment clauses prohibiting assignment of contract within a specific period of time. This includes HUD properties, short sales, and REO properties which usually prohibit a property from being resold for 90 days. There is potentially a way around these non-assignable contracts using an LLC.

Can a non-assignable contract still be assigned?

Even an non-assignable contract can become an assignable contract in some cases. A common approach is creating an agreement with an LLC or trust as the purchaser. The investor can then assign the entity to someone else because the contractual rights and obligations are the entity’s.

Assignment agreements are not as complicated as they may sound, and they offer an excellent entry into real estate investing without significant capital. A transaction coordinator at Transactly can be an invaluable solution, no matter your volume, to keep your wholesaling business on track and facilitate every step of the transaction to closing – and your assignment fee!

Adam Valley

Similar posts, getting to close: contract to close checklist for sellers.

Review our contract to close checklist for sellers to find out what exactly it is the seller is responsible for to make sure the home..

Option Contract in Real Estate Defined

Understanding the option contract real estate definition will better prepare you for your next purchase or selling of a property.

What Does a Contract to Close Coordinator Do?

A contract to close coordinator is simply just someone that is able to help you out in the complicated real estate process without stepping on your...

Get notified with new real estate posts.

Be the first to know about new real estate tech insights. Subscribe to stay up-to-date with Transactly. 

Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

Table of Contents

• What Is an Assignment?
• What is an Assignment in Real Estate?
• What Does it Mean to Assign a Contract in Real Estate?
• How Does a Contract Assignment Work?
• Pros and Cons of Assigning Contracts

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

• Find the right property.
• Get a purchase agreement signed.
• Find an end buyer.
• Assign the contract.
• Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won’t take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it’s compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

Bonus:  Get a FREE copy of the INVESTOR HACKS ebook when you subscribe!

Free Subscriber Toolbox

Want to learn about the tools I’ve used to make over $40,000 per deal ? Get immediate access to videos, guides, downloads, and more resources for real estate investing domination. Sign up below for free and get access forever.

Join our growing community

subscribers

Welcome to REtipster.com

We noticed you are using an ad blocker.

We get it, too much advertising can be annoying.

Our few advertisers help us continue bringing lots of great content to you for FREE.

Please add REtipster.com to your Ad Blocker white list, to receive full access to website functionality.

Thank you for supporting. We promise you will find ample value from our website. 

Thanks for contacting us! We will get in touch with you shortly.

Assigning Real Estate Contracts: Everything You Need to Know

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. 3 min read updated on July 10, 2020

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. Then, you find a buyer willing to pay a higher price for it.

How Contract Assignment Works

The first thing you need to do for contract assignment is to find a motivated seller. This is a person who owns a property, and for some reason, needs to sell in a hurry. This is generally because of a problem they are having, such as needing to move to a new home quickly. You'll need to be able to tell the difference between this sort of seller and someone who isn't in so much of a hurry to sell, and perhaps just wants to know what the property is worth.

You can find motivated sellers by placing ads in the newspaper, marketing on the internet, or sending direct mail. A combination of strategies works best.

The next thing you need to do is to obtain an assignment contract document. You can find templates on the web, but it's a good idea to have an attorney look it over before signing anything. That way, you will know that everything is completely legal. You will also be able to use that attorney if things don't work out as planned.

After the contract is signed, you submit it to a title company or an attorney who handles real estate closings. They will then do a title search. This ensures there are no existing liens against the property. This step is crucial because you do not want to buy a property that has a problem with the title. The title company is objective and independent and therefore makes sure everything is fair and legal.

At this point, you may search for a buyer. This will require more marketing strategies and can be a difficult process, but when you do find a buyer, you can move on to the next step - closing on the property. You'll need to collect a non-refundable deposit known as “earnest money” to make sure the buyer won't back out. If the buyer does change their mind, you get to keep the earnest money. This amount can be determined by you or the buyer.

Next, you get paid! The amount you receive will cover the amount you agreed to pay the property seller, along with an amount you get to keep in return for finding the buyer and making the transaction happen.

While this process takes place, you should make sure the seller understands how the process works , and that you will make a profit from the transaction. Otherwise, either the seller or buyer may decide they don't like the idea of your profiting from the sale and may back out. Reassure the seller that they are still getting the amount agreed upon for the sale.

Most contract assignments are done for $5,000 profit or less, but you can do it for a higher amount if you choose. If problems arise, it's possible to do a double or simultaneous closing, thereby keeping both parts of the sale separate and anonymous. Some title companies may not agree to do this, so if it becomes an issue, you should discuss it in advance.

Drawbacks of Contract Assignment

Contract assignment, or wholesaling, can be a  profitable venture , but there are a few pitfalls to watch out for, such as:

• You cannot make any repairs or renovations to the property because you do not own it at any point.
• You cannot offer any type of financing to the buyer.
• You must get the sale accomplished within a short amount of time before the contract expires.
• The process of closing on the property is detailed and can be complicated.
• You must find a buyer who is willing to pay in cash because it's hard to find a lender who will approve a mortgage for an assigned contract.

You also need to check the laws in your state, because in some states it is not legal to market a property that you don't own.

If you need more information or help with assigning real estate contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Property Contracts
• Sample Real Estate Contracts
• Land Sale Contracts
• Commercial Real Estate Contract Provisions
• Deed Contract Agreement
• Assignment Of Contracts
• Define Subject to Contract
• As Is Sales Contract
• Bill of Sale Land Contract
• Extension Addendum to Contract

Real Estate Contracts

What is an assignment contract.

Assignment contracts are a vehicle used by real estate investors to transfer one party’s rights and obligations under an existing real estate contract to another party. Assignment contracts don’t involve transferring or selling the property directly like a purchase agreement. Instead, the buyer under the original purchase agreement (the assignor) assigns their rights and obligations under the purchase agreement to the assignee, sometimes for a profit. The assignee then becomes the buyer under the original real estate contract.

By clicking Subscribe Now!, you agree to receive Academy Newsletter emails from Blueprint. You also agree to our privacy policy and terms of use . You can update your subscription preferences at any time by clicking the unsubscribe link in our emails.

When Is an Assignment Contract Used?

In one scenario, a type of real estate investor called a wholesaler contracts with the current owner(s) of a distressed property that may be unsellable to average homebuyers. The wholesaler creates a purchase agreement with that owner to buy their property. The wholesaler then finds an end buyer who wants to take possession of the property. The assignment contract is then created to transfer the wholesaler’s rights and obligations under the original purchase agreement to the end buyer.  

Elements of an Assignment Contract

• Assignor : the real estate wholesaler. This is the person who is the buyer under the original purchase agreement and who is selling or transferring their rights and obligations under that contract. 
• Assignee : the end buyer. This is the person who is purchasing or receiving the assignor’s rights and obligations under the original purchase agreement and who would ultimately pay the purchase price (plus any assignment fee agreed to in the assignment contract) and take possession of the property. 
• Description or identification of contract being assigned:  a description of the original purchase agreement being assigned. Oftentimes, the assignment contract will also attach the original purchase agreement or state that it has been provided to the assignee.   
• Subject property information: the property address, legal description, or property identification number/parcel number for the property that is the subject of the original purchase agreement.  
• Assignment earnest money amount:  like with other types of real estate contracts, earnest money shows the assignee is a serious buyer. The money helps ensure that the assignee won’t back out of the deal for frivolous reasons. 
• Assignee’s purchase amount: the amount the end buyer agrees to pay that fulfills or exceeds the original purchase agreement amount. 
• Assignment fee: the amount of money the assignor will make for finding an end buyer. The assignment fee should be clearly set forth in the assignment contract.
• Name of the company holding escrow : the assignment contract will designate what company is holding escrow.  This escrow company should match the escrow company listed in the original purchase agreement or you will need an amendment to the original purchase agreement or, in states where it is permissible, a split escrow.  
• Closing date: the date by which the transaction should be finalized. This should correspond to the original purchase agreement’s closing date. If a different date is used, an amendment to the original purchase agreement may be required.  
• How assignment earnest money is handled : should one party cancel the contract or fail to meet the contractual obligations, the earnest money may either be forfeited by the assignee or returned. In instances of a dispute between the parties, the third party holding escrow may release the assignment earnest money pursuant to the terms and conditions of the assignment contract.

Writing a comprehensive assignment contract is a vital part of several real estate investing strategies. If you’re new to creating these kinds of contracts, be sure to get some legal advice before moving forward. Once you have a solid assignment contract template in place,  transactions using this contracting tool will run more smoothly. 

* The information provided on this site does not, and is not intended to, constitute legal, financial, tax, or real estate advice. Please consult your expert for advice in those areas. All content is for general informational purposes only and is not intended to provide a complete description of the subject matter. Although Blueprint provides information it believes to be accurate, Blueprint makes no representations or warranties about the accuracy or completeness of the information contained on this site. Specific processes will vary based on applicable law. The title and closing process will be handled by a third-party attorney to the extent required by law. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed.

• Cookie Policy
• Privacy Policy
• Terms of Service
• Blueprint Platform
• Blueprint API
• Underwriting Partner
• Where We Work
• For Investors
• For Wholesalers
• For Lenders
• For Proptech
• API Documentation
• Blueprint Academy
• Guides & eBooks

Quick Links

Get in touch.

(615) 933-0075

[email protected]

401 Church St. #1710  Nashville, TN 37219

We, us, and Blueprint refer to Blueprint’s  licensed title agencies . We act as an agency for one or more affiliated and unaffiliated insurance companies. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed. Closings will be handled by a third-party attorney where required by law. Features and services availability vary by market and applicable law.

Copyright ©2023 Blueprint Title Company All Rights Reserved Copyright

Assignment of Contract in Real Estate [And Or Assigns]

Assignment of Contract in Real Estate

Most people think that the only way to start real estate investing is to either:

• Pay a down payment of 10-20% from your own savings and finance the rest
• Partner with another investor and do a joint venture

The common thread between the options?

A large amount of money paid upfront, coming from your own pocket.

If you don't have a large amount of cash put away, you wonder how you'd ever get your start.

Are you just doomed to watching as investment opportunities pass you by?

Of course not!

There is a third option, a legitimate way of investing in real estate without a money down: real estate assignment contracts.

With assignment contracts, you are not purchasing the property outright; instead, what you are doing is getting the exclusive right to purchase a property within a certain timeframe, an investing strategy referred to as wholesaling.

Some wholesalers choose to put up an earnest money when securing the right to buy a property from a seller, but it is not required . All you have to do is to show up with a real estate contract and an offer to purchase the property for a specified amount by a specified closing date.

However, not all real estate contracts are written the same.

For wholesaling to be a lucrative investing strategy, you have to add a special provision to the purchase agreement before presenting it to the seller: t he assignment clause .

What Is an Assignment Clause in a Real Estate Contract?

An assignment clause in a purchase and sale agreement in real estate gives the original buyer (the assigning party) the ability to "assign" or transfer the rights to purchase a property to a new buyer (the assignee).

This is done by affixing the phrase "and/or assigns" next to your name in the real estate contract.

This means that on the buyer's name, it should say: John Smith and/or assigns .

As long as the seller agrees and signs the assignment contract, then it constitutes their written consent to sell the property to someone other than you.

However, if you forget to put the assignment clause, then you cannot assign the contract to someone else.

When you assign the contract to the new buyer, all the contractual obligations are transferred also, and the end buyer gets full ownership privilege once the transaction is completed.

As there is no free lunch in this economy, you get to collect an assignment fee for your troubles.

Who Will Buy the Real Estate Assignment Contract?

In today's hot real estate market , house flippers, landlords, or simply buy-and-hold investors would not pass up investment opportunities such as the chance to buy real estate for lower than the market value.

For best results, it is recommended that you sell the assignment contract to all cash buyers for the following reasons:

• They have the necessary liquidity to be able to close quickly, sometimes in as short as a week;
• They are not dependent on financing from banks or traditional lenders, eliminating the uncertainty that they might not move forward with the deal;
• They will buy the property as is, with no need to negotiate for repairs or ask concessions from the seller.

Sellers who enter in assignment contracts with a wholesaler are typically motivated sellers, which means they are stuck with a problem property that is either costing them money (major structural damage) or is in danger of being lost (foreclosure or bankruptcy).

In any case, they need to sell fast , and this is where cash buyers can be really helpful.

How Does Assignment Work?

Generally, the entire process of real estate investing via assignment agreement goes as follows:

Find a Property Which Can Be Bought for Lower Than Market Price

Distressed properties, such as those on the brink of foreclosure, can be bought for a huge discount and thus, present an attractive investment opportunity.

First identify an area you're interested in, then scout homes showing visible damage or neglect. You can then get in touch with owners for a potential purchase.

Make an Offer on the Property

To make a suitable offer on one property you have your eye on, do your due diligence by running comps.

This means looking at comparables ("comps"), or recently sold properties similar to your target purchase in order to establish a basis for your offer. Browsing online listings, or simply driving around the neighborhood and asking around are a good source of information on comparables.

Present the Purchase Agreement With “And or Assigns” Verbiage Built In

Once you're confident with your offer, present a purchase and sale agreement to the owner. It should contain the buyer and seller information, property details, purchase price, closing date, and other contingencies both parties agree on.

Don't forget to include the assignment clause, as if you forget that, the contract prohibits you from assigning the contract to another investor and you'll be on the hook to buy the property.

Assign the Contract to an End Buyer

After the original contract is signed, you, as the buyer, reserves the right to purchase the property up to a time stated in the contract.

You can then find another buyer to assign the contract to if you don't intend to go ahead with the purchase yourself.

Collect Your Assignment Fee Once the Real Estate Transaction Is Completed

Once the keys and the cash change hands, you are compensated with an assignment fee at the close.

Pros And Cons Of Having Successors And Assigns Clause In Real Estate Contracts

Pro #1: you have control over the transaction.

Having the phrase "and or assigns" after your name in the assignment contract template gives you the flexibility of transferring your purchase rights to another buyer for a fee.

In case you change your mind later on and decide to purchase and flip the property yourself for a higher profit, you are also free to do so.

Pro #2: You Can Put Together Real Estate Deals And Earn Without Having To Spend A Dime

Real estate wholesaling is also known as "contract flipping".

Compared to a full blown house flipping where you have to buy the property and spend for repairs and upgrades prior to selling it for a higher price, with assignment contracts you don't have to do anything to the property before you earn.

The only investment you have to make is your time and effort in finding motivated sellers.

Sometimes, you don't even have to set foot on the property nor even see it with your own eyes before you sell your buying rights to another investor!

Such is the power of a real estate assignment contract.

Pro #3: The Parties Involved Can Have Huge Savings On Realtor's Fees

The buyer's and seller's agent will each get 3% commission off the purchase price. For illustrative purposes, say a house sells for $300,000, realtor fees are a whopping $18,000 (6% of the purchase price).

On the other hand, a real estate wholesaler's assignment fee typically maxes out at $7,000 , making it attractive for house flippers and other investors. They get a nice investment property at a discount without breaking sweat since it's a wholesaler who found it for them.

For the owner, this means they pocket more money since they don't have to take anything off the price they have agreed to sell for.

Pro #4: Only One Closing Cost Needs To Be Paid

After the assignment of contract to the new buyer takes place, you immediately take yourself out of the equation, and the transaction ultimately happens between the seller and the end buyer.

This means the following:

• only one set of paperwork is to be filed;
• only the buyer and seller's names appear in the property chain of title; and,
• only one transaction takes place, so the closing cost only needs to be paid once.

Pro #5: The Wholesale Deal Is Completely Transparent

Honesty and transparency are the hallmarks of a good business person.

If you're a newbie venturing out into your first deal, there's no one yet to vouch for you so you're relying on your word to build your reputation.

It is better to inform the seller beforehand that you intend to transfer the purchasing rights for a profit so that they wouldn't be shocked if another person shows up at the closing table.

Pro #6: You Develop a Network of Real Estate Sellers, Buyers, and Investors

There is a well-known saying that goes: "Your network is your net worth."

And it is very true in this line of business. Since wholesaling is mainly facilitating the sale of investment properties between buyers and sellers , you need to have a lot of social capital, which means you need to know a lot of people.

Wholesaling real estate allows you to rapidly expand your network, opening up plenty of opportunities for you down the line.

Con #1: If One Party Backs Out Of The Deal, It Would Reflect Poorly On You

In flipping assignment contracts, what you are selling is something intangible.

As such, it is heavily dependent on the reliability of the parties at both ends of the deal to uphold the terms of the contract. If either one defaults and the sale falls through, you're the one who is going to look bad.

That's why it is important to have a buyers list ready so that you can have some wiggle room if something unexpected happens.

Or even better, have a backup financing option so you can buy the property yourself if your buyer backs out.

Con #2: Certain Real Estate Properties Are Not Eligible For Assignment Contracts

HUD homes and real estate owned (REO) properties typically have anti assignment clauses preventing them from being bought and sold through a contract assignment.

Con #3: Sellers May Think You're Taking Advantage Of Them

The assignment fee that you are set to receive from the deal is written into the contract for the involved parties to see.

This may turn buyers and sellers off: buyers might feel like they're paying for more than the property is actually worth; and sellers might feel like they missed out on some serious money while a wholesaler gets to make money in their financial distress.

Con #4: You Don't Get Owner's Rights

Although you have the exclusive right to buy the property, ultimately, what you have is just a piece of paper. You cannot touch the property, you cannot live in it, you cannot do any upgrades--the list of restrictions go on.

For distressed properties in a state of disrepair, it can be a challenge to sell it even to the most seasoned of house flippers.

Con #5: You Have to Deal With the Time Pressure Element

The contract states the closing date by which you have to find a buyer. This is due to sellers usually rushing to offload a property that's causing them problems, so they're operating on a short timeframe.

If you are just starting out and your network is still quite small, finding a buyer within a short period of time can be difficult.

Frequently Asked Questions: Real Estate Assignment Contracts

Do you need a license to be a real estate wholesaler.

The only thing you need to keep in mind to keep everything above board and avoid legal trouble is that you'll have to be the buyer or the seller in the transaction.

Never sell the property in behalf of the owner --that's akin to acting as a real estate agent, and you're going to need a license for that.

This is where having the and or assigns verbiage is useful because you can definitely make money from real estate without having to purchase the property yourself.

Once you got the exclusive right to buy the property, you can transfer said contractual rights to another buyer in exchange for a small fee who will then be the one to fulfill the terms of the original contract.

What Do I Do if the Buyer Backs Out From the Contract Assignment to Purchase the Property?

Real estate wholesaling typically goes like this: you find a buyer and everything seems to be going well and they're set to close in a few days and you're about to get that assignment fee.

Unfortunately, the buyer calls you to say that they aren't going ahead with the deal.

Are you on the hook to buy the property?

The answer is yes, unless you want to breach the contract and ruin your reputation as a wholesaler.

But, as long as you did your due diligence, crunched the numbers, and found that the property is a great buy, you shouldn't be worried about losing money.

You're guaranteed to make money eventually, maybe not as fast as if it was a straight up wholesale transaction, but there's nothing to be scared of about getting "stuck" with the property in the meantime as you look for a buyer.

What is Double Closing?

When you choose the double closing method, there is an extra step to the ones outlined above : fund the real estate purchase yourself using your own cash, or through hard money loans. Although it has a higher interest rate versus traditional options, hard money loans are favored by real estate investors due to fast approvals and interest-only payment options.

In any case, with double closing, you buy the property at the price you and the seller agreed upon beforehand, and then afterward, you sell it to your end buyer .

Sometimes, double closing can even happen on the same day if you time it right!

This means, the seller and the end buyer ultimately never have to meet. They may not even be aware of the other party, so you don't have to worry about protecting your profits from the scrutiny of either party, and no one would walk away from the transaction feeling ripped off .

That's not to say wholesaling is essentially ripping off people, not at all!

You put together the deal, you connected a motivated buyer with an all cash buyer , of course you deserve just compensation for your efforts in the form of an assignment fee. Sellers walk away with the cash to start anew, and the real estate investors gain a property they intend to make money off on.

Everybody wins!

The downside to double closing versus a real estate assignment contract is having to pay the closing costs twice . This is because ownership is transferred to you, regardless of how brief it is.

And it isn't just the cost that is doubled, you also double the paperwork !

If you figure that a double close is not for you, then you're better off doing a real estate assignment contract. That way, you're able to collect your fee without paying a cent in closing costs!

Final Thoughts: Assigning Contracts In Real Estate

Now that you have perfected your real estate contract, you feel like you're ready to embark on your first wholesale deal.

The first step that you need to take is to find the right investment property. The typical criteria are as follows:

• must be in a good location;
• must have a good future prospect of urban development (hello, land appreciation!); and,
• must be selling at a discount.

While it may sound like a tall order, with Property Leads , we can help you find the property you're looking for!

We are the only pay-per-lead platform that uses SEO to generate the motivated seller leads that has the highest chances of conversion. This means you need to talk to fewer sellers but you'll end up closing more, resulting in more profits for you!

If you're interested on taking your real estate investing business to the next level, sign up below and we'll quickly arrange a call with you to have high quality leads delivered straight to your inbox!

PROPERTY LEADS

30 N Gould St Ste N Sheridan, WY 82801 (207) 309-3949 [email protected]

Watch these Dates for Key Market Research Reports

Florida Realtors Online Education Portal - LearnUpon

Click here to launch LearnUpon, Florida Realtors' online education portal for GRI and more.

Our Annual Convention is the Premier Event for Serious Realtors

Every August, network with top producers to close more deals, master skills that lead to more listings, and learn about trends that will change how you do business.

Make Your Voice Count in the Capital

• News & Media
• Florida Realtors News

Understanding Assignability of Contract

Many real estate contracts allow buyers to “assign” their rights and obligations under the contract, and sellers can suddenly find themselves working with Joe rather than Sally. What’s a Realtor to do? Ask the right questions – and don’t give legal advice.

ORLANDO, Fla. – Florida Realtors® Legal Hotline fields many calls from members, and some topics come in waves. Currently, one of those waves is made up of Realtors® perplexed by contract paragraphs about assignability. Most callers want to know how it should be completed and whether it applies to their current transaction.

Since Realtors rather than actual buyers or sellers complete form contracts, it’s important to understand the legal concept of assignment, as well as the agent’s role when a customer has an assignable contract.

In the Florida Realtors/Florida Bar contracts (FR/Bar), assignability of contract is addressed in paragraph 7. For the purposes of this article, the examples are based on the FR/Bar residential contracts – but always refer to the contract used in your transaction since it varies.

In paragraph 7, the parties check one box to indicate if the buyer is able to assign the contract (or not), and whether the buyer would be released from liability if the buyer is allowed to assign it (or not).

First, the concept of assigning a contract: If an assignment of contract occurs, it means that one party to an existing contract (the “assignor”) has handed off the contract’s obligations and benefits to another party (the “assignee”). In the context of the FR/Bar contracts, the assignor is the buyer in the contract and the assignee is a non-party, i.e. another buyer not currently part of the contract.

The next step is addressing the release of liability. The assignor may want the assignee to step in and assume all of the contractual obligations and rights, releasing the original buyer from further liability under the contract. This means that if a buyer assigns the contract, that buyer essentially walks away from the transaction, with the assignee taking on all further obligations currently within the contract. It also means that the seller’s recourse, should the assignee fail to comply with the contract, is solely against the assignee and not the initial buyer.

In applying these concepts to language in the FR/Bar contract, a buyer’s agent should ask the buyer if they have any intention of assigning their interests in the contract to another party. If yes, does the buyer want to remain potentially liable under the contract should the assignee fail to perform?

If a seller’s agent receives an offer that is assignable, they should ask the seller if they’re willing to allow the buyer to assign the contract to a third party. If yes, is the seller okay with allowing the initial buyer to just walk away, or do they want to hold the initial buyer to the contract terms as far as liability is concerned?

Please note: These are all questions your customers should answer. A Realtor shouldn’t give legal advice, explain the concept of assignability, or describe potential outcomes or issues that could arise with an assignable contract. If your questions cause customers to ask even more questions about assignability, you should advise customers to seek legal advice from their attorney.

Lastly, understand that this article covers the contract portion of assignability. Assuming the parties agree the contract is assignable, a buyer who later wants to assign the contract still needs to sign a separate legal document assigning their rights/interests in the contract over to the assignee, aka “the new buyer.”

The initial buyer/assignor may need their attorney to assist with drafting this document, which covers their agreement. In other words, paragraph 7 only covers whether the seller and initial buyer agree to the initial buyer being able to assign the contract. A separate assignment document would cover the assignor and assignee’s agreement.

Meredith Caruso is Associate General Counsel for Florida Realtors

© 2024 Florida Realtors

You May Also Like

• Are You Ready? NAR Settlement = New Practices
• Tribute to Don Asher
• Florida Realtors Unveils 'Keeping It Real' Toolkit

GET STARTED | Get Your Fair Cash Offer Today

• Email This field is for validation purposes and should be left unchanged.

What is an Assignment of Contract in Real Estate?

By erlstealth

What is an assignment of contract in real estate? An assignment of contract in real estate is a process where the original party to a contract transfers their rights and obligations to another party, allowing the new party to step in and complete the transaction. Are you a property seller, real estate investor, house buyer, land buyer, or land seller wondering how to maximize your real estate transactions? One strategy you might not have considered yet is the assignment of contracts in real estate deals. This guide will walk you through all you need to know about this powerful but often misunderstood tool. 

Steve Daria and Joleigh , experienced real estate investors, often utilize the assignment of contract method to manage their property transactions efficiently. This process enables them to transfer their contractual rights and obligations to another party, streamlining their investment operations. By mastering this technique, Steve and Joleigh can swiftly adapt to market opportunities and enhance their real estate portfolios.

An assignment of contract in real estate is a strategic maneuver that allows one party to transfer their rights and management under a contract to another party. 

Typically used in wholesaling, this transaction enables an investor (the assignor) to negotiate a deal with a property owner and then assign the contract to another buyer (the assignee) before the closing date. 

This process circumvents the need for the assignor to finance or take ownership of the property , as the assignee steps into their shoes and completes the purchase according to the terms outlined in the original contract. 

Key Elements of an Assignment

• Assignor : The original party who has the rights to the contract.
• Assignee : The new party to whom the rights are transferred.
• Contract Rights : The specific rights being transferred, such as the right to purchase a property.

Why Use Assignment of Contract?

Using an assignment of contract in real estate can offer several advantages. 

Here are some compelling reasons to consider this strategy:

Flexibility

Assignments offer flexibility for both buyers and sellers. 

Buyers can secure a property without needing immediate financing , while sellers can move properties more quickly.

For investors, assigning contracts can be a way to minimize financial risk. 

Since you’re not closing on the property yourself, your financial exposure is limited.

Profitable Opportunities

Assignments can be highly profitable. 

By selling the contract rights to another buyer for a higher price , you can make a profit without having to own the property.

Get An Offer Today, Sell In A Matter Of Days...

• Property Address * Street Address Address Line 2 City Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Armed Forces Americas Armed Forces Europe Armed Forces Pacific State ZIP Code
• I agree to receive text messages from Creating Real Estate Solutions LLC. Message & data rates may apply.
• Phone This field is for validation purposes and should be left unchanged.

Key Benefits for Property Sellers

If you’re a property seller, you might be wondering how an assignment of contract in real estate can benefit you. 

Here are some key advantages:

• Faster Sales: Assignments can facilitate quicker transactions, allowing you to sell your property and move on to other opportunities.
• Increased Buyer Pool: By allowing assignments, you broaden the pool of prospective buyers for your property, including investors who may not be able to close immediately.
• Reduced Holding Costs: A faster sale minimizes the duration your property remains unsold on the market, minimizing your holding costs such as property taxes and maintenance.

Strategies for Real Estate Investors

For real estate investors, mastering the assignment of contract can be a game-changer. 

Here are some strategies to keep in mind:

• Identify Motivated Sellers: Seek out sellers who are eager to sell quickly. These individuals are more likely to agree to an assignment clause in your contract.
• Build a Network of Buyers: The success of your assignment deals depends on having a network of interested buyers. Cultivate relationships with buyers who are ready to take over contracts.
• Negotiate Assignment Clauses: Ensure that your contracts include assignment clauses, making it clear that you have the right to assign the contract to another party.

Tips for House Buyers and Land Buyers

House buyers and land buyers can also benefit from understanding the assignment of contract in real estate.

Here are some useful tips:

• Do Your Due Diligence: Before accepting an assigned contract, thoroughly vet the property. Ensure it meets your criteria and that there are no hidden issues.
• Understand the Terms: Make sure you understand all terms and conditions of the contract. This includes any fees or additional costs that may be involved in the assignment.
• Work with Professionals: Engage professionals, such as real estate attorneys and agents, to guide you through the process. Their knowledge and ideas can help you avoid potential pitfalls.

How to Execute an Assignment of Contract

Executing an assignment of contract involves several key steps. 

Here’s a step-by-step guide to help you through the process:

Step 1: Secure the Property

First, enter into a purchase agreement with the property owner. 

Ensure that the contract includes an assignment clause.

Step 2: Find an Assignee

Next, find a buyer who is interested in taking over the contract. 

This could be an investor, another buyer, or a real estate developer.

Step 3: Execute an Assignment Agreement

Draft and execute an assignment agreement between you (the assignor) and the assignee. 

This document should outline the terms of the assignment , including any fees.

Step 4: Notify the Seller

Inform the property seller of the assignment. 

While most contracts allow for assignment without the seller’s permission, it’s best practice to keep all parties informed.

Step 5: Close the Deal

Finally, the assignee will close on the property according to the original contract terms. 

You will receive any agreed-upon assignment fees at this point.

Common Mistakes to Avoid

While assignment of contracts can be highly beneficial, there are common mistakes to avoid:

Not Including an Assignment Clause

Ensure that your original purchase agreement explicitly states that the contract is assignable. 

Failure to do so can prompt serious complications.

Overestimating Property Value

Avoid overestimating the property’s value when setting your assignment fee. 

An inflated price can scare away potential buyers.

Lack of Transparency

Always be transparent with all parties involved. 

Hidden fees or undisclosed information can lead to mistrust and legal issues.

The assignment of contracts in real estate is a powerful tool that offers flexibility, reduces risk, and can be highly profitable. Whether you’re a property seller, real estate investor, house buyer, or land buyer, understanding this strategy can enhance your real estate transactions. By following the steps and techniques outlined in this post, you can successfully incorporate assignments into your real estate dealings. 

**NOTICE:  Please note that the content presented in this post is intended solely for informational and educational purposes. It should not be construed as legal or financial advice or relied upon as a replacement for consultation with a qualified attorney or CPA. For specific guidance on legal or financial matters, readers are encouraged to seek professional assistance from an attorney, CPA, or other appropriate professional regarding the subject matter.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Sum of 7 + 9 *

General Principles of Assignments in Real Estate Transactions

Assume a seller, ABC Company, enters into a contract to sell a parcel of land (referred to here as “Blackacre”) to Ms. Green. Ms. Green subsequently assigns her interest in the contract to Mr. Smith. Such assignments of contracts of purchase and sale raise a number of practical issues—e.g. notice to the seller, payment for the assignment, and transfer of the deposit—that affect not only the seller but also the original purchaser and the eventual purchaser. A party wishing to assign its interest in a contract of purchase and sale to a new party should not assume that the matter is as simple as entering into an assignment with the new party and then walking away and forgetting about the contract.

A real estate contract will often contain provisions that limit or prohibit an assignment of a party’s interest in the contract. If the contract is silent as to the rights to the parties to assign their interests in the contract, then the rights of the parties, with few exceptions, can be assigned. Normally, assignments of contracts relating to the purchase and sale of real estate involve the purchaser assigning its interest in the contract; however, it is not unheard of to have the seller assign its interest in the contract.

In our scenario, to be binding on it as the seller, ABC Company must be given notice of the assignment, although it does not have to receive a copy of the assignment or the business terms relating to the assignment. If ABC Company has been given notice that Ms. Green’s interest in the contract has been assigned, it may be concerned that she is ‘flipping’ her interest in the contract for a profit. Consequently, ABC Company may wish to seek advice as to whether the contract is enforceable.

Assuming that Mr. Smith is paying Ms. Green a specified amount of money for the assignment, the question arises as to when this money will be paid. Ms. Green will want the money to be paid when they enter into the assignment but Mr. Smith will want to pay at the time that they complete the purchase and sale of Blackacre. In most cases, the latter time period is the norm but, in any case, money paid for an assignment is subject to the Goods and Services Tax.

Ms. Green will likely have paid a deposit to ABC Company pursuant to the contract and will want the deposit to be repaid to her at the time of the assignment rather than having to wait until the purchase and sale of Blackacre is completed. It would not be unusual for Mr. Smith to reimburse the deposit to Ms. Green at the time that they enter into the assignment.

Mr. Smith should look to obtain assurances by way of representations and warranties from Ms. Green that the contract to purchase Blackacre is in full force and effect and that her interest can be assigned to him. In turn, Ms. Green should look to obtain representations and warranties from Mr. Smith that he will fulfill her obligations to complete the purchase of Blackacre since an assignment will not release Ms. Green of her obligations under the contract unless such release is specifically provided for—and has been agreed to by ABC Company.

Frequently, and contrary to the scenario presented here, a contract for a real estate transaction will often limit the right of the purchaser to assign its interest in the contract. A common limitation is that “. . . the purchaser may only assign its interest in the contract with the consent of the seller, such consent not to be unreasonably withheld.” In most cases, it would not be unreasonable for the seller to insist that the assignee contract directly with the seller to fulfill the obligations of the assignor under the contract so that, if there is a default, the seller has the right to seek remedies against both the assignor and the assignee.

So long as all parties to a contract of purchase and sale are aware of their rights and obligations, the completion of a purchase and sale where a contract has been assigned can and should proceed in a straightforward manner.

Learn More About Commercial Real Estate

Our Commercial Real Estate Group has experience in all aspects of the law and practice related to commercial property acquisitions, management, structuring, development and sales. 

Related Articles

Articles | Dec 23, 2021

Critical March 1, 2022 Deadline for Preserving Non-Domestic Water Rights Nears

Case Studies | Jan 8, 2021

Lease found to be "clear and unambiguous"

Articles | Apr 20, 2020

Real Estate Transactions and COVID: Challenges to Closing

Or call toll-free at 1-877-682-4404

This field is required

Subscribe to our mailing list

• Employment Law Seminar
• Construction Law Seminar
• Women's Event
• Golf Tournament
• Hockey Night
• Client Reception
• Employment Alert

What You Need to Know About Assigning Real Estate Contracts

If you haven’t assigned your first real estate contract yet, that’s okay. But if you’re going to be in the investing game for the long-haul, you will want to know how to get the job done right. Although wholesalers are most likely to use an assignment contract, the principles discussed below are true of any contract. Typically, contract assignment comes up when you find a property and secure a price, often well under market value, then turn around and “assign” purchasing rights to another investor or end-buyer. Learn how to assign contracts correctly with the tips below.

Be Clear With Your Real Estate Contract Terms

Specificity is vital for effective legal documents. One of the most common misconceptions about any type of legal writing is that legalese and verbosity come with the territory. This couldn’t be further from the truth. In fact, with assignment contracts, the simpler you keep matters, the better. Our good asset protection students may already be wondering if it is better to use your entity or your personal name in these contracts. Ideally, both parties should be using entities like LLCs to protect their investments. This also happens to make assignment easier. A good model to start with is simply: “[Your Entity Here] assigns XYZ Property to John Q. Public.” But if you have not covered your backside with an entity yet, you can still make the assignment in your own name--but we highly recommend that you get hip to protecting your assets with an LLC structure for lawsuit prevention regardless. If you are the one obtaining financing or do not yet have an entity, you may need to proceed with your own name. But you can still CYA with a simple provision in the contract.

Such a provision should include the fact that you (the buyer/assignor) are a real estate investor assigning interest in the property to a clearly-named third party. Get that clearly-named third party to initial this provision when signing the contract to reduce odds of a misunderstanding, or worse, down the line.

When in Doubt, Get it in Writing

This advice goes for any type of legal agreement. Always get any promises, offers, or commitments in writing. Never, ever just take a potential buyer’s word that they will follow through on matters discussed in negotiations. Here are some of the essential components of an assignment contract:

• A clear reference to the property in question, usually by address.
• A clause specifying that you make no guarantees relating to the property or its condition and that the other party is entering the contract following their own investigation of the property.
• A clear acceptance clause.
• A clause detailing earnest money, namely how much of the total the assignor will be paying you upfront. This is the part that is the “teeth” of your contract, which will ensure you get paid as promised. If you used an LLC or other entity in the assignment of contract, ensure payments are made to the entity’s account rather than your personal account.
• Specifications about your assignment fee, specifically dates and types of payment accepted. Caution: do not word this or any piece of your contract as a “finder’s fee.”
• A provision about your being informed of the assignment. Notify the original seller as well.

If any of the above are confusing to you, get a lawyer’s assistance with drafting an appropriate contract.

Don’t Attempt Assignment Contracts Alone: Get Professional Help

Finally, be aware that contracts are not good DIY projects. If you lack legal training, this article may be helpful in allowing you to identify if you have the relevant pieces of your assignment together, but is no substitute for personalized legal advice. Get help from experts like the legal professionals at Royal Legal Solutions for anything you need to stand up in court. We are happy to assist with basic legal documents and other transactional real estate matters as well as asset protection. Remember, we are a full-service firm for real estate investors--and real estate investors ourselves--so we have been in your shoes and are happy to help you with whatever you may need for your real estate business.

SCOTT ROYAL SMITH

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

Learn How To Achieve Total Asset Protection While Growing Your Professional Network

Ready to know more than your attorney? Join our community platform where you'll get immediate FREE access to all our best educational resources for real estate investors. Including 8 Masterclasses, group mentoring replays, and much, much more.

SIGN UP FOR OUR EMAILS

Join thousands of real estate investors in all 50 states as they enjoy exclusive content, special promotions, and behind-the-scenes access to me and my guests. No spam, ever. Just great stuff!

COMMUNITY NETWORKING

Posts by category, do you have asset protection questions we can help.

• Assignment Clause

Get free proposals from vetted lawyers in our marketplace.

Contract Clauses

• Acceleration Clause
• Arbitration Clause
• Cancellation Clause
• Choice of Law Clause
• Confidentiality Clause
• Consideration Clause
• Definitions Clause
• Dispute Resolution Clause
• Entire Agreement Clause
• Escalation Clause
• Exclusivity Clause
• Exculpatory Clause
• Force Majeure Clause
• Governing Law Clause
• Indemnification Clause
• Indemnity Clause
• Insurance Clause
• Integration Clause
• Merger Clause
• Non-Competition Clause
• Non-Disparagement Clause
• Non-Exclusivity Clause
• Non-Solicitation Clause
• Privacy Clause
• Release Clause
• Severability Clause
• Subordination Clause
• Subrogation Clause
• Survival Clause
• Termination Clause
• Time of Essence Clause

Jump to Section

Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

• Example 1 . A business closing or a change of control occurs
• Example 2 . New services providers taking over existing customer contracts
• Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
• Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival .  Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database,  EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, <  https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database,  EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database,  EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database,  EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database,  EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

• Real estate contracts
• Sales contract
• Asset purchase agreement
• Purchase and sale agreement
• Bill of sale
• Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Meet some of our Lawyers

Muhammad Yar L.

I am Muhammad, a legal counsel, technology law advisor, and corporate and commercial law expert, licensed to practice in New York State. I graduated from University of London and Georgetown Law Center and have about 7 years of experience in corporate and commercial law. As a As a technology law advisor, I possess deep insights into SaaS agreements, master service agreements, master subscription agreements, and SaaS Agreements, among others.

The Castro Law Firm, located in Royal Palm Beach, Florida, provides a range of legal services to clients that focus on probate, estate plannnig and business matters. Our staff is fluent in Spanish. We offer free consultations and virtual appointments.

I build legal solutions which create extraordinary value for my clients. I am a partner in Alliance Law Firm International PLLC in Washington. My specialties include tax, wealth management, estates, corporations/business, venture capital, private equity, and natural resources. Prior to practicing law, I had a decade-long career in international private equity and investment banking. I have worked on building and managing companies in technology, energy, materials, retail, and natural resources. I am licensed to practice in the District of Columbia and Pennsylvania. I have degrees from the Georgetown University Law Center (JD) and the Yale School of Management (MBA).

I am a Silicon Valley tech lawyer with over 13 years of in-house experience and additional years in BigLaw. I provide tech licensing, data privacy, employment, international expansion, go to market, and other corporate and commercial legal services to clients in software, SaaS, bio-tech, cryptocurrency, financing, and construction business. I currently run my own practice concentrating on transactional, commercial, corporate or employment matters. Prior to starting my own practice, I joined as the first in-house counsel to lead the global legal strategy to bring tech products to market, increase revenue, decrease exposure to risk, and raise venture funding for HashiCorp Inc., currently an unicorn technology company with evaluation over $5 billion and venture funding over $350 million; Sysdig Inc., a technology company with venture funding of $195 million; and Anaplan Inc., currently a publicly traded company on the US Stock Market. Furthermore, I acted as in-house counsel advising leading technology enterprise companies such as HP, VMware, and Genentech and currently act as member of strategic advisory boards to several technology companies located globally

I'm a tenants rights attorney based (and licensed) in New York. My expertise includes filing complaints and responsive pleadings as well as reviewing leases and contracts and motion practice.

Artem (Art) V.

Art is an attorney licensed to practice in New York, specializing in business and corporate law. His expertise encompasses a wide range of services, including corporate governance, finance transactions, contractual issues, non-disclosure agreements, intellectual property, and privacy matters. Art's professional experience also includes advising institutional lenders in the commercial real estate sector on financing, restructuring, and workout projects. Passionate about supporting the growth and development of start-ups, as well as small and mid-sized corporations, Art offers customized legal solutions for a broad spectrum of concerns related to corporate matters, contracts, and general business affairs. His approach is tailored to meet the unique needs of each client, ensuring comprehensive support in navigating the complexities of the legal landscape.

Find the best lawyer for your project

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

CONTRACT lawyers by city

• Atlanta Contract Lawyers
• Austin Contract Lawyers
• Boston Contract Lawyers
• Chicago Contract Lawyers
• Dallas Contract Lawyers
• Denver Contract Lawyers
• Fort Lauderdale Contract Lawyers
• Houston Contract Lawyers
• Las Vegas Contract Lawyers
• Los Angeles Contract Lawyers

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Find lawyers and attorneys by city

What Is an Assignment of Contract?

What happens when rights and duties under a contract are handed off to a third party.

An assignment of contract occurs when one party to an existing contract (the "assignor") hands off the contract's obligations and benefits to another party (the "assignee"). Ideally, the assignor wants the assignee to step into their shoes and assume all of their contractual obligations and rights. In order to do that, the other party to the contract must be properly notified.

Read on to learn how assignments work, including how to keep an assignment option out of your contract.

• How Assignments Work
• When Assignments Will Not Be Enforced
• Delegation or Assignment?

How an assignment of contract plays out depends on many factors, especially the language of the contract. Some contracts might contain a clause prohibiting assignments while other contracts might require the other party to consent to the assignment.

Here's an example of a basic assignment of a contract: Tom contracts with a dairy to deliver a bottle of half-and-half to Tom's house every day. The dairy assigns Tom's contract to another dairy, and—provided Tom is notified of the change and continues to get his daily half-and-half—his contract is now with the new dairy.

An assignment doesn't always relieve the assignor of liability. Some contracts can include a guarantee that, regardless of an assignment, the original parties (or one of them) guarantee performance (that is, that the assignee will fulfill the terms of the contract ).

Learn more about how contract assignments work in our article about how a contract is assigned .

An assignment of a contract will not be enforced in the following situations.

The contract prohibits assignment. Contract language, typically referred to as an anti-assignment clause, can prohibit (and "void") any assignments. We provide a sample, below.

The assignment materially alters what's expected under the contract. If the assignment affects the performance due under the contract, decreases the value or return anticipated, or increases the risks for the other party to the contract (the party who is not assigning contractual rights), courts are unlikely to enforce the arrangement. For instance, if Tom's local, organic dairy assigned the contract to a factory farm dairy, this would be considered a material alteration.

The assignment violates the law or public policy. Some laws limit or prohibit assignments. For example, many states prohibit the assignment of future wages by an employee, and the federal government prohibits the assignment of certain claims against the government. Other assignments, though not prohibited by a statute, may violate public policy. For example, personal injury claims cannot be assigned because doing so may encourage litigation.

In some cases, a party might not wish to assign the contract but only to get somebody else to fulfill its duties. Obviously, not all duties can be delegated—for example, some personal services are usually not delegated because they're so specific in nature. For example, if you hired Alan Jackson to perform at your event, he couldn't arbitrarily delegate his performing duties to Lady Gaga.

To prohibit one party from delegating the responsibilities of the contract, the parties should include specific language to that effect in the agreement. For example, an anti-assignment clause might say, "Neither party shall assign or delegate its rights."

Thank you for your feedback

Please explain why

Based on Your Previous Answers, We Have a Few Last Questions

These additional details allow our attorneys to gain a deeper understanding of the specifics of your case

How It Works

• Briefly tell us about your case
• Provide your contact information
• Choose attorneys to contact you

Copyright © 2024 MH Sub I, LLC dba Nolo ® Self-help services may not be permitted in all states. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Your use of this website constitutes acceptance of the Terms of Use , Supplemental Terms , Privacy Policy , Cookie Policy , and Consumer Health Data Notice .

• Advice: Real Estate

Four Reasons To Use A Real Estate Contract Assignment

Overlooked though they may be, these two words offer flexibility and potential to buyers that have a great real estate buyers' agent and the wits to exercise the rights they provide.

Today, we'll explore real estate contract assignments and identify a few ways a buyer can use assignability in today's insane uber sellers' housing market.

Real Estate Contract Assignment

Two Important Words In The Real Estate Contract

As the image above showed, the two words that I have been referring to are "or assignees" which follow the name of the buyer at the very beginning of many real estate contracts.

So what does "or assignees" mean here? 

DISCLAIMER : Joe Manausa Real Estate is  not a law firm, does not act as your attorney, and is not a substitute for advice from an attorney. My lay opinions shared here come from more than 30 years of selling and buying residential real estate in Tallahassee, Florida and are provided  for educational, informational, and referential purposes only.

The "or assignees" after the buyer's name lets all parties to the contract know that the buyer has the right to pass along all the rights the contract grants to him/her, and it is those rights that create the opportunities that I am addressing.

So, for example, I go and find a home for sale and put it under contract with the homeowner using a contract form that includes the 2 words “or assignees” after my name on the contract. I have the ability to assign my position as the buyer to you.

Or perhaps I sell you my position. You then proceed to close on the home as the buyer under the terms of the contract.  You'll need to check with a real estate attorney whether or not the liability under the contract can be passed along too. You will want to know if the seller retains recourse against the assignor, the assignee, or both in the case of a default by the buyer.

Answers To Frequently Asked Questions

You see, it is not uncommon for two or more parties to come together to buy a property, only to have the organizational structure of the purchase not yet established.

For example, a new home hits the market and an investment group wants to buy it. They agree to submit an offer, but only one of the parties puts her name on the form. This makes it easy in negotiations so that the document does not have to continually pass through multiple hands for each counter offer required to obtain a contract.  Prior to closing on the property, the investment group forms a new LLC and then the party who had signed the contract assigns the contract to the LLC and that is how the investment group takes ownership.

The reason that assigning contracts for profit is tricky is that the new buyer has to close on the home under the terms of the contract b etween the seller and the buyer. So unless a cash buyer is involved, it is definitely going to result in a time crunch to obtain a new buyer who can, in turn, obtain financing within the remaining window of time that the contract allows.

If the assignor is financially strong and has the ability to proceed to close if the newly assigned buyer fails, then the assignor will typically profit from a non-refundable earnest money deposit that was required as a condition of the assignment.

Keep Up With New Trends In Tallahassee!

Get the tallahassee real estate newsletter.

Other buyers, sellers, lenders, and real estate agents have this critical information, and now you can too!

Get immediate access to our most recent newsletter.

Let more than 30 years of experience work for you with charts, graphs, and analysis of the Tallahassee housing market.

The savings come from avoiding a double-closing, where Buyer One completes a purchase (and pays all the closing costs and taxes required under the contract and the law) only to sell it to Buyer Two with a whole new set of taxes and closing costs.

A famous case where something similar to this occurred was when Walt Disney wanted to acquire many contiguous land parcels in Central Florida in order to build Walt Disney World. Disney knew if all the contracts were in one buyer's name, then locals would see what was going on and prices would soar. Though I'm not sure if he used assignments or double sales, the assignment method would have saved additional money in the purchases.

They grow a network of prospective real estate investors who are interested in opportunities to buy homes to lease to tenants. The wholesaler goes out and makes offers on many of the properties that hit the market, and when they obtain favorable terms through a contract to purchase a home, they market the contract to their investor pool to find a buyer that will pay them a "finders fee" through real estate contract assignment. For a well-funded investor, this can be a great way to earn a bunch of small profits.

Assignment Of Contracts - Use With Informed Discretion

Now that you understand some of the ways a real estate contract assignment can be used, you might be tempted to want to get involved. My advice is to use discretion.

Unless you are doing a simple assignment to simplify a purchase, you really need to ensure that you are prepared to handle the various situations that could potentially occur should matters not work out the way that you planned. You should consult an active real estate attorney to address your plans and to inquire about liabilities that might not be addressed in this article.

You should also tune in to the real estate market, making sure you understand supply and demand and the likely future movement of home prices. Investors who wholesale real estate are typically very bullish on the housing market, so an unexpected turn could cause great financial harm.

If you have any thoughts about real estate contract assignment that I failed to mention in this article, please let me know through the comments section below.

Top Tips For Homebuyers

Your local expert in tallahassee.

When moving to, in, or from Tallahassee, you will fare better if you work with a local expert. We are here to help. If you have further questions on the Tallahassee real estate market, you can leave a comment below, give us a call at  (850) 366-8917 , or  drop us a note  and we'll give you the local information needed to ensure a successful, smooth transaction.

As a local born and raised in Tallahassee with a focus on customer service, I promise you'll find great success when working with Joe Manausa Real Estate, just as have our past customers. You can read thousands of their reviews reported on Google, Facebook and Zillow right here:  Real Estate Agent Reviews Tallahassee .

Think all REALTORS are alike?

Read what people are saying about working with Joe Manausa Real Estate! You can see thousands of real customer reviews reported on Google, Facebook and Zillow at this link:  CLICK HERE FOR REAL ESTATE AGENT REVIEWS .

Post a Comment

Related posts.

6 Real Estate Contract Terms You Should Not Overlook

Buying a house is more than just picking the right place—it's about nailing the details that can make or break your ...

How To Tell If Your Agent Is Writing A Real Estate Contract That Will Cause You Trouble

Whether you are buying or selling a home, a real estate contract is going to be involved and will hopefully serve its ...

• Advanced Search
• Property Tracker
• Featured Listings
• Newly Listed Today
• Buyer Testimonials
• Home Finder
• Buying New Construction
• Open Houses
• Our Guarantee
• Mortgage Calculator
• First Time Home Buying
• Out Of Country Purchasers
• Large Price Reductions
• Joe Will Buy Your Home
• How We Sell Your Home | How To Sell A House
• Seller Testimonials
• Home Evaluation
• Love Your Listing
• Marketing Plan
• Preferred Vendors
• Sell My Lot
• — BY ZIP CODE —
• — SELLER'S STATUS —
• Coming Soon Listings
• Just Listed
• Back On The Market
• Recent Price Reductions
• Foreclosures
• Bank Owned Properties
• Short Sales
• Distressed Property
• Arms Length Only
• — POPULAR SEARCHES —
• New Construction
• Luxury Homes
• Gated Community
• Homes With Acreage
• — POPULAR FEATURES —
• Golf Course Homes
• Swimming Pools
• — LEON COUNTY —
• Bobbin Neighborhoods
• Brookside Village
• Camellia Oaks
• Centerville Conservation
• Golden Eagle Plantation
• Killearn Acres
• Killearn Estates
• Killearn Lakes
• Lafayette Oaks
• Lakeshore Estates
• Lexington Parc
• Mission San Miguel
• Ox Bottom Crest
• Ox Bottom Manor
• Rivers Landing
• Summerbrooke
• Waverly Hills
• — WAKULLA COUNTY —
• Hidden Meadows
• Magnolia Gardens
• Mallard Pond
• The Flowers
• Wakulla Gardens
• — ELEMENTARY SCHOOL ZONES —
• Apalachee Elementary School
• Astoria Park Elementary School
• Bond Elementary School
• Brevard Elementary School
• Buck Lake Elementary School
• Canopy Oaks Elementary School
• Chaires Elementary School
• Conley Elementary School
• Desoto Trail Elementary School
• Ft. Braden Elementary School
• Gilchrist Elementary School
• Hartsfield Elementary School
• Hawks Rise Elementary School
• Killearn Lakes Elementary School
• Oak Ridge Elementary School
• Pineview Elementary School
• Riley Elementary School
• Roberts Elementary School
• Ruediger Elementary School
• Sabal Palm Elementary School
• Sealey Elementary School
• Springwood Elementary School
• Sullivan Elementary School
• Wesson Elementary School
• Woodville Elementary School
• WT Moore Elementary School
• — MIDDLE SCHOOL ZONES —
• Cobb Middle School
• Deerlake Middle School
• Fairview Middle School
• Ft. Braden Middle School
• Griffin Middle School
• Nims Middle School
• Raa Middle School
• Swift Creek Middle School
• Montford Middle School
• — HIGH SCHOOL ZONES —
• Chiles High School
• Godby High School
• Leon High School
• Lincoln High School
• Rickards High School

The Real Advisors Member Vault.

Our Friendly Team is Available:

M-F 9 AM - 5 PM EST

Need answers right away?

Prefer to speak to someone?

1 (813) 279-2723

9 AM - 5 PM EST

Monday -Friday

Not a fan of the phone?

Not a fan of email?

Lesson 5 – Contract Assignment 101: What it Takes to Wholesale a Property

Considering real estate investing but not sure, exactly, where to start? Dig into WHOLESALING. Done right, wholesaling is the simplest and fastest way to generate four- and five-figure paydays without laying down a dime. As a wholesaler, your role is simple:

• Find the deal
• Run the numbers and assess the deal
• Get the deal under contract
• Assign that contract to a cash buyer—usually a rehabber or fellow investor

Because you never personally close on the property, you won’t have to worry about a down payment or about securing funding for the deal. All you’ll have to do is lock it down for a good price—a price that still leaves a healthy profit margin for the “real” buyer.

Understanding Contract Assignments

That last piece—assigning the contract to a rehabber, real estate investor or retail buyer—is often misunderstood and, often, what keeps high-potential wholesalers out of the game. The good news, though? Once you understand the assignment process, it’s very simple and straightforward. As you build your business and your cash buyer lead list, the assignment process gets even easier. After a while, you’ll know exactly who you can assign this deal or that deal to and, with a quick email or two, can assign virtually any property you get under contract.

Sounds pretty good, doesn’t it?

But, first, back to the real question: what IS a contract assignment? It’s actually exactly what it sounds like. You get a property under contract and you ASSIGN that contract to the rehabber or other end buyer. For your powerhouse negotiation skills and ability to lock down a great deal, you get an assignment feed—think of it as a finder’s fee. That fee is baked into the price you present the buyer.

So let’s back up and use a real-world example—this is a recent wholesale deal we got into contract:

• ARV (After Repair Value): $225,000
• Estimated Repairs: $28,950
• Contract Price: $110,800

We got this particular property under contract for $110,800, estimating the ARV at $225,000 based on the comps and $28,950 in repairs. We then flipped the contract to a rehabber for $120,050, including our $8,550 assignment fee. For us, it was a great deal—we made $8,550 with just about two hours worth of work. And the rehabber was more than happy to pay. Even paying a five-figure assignment fee left him with a 30% profit margin—less his 5% to 10% closing costs, he’s still looking at a solid profit once the work is done.

What Assigning MEANS—and What it Doesn’t

The good thing about assignments is that they don’t require much. Once you have a cash buyer on the hook, you simply assign the contract to them as is. In other words, they’re assuming everything you and the seller agreed to—the price, the terms, the contingencies, the close dates and anything else layered into your contract. They’re also accepting your assignment fee, which you dictate.

For some wholesalers, that’s the challenge. They might have good cash buyers standing by, but the terms they’ve negotiated with the seller don’t sync with the buyer’s expectations. Maybe the repairs are more extensive than the wholesalers budgeted for or the deal they negotiated doesn’t leave enough wiggle room for the end buyer. Whatever the situation is, it ultimately leaves the wholesaler holding the contract—and that can be a real challenge.

However, if you’re smart, strategic and think like a rehabber or cash buyer, you WILL find someone to assign your contract to. In virtually every market, there are real estate investors hunting for great deals. If you have one—or, better yet, lots —you’ll be in high demand.

The Simple Steps to Assigning a Contract

With all of that info under your belt, the next step is to wholesale a property— and that means assigning a contract. Here’s what the process looks like: STEP 1: FIND A SELLER

As always, focus on MOTIVATED sellers. These sellers have a property and want—or, often, NEED—to sell. This puts you in a good position to lock down a great deal with very few contingencies. If you can show a motivated seller the value you bring to the table—you’ll buy as-is, you’ll paying closing costs, you’ll move FAST—then, often, they’re more than willing to play ball.

Motivated sellers are out there—you just need to find them. Work with your real estate agent, scour Craigslist, post bandit signs and NETWORK, all with an eye on finding motivated sellers. When you find them, ACT FAST. If you’ve engaged them, chances are other wholesalers and rehabbers aren’t far behind.

STEP 2: GET IT UNDER CONTRACT

This is the most important part. When you find a good deal—confirmed by your comps and your calculations, of course— get into contract. And do it NOW.

There are plenty of simple contract templates floating around online. Download one and bring it with you for your walk-throughs. Once you’ve agreed on a price, SIGN then start searching for a cash buyer. One final note: be sure your agreement has a clear “and/or assigns” mention in it. This will give you the power to assign that contract to a new buyer before close.

STEP 3: SUBMIT TO THE TITLE COMPANY

Depending on your market, a closing attorney or title company will conduct a title search at this stage. This search will confirm this person CAN sell the property, and that there are no outstanding liens tied to it. You want a CLEAR title before moving forward. If there are issues, consult with your attorney—it may not be worth pushing ahead.

STEP 4: FIND A CASH BUYER

Again, you’ll need to find a cash buyer to jump in and take over the contract. This is the person you’re assigning the contract to and the person whose name you’ll include on the “and/or assigns” line of the agreement.

Like motivated sellers, cash buyers are EVERYWHERE. Your real estate agent, closing attorney, title company and other industry contacts will, no doubt, know plenty of rehabbers and investors looking for deals. You can also strike out on your own and put up bandit signs, check Craigslist and scope out local events like REIA meetings and industry workshops. Here, you’ll find fellow real estate investors looking for a deal—and looking for a great wholesaler like you.

As you meet more and more buyers, be sure to get a sense of what they’re looking for and what they invest in. In the future, you’ll be able to better connect the dots and simply reach out to a targeted buyer when you have a relevant deal on the books.

In this case, once you have a cash buyer, assign the contract. We often tell the seller that we’re working with an “associate” to close the deal and that they, technically, will be buying the property. It’s important to be transparent but also to assure the seller that nothing has changed. They’re still getting the cash you agreed to with the same terms and closing schedule.

STEP 5: CLOSE—AND GET PAID!

At close, you, the seller and the end buyer will sign on the line and close the deal. Typically, the wholesaler gets their assignment fee at close.

In most cases, you’ll simply assign the contract and the end buyer will deal with the nitty-gritty of close, but there are instances where “double closes” are required. In these, you WILL close on the deal and then flip the property to the end buyer. Be careful with these double closes. Some may allow the end buyer to fund the deal. Others, though, require a gap between the closings which could leave you, the wholesaler, on the hook for the full payment amount. Granted, there are “gap loans” that cover these kinds of transactions for a short period of time—usually 24 to 48 hours. But if you don’t have to go down that road, don’t. It’s easier, cleaner and less stressful.

Ultimately, though, that’s it. That’s what it takes to assign a contract and flip a wholesale deal. Sounds pretty simple, right? Exactly.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

• About the Firm
• H. Kenneth Butera (1961 – 2024)
• William J. Brennan
• Kevin A. Palmer
• Stuart N. Cohen (Retired)
• N. Curtis Ward
• J. Kenneth Butera
• Rodney S. Fluck
• Practice Areas
• Business / Employment
• Estates / Wills
• Finance / Taxes
• General / Opinion
• Litigation / Personal Injury
• Personal / Family
• Restaurant / Liquor License
• Real Estate / Property
• Queen’s English / Latin Lovers

Home » Blog » Newsletters » Assignment of Real Estate Contracts

Assignment of Real Estate Contracts

This article continues the discussion of assignments of contracts  from our last issue.  Specifically, this article addresses assignment of real estate sales contracts, where the ability to assign and the effects of assigning are sometimes crucial.  Following are some aspects of assignments of real property purchase and sale agreements.

         Are real estate contracts freely assignable?  Maybe. This depends on the agreement that the buyer and seller negotiated.  Typically a seller reaches a level of comfort with regard to the trustworthiness and financial wherewithal of a particular buyer prior to signing an agreement. This expectation can be defeated if the buyer can simply assign its rights to buy the property to a third party who is a “stranger” to the seller.  As a result, sellers attempt to restrict assignments of real estate agreements.  For example, the agreement might say that it can be assigned only with the express written consent of seller, which cannot be unreasonably withheld.  Whether a party acts “reasonably” is subjective, and thus, this approach can cause problems. A second approach might be to deny the buyer’s right to assign the property unless it is to an affiliate or subsidiary of the buyer.  This approach allows a buyer to use a particular entity often times a so-called “single purpose entity” to buy the property.  From the seller’s standpoint, this is often acceptable because the seller is generally still dealing with the same principals; the owners behind the assignee are generally the same owners behind the original buyer. 

If the agreement is silent on matters of assignment it is freely assignable provided the transaction is an all cash deal to the seller.  If the agreement calls for a mortgage from the buyer to the seller or if the property is to be bought by the buyer subject to a mortgage, then the seller is only obligated to make the deed out to that original buyer, effectively nullifying any assignment.  This is an old rule but it remains sensible because when the seller signs the agreement he is relying on the credit-worthiness of a particular buyer to either make good on mortgage payments to the seller or to make payments on a mortgage loan upon which the seller is probably still a borrower. 

Is the buyer liable on the agreement after he assigns it?  Generally, yes.  Unless the agreement of sale or an assignment document that is signed by all parties including the Seller expressly relieves the assignor of liability, the assignor remains bound and liable for financial obligations under the agreement.  For this reason, it is a good idea for the assignor to get a written indemnity from its assignee as part of the assignment. 

What about realty transfer taxes?  It was once commonplace in commercial transactions in Pennsylvania for a buyer to sign an agreement to get a property “under contract”, and afterward set up an affiliate or a subsidiary which the buyer would assign the agreement to at closing.  This is less common now as the Pennsylvania Department of Revenue now generally taxes assignments of agreements of sale.  To avoid such taxes buyers now often avoid assignments by setting up and capitalizing the buyer (by contributing deposit money to the buyer) at the time the agreement is entered into rather than signing an agreement and then subsequently assigning it to a later formed entity.   Other approaches are possible, including the use of so-called “novation agreements”, but in general buyers seem to be taking the simpler route of setting up the buying entity at the start of the transaction and skipping the assignment of the agreement altogether.  

If you are a seller an assignment restriction should be included in your agreement of sale.  If you are a buyer the substance of these restrictions should be reviewed and, if needed, negotiated.  Realty transfer tax liability should also be considered. 

       —  Rod Fluck

Recent Posts

• PLCB: Emergency Temporary Expansions under the COVID -19 Emergency Declaration
• To All Members of the Alcohol Industry in Pennsylvania
• The PLCB to offer Virtual Training for RAMP
• Pennsylvania COVID 19 Update
• Pennsylvania COVID-19 Measures Effective Jan. 1, 2021
• December 2020
• November 2020
• October 2020
• September 2020
• November 2019
• September 2019
• January 2019
• November 2018
• September 2018
• January 2018
• October 2017
• August 2017
• February 2017
• December 2016
• October 2016
• August 2016
• February 2016
• December 2015
• October 2015
• August 2015
• February 2015
• December 2014
• October 2014
• August 2014
• February 2014
• December 2013
• October 2013
• August 2013
• February 2013
• December 2012
• October 2012
• August 2012
• February 2012
• October 2011
• February 2011
• February 2010
• January 2010
• February 2009
• October 2008
• September 2008
• February 2008
• December 2007
• October 2007
• February 2007
• October 2006
• Newsletters
• Uncategorized

Understanding the Concept of an Assignment Fee in Real Estate

Navigating the realm of real estate transactions can often feel like deciphering a complex puzzle, especially for those who are early on their property journey. A concept that can confuse professionals and individuals involved in transactions alike is the idea of an assignment fee in real estate—something that comes into play in various scenarios. In the context of real estate, an assignment fee is an essential concept to grasp, bridging the gap between  creative financing  and the traditional purchase and sale of properties.

What is Assignment in Real Estate?

To understand an assignment fee in real estate, you first have to understand what an assignment is. An assignment contract is essentially the document that gives someone the right to purchase a property. The assignment fee refers to the payment made to an individual, generally known as an assignor, for transferring their rights and obligations under a pre-existing real estate assignment contract to another party, known as the assignee. 

This transaction is particularly prevalent in the practice of  real estate wholesaling . In these transactions, an individual will secure a contract to purchase a property and then assign that same contract to an end buyer, charging a fee for the convenience and the opportunity they present.

A contract assignment fee is a strategic tool for those looking to leverage lucrative opportunities within the market without needing a significant capital investment. It allows for flexibility in the investment realm, enabling professionals to generate income from real estate deals without the traditional barriers of entry. This means people can make headway in their careers without having to obtain mortgage loans or conduct extensive renovations.

In essence, the assignment fee is the financial reflection of the value that the assignor brings to the table in a transaction. The assignor is a useful party for both buyers and sellers, helping the process along by identifying a potentially profitable deal, negotiating terms, and then passing on the right to execute the deal to a suitable party. Understanding this concept is crucial for real estate investors at all stages of their careers, especially those interested in using wholesale strategies and creative financing options.

What is an Assignment Fee in Real Estate?

The assignment fee in real estate is a concept rooted in the overarching principle of a contractual rights transfer. It represents the price that an assignee, someone interested in purchasing property, pays to the assignor for the rights to acquire said property under the terms the assignor has already negotiated with the seller. To make sure you get the right fee for the assignment of a contact, you need to understand the mechanics of how they work. 

This section expands on how assignment fees function in real estate transactions and delves into the factors that influence their amounts.

Explanation of How Assignment Fees Work in Real Estate

When an investor or a wholesaler, known in this case as the assignor, enters into a purchase agreement with a property seller, they acquire the legal right to buy the property at some negotiated, agreed-upon terms. However, instead of completing the purchase themselves, the assignor then finds another buyer, known as the assignee, who is interested in taking over the contract to eventually own the property.  This is when assignment fees come into play. 

The assignee must pay an assignment fee to the assignor for the right to purchase the property. Only once this fee is paid can the assignee step into the shoes of the original buyer, then proceed to close the deal with the seller. The original contract to buy is thus “assigned” from the assignor to the assignee, who from then on becomes responsible for fulfilling its terms.

Factors That Determine the Amount of Assignment Fees

The amount, or monetary value, of the assignment fee can vary greatly from deal to deal, being influenced by a range of factors, which we’ve broken down below:

Property Value and Equity:  Appropriately, the value and equity of the property will inform the assignment fee. A property with high value or substantial equity typically commands a higher assignment fee and vice versa.

Market Demand:  Consider  overarching market trends  when ascertaining an appropriate assignment fee. For example, in a seller’s market with higher demand for properties, assignment fees can increase because of plentiful competition among buyers.

Deal Profitability:  Even in the cases of lower-value properties, the nature of the deal itself will impact the assignment fee. This means that the more profitable a deal appears to be, the higher the fee that an assignor can command.

Negotiation Skills:  In a similar vein to the impact that profitability can have, negotiation skills can also change the shape of an assignment fee. The ability of the assignor to negotiate deals on both ends can directly impact their fee amount, with skilled negotiators often being able to secure higher fees.

Timeframe:  Time is money, and in the case of a wholesale assignment contract, this can be especially true. If the assignor negotiates the situation and closes the deal quickly, they might be able to command a higher fee for the increased convenience of a speedy transaction.

Comparison of Assignment Fees with Other Real Estate Transaction Costs

Assignment fees differ from the costs associated with various other real estate transactions in a variety of ways: 

Earnest Money vs. Assignment Fee:  Earnest money is a kind of deposit made to demonstrate the buyer’s seriousness about acquiring a property. This fee can typically be refunded under certain conditions or applied to the purchase at closing. On the other hand, an assignment fee is a non-refundable payment made to the assignor, specifically for the right to take over the contract.

Closing Costs vs. Assignment Fee:  Closing costs can encompass a variety of fees that buyers and sellers pay at the end of a real estate transaction. These fees can include things such as those associated with title searches, real estate attorney’s fees, and credit report charges. Assignment fees are separate from these, only ever being paid to the assignor for the contract rights.

Commission vs. Assignment Fee:  Real estate agents earn their living through commissions based on the property’s sale price, paid by the seller, generally from their earnings through making the sale. In contrast, an assignment fee is paid by the assignee to the assignor and is not related to the sale price or commission.

Understanding the nature of assignment fees, such as when they’re applicable, how they are calculated in relation to a transaction, and how they compare to other common transaction costs, is essential for anyone involved in real estate investing. This level of understanding is particularly vital in strategies such as wholesaling, where such fees are part and parcel of the process.

Pros and Cons of Assignment Fees

Assignment fees in real estate can be positive elements of transactions for sellers and investors while posing some notable challenges depending on the perspective of all parties involved, including the buyer. Below, we explore the advantages and disadvantages for the enactors of these transactions, as well as the risks and challenges that come with assignment fees.

Advantages for Sellers and Investors

For sellers:.

Quick Sales:  Sellers benefit from the existence of assignment fees as they can do wonders for speeding up the transaction. Wholesaling and the assignment fees that come with it are especially viable solutions when a seller wants to shift their asset quickly. Investors or fellow wholesalers who offer to pay these fees often aim to close deals rapidly.

Fewer Hurdles:  Sellers might avoid some traditional selling hurdles when embracing the nature of wholesaling and assignment fees. In the standard selling cycle, sellers might have to go through various stages, such as multiple showings or a buyer’s own financial approval process. These processes can be skipped altogether when dealing with investors ready to pay an assignment fee.

For Investors:

Profitability:  Investors or wholesalers can use assignment fees as their primary source of income. As it sidesteps the traditional processes of investing and reselling properties, wholesalers stand to make a profit through the assignment fee without having to close on the property themselves. By embracing this system, they also avoid closing costs and the need for financing.

Less Capital:  Wholesaling is a great method for generating income, without needing the same level of seed investment. Since the investor doesn’t need to purchase the property outright, they generally just have to pay a small (often refundable) deposit for the contract; there is less capital required upfront compared to traditional real estate investments.

Flexibility:  Because of the nature of deals that use assignment fees, investors can back out of a particular deal at any time. This can be achieved by offering and assigning the contract to another, more suitable buyer if the deal doesn’t fit their investment strategy or if they cannot secure financing.

Disadvantages for Buyers and Sellers

For buyers:.

Increased Cost:  Assignment fees do often increase the overall cost for the end buyer, as it becomes their responsibility to cover both the property’s agreed-upon price and the assignment fee. In some cases, the assignment fee can be taken from the overall sale price, but this isn’t common, meaning the speedier sale usually comes with an inflated price tag. 

Transparency Issues:  Buyers in these situations can often find it challenging to get full transparency regarding the property’s conditions or the original contract terms if not properly disclosed by the assignor. This shouldn’t be an issue, as long as the wholesaler or assignor does their job properly, but buyers should make sure to vet any collaborators carefully. 

Potential for Overextension:  Sellers may encounter issues if they work with the wrong wholesaler or investor. In some cases, an inexperienced investor can overextend and find it difficult to find a buyer to whom they can assign the contract, slowing down the transaction process and possibly reversing it. 

Market Misrepresentation:  Sellers could face the challenges of market misrepresentation if the assignor markets the property incorrectly or unethically, leading to potential legal challenges. For example, if the assignor lies about the property’s amenities, uses  unrealistic photography , or overvalues it, buyers might respond with legal action. 

Potential Risks and Challenges with Assignment Fees

Legal and Ethical Considerations:  The legality of assignment fees, much like many other aspects of the real estate market,  varies from region to region . Along with the legal side of things, there may also be ethical considerations to consider if parties are not fully informed of the contract terms and fees involved.

Market Fluctuations:  Market conditions can change rapidly—need we remind you of what happened to the housing market in 2008? This means that if the property value decreases or interest rates increase, it will likely become more challenging for the assignor to find a buyer willing to pay the fee on top of the existing property price.

Contractual Risks:  If the assignee fails to close the deal, the assignor might end up legally obligated to purchase the property under the original contract terms. Considering the reasons that most investors choose to embrace wholesaling and assignment fees, this could pose a significant financial risk that they’re not ready to incur.

Reputational Risks:  Assignors who consistently charge unnecessarily high assignment fees might gain a negative reputation in the real estate community among potential clients and fellow professionals alike. It’s important to consider what a fair, mutually beneficial fee should be to avoid potentially negatively affecting future business.

Complexity in Transactions:  Assignment fees add a level of complexity to real estate transactions, which are already fairly complicated at the best of times. There may be misunderstandings or disputes between the involved parties over the terms of the contract, the condition of the property, or the responsibilities each party has.

Both sellers and investors involved in wholesaling and assignment in real estate need to weigh the potential for quick and profitable transactions against the complexities and risks assignment fees introduce. It is crucial for every party involved to conduct suitable due diligence, operate transparently, and possibly seek professional legal counsel to ensure the process is conducted legally and ethically.

Legal and Ethical Considerations

The use of assignment fees in real estate transactions is full of potential, being a viable part of a strategic investment plan. However, while assignment fees and the deals they’re attached to can be highly lucrative, they also come with the potential for legal and ethical quandaries. Here, we delve into the legal regulations and ethical considerations that assignors should consider, highlighting potential issues that could arise from the misuse of assignment fees.

Legal Regulations and Requirements

Regulatory landscape:.

Disclosure Requirements:  Many jurisdictions require the full disclosure of an assignment fee to all parties involved in a transaction, ensuring no one feels like they’ve missed out on any vital information. Failure to clearly express the assignment fee to the buyer can often lead to legal penalties or complications.

Contractual Rights:  There are some contractual points to consider when handling an assignment fee in real estate. The original purchase agreement must expressly allow for the assignment of the contract without the need for repeat consent of the seller, or the investor must obtain written permission from the seller to assign the contract.

Licensing Laws:  Some regions may require an individual enacting a wholesale deal or receiving an assignment fee to have a professional real estate license, as the transaction could be considered as engaging in real estate brokerage without a license. This is worth considering if you want to pursue a career as a wholesaler or investor in general. 

State and Local Laws:  Both assignment fee legality and the ability to assign a contract can vary greatly between the different states and localities of the US. It’s crucial to understand the specific regulations of the area where you’re working and or where the property is located. It’s always important to tailor your approach to real estate for the area that you operate within. 

Ethical Considerations:

Fairness to All Parties:  Ethically, the fee should always reflect the value that’s actually been added by the assignor in finding the deal and should not be exploitative. If you’re working as a real estate wholesaler or receiving an assignment fee in any other way, make sure that you’re offering real value without overstating your contribution to the transaction. 

Transparency:  Assignors must be totally transparent about the property’s condition, the original contract terms, and the assignment fee’s size at every stage of the transaction. Remember, you’re not just trying to avoid legal implications with your honesty; you’re looking to build positive professional relationships built on trust. 

Conflict of Interest:  Ethically, an assignor should avoid any conflicts of interest in all transactions and should not misrepresent the potential value or investment benefits to the assignee. For example, if the assignor knows that an area is losing steam in the market, they should make that clear to their assignee.

Examples of Potential Legal and Ethical Issues

Non-Disclosure:  Failing to disclose one’s assignment fee openly and clearly to the end buyer or seller can lead to lawsuits, as it may be considered a fraudulent practice. It’s absolutely essential that a wholesaler makes it clear what they stand to gain from a deal so everyone understands the transaction from top to bottom. 

Predatory Practices:  Charging exorbitant assignment fees, especially in distressed markets or from vulnerable sellers, which are often hubs for real estate wholesaling, can be seen as unethical and might lead to legal challenges. This is why offering real value and making your fees reasonable is crucial.

Misrepresentation:  An assignor could face serious legal action if they misrepresent the terms of the original contract or the property’s condition for the purpose of securing a higher fee. It goes hand in hand with all of the other aspects of transparency—assignors must be clear and honest at every stage to avoid legal and ethical complications. 

Violation of Licensing Laws:  If an assignor acts as a de facto real estate broker by frequently assigning contracts for fees without a professional license, they might face legal penalties, including fines and injunctions. These laws vary from state to state, meaning it’s best to have a license in place, ensuring you can work in as many areas as possible. 

Breach of Contract:  If the original contract does not allow for the assignment of the property and the assignor proceeds without consent, they are highly likely to be sued for breach of contract. It should go without saying, but every real estate transaction needs to be enacted with the utmost professionalism, ensuring every party is fully aware of its nature. 

It’s essential for every party involved in the assignment of real estate contracts to be aware of the legal and ethical implications. The complex nature of these transactions often warrants the involvement of a dedicated legal professional to navigate the potential minefield of legal regulations and ethical considerations. Moreover, maintaining transparency and integrity throughout the process not only helps assignors avoid legal troubles but also builds a reputation that can lead to more successful deals in the future.

In this exploration of assignment fees in real estate, we’ve navigated their many complexities and nuances. From definition to application, assignment fees are a pivotal mechanism for investors, particularly in the realm of wholesaling.

There are many advantages and disadvantages associated with assignment fees. For sellers and investors, they can represent an expedient route to liquidity and profit. Conversely, for buyers, they can often introduce additional layers of cost and complexity.

The discussion of legal and ethical considerations illuminated the tightrope walked by those who engage in these transactions. The importance of adhering to disclosure norms, maintaining transparency, and aligning practices with the legal stipulations of the local and state jurisdictions cannot be overstated in this particular vein of real estate.

While the concept of assignment fees may appear straightforward, its application is often fraught with potential legal and ethical pitfalls. Those involved in real estate transactions must have a clear understanding of these fees and the corresponding regulations that govern their use.

By engaging in thorough research and due diligence and enlisting expert guidance, navigating the complex world of real estate can be achieved with confidence. The strategic use of assignment fees can indeed unlock opportunities and foster successful transactions, but only when managed with suitable care and consideration of all the variables at play.

For more insightful pieces about the real estate industry,  visit our blog today .

Copy short link