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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:
Real Estate Meetings
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.
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Purchase Contract Assignment Form
Create a high quality document online now!
Updated October 30, 2021
A purchase contract assignment is between a holder (assignor) that transfers their interest in buying real estate to someone else (assignee). Before the closing, it is common to assign a purchase contract to a business entity or the person whom the loan or mortgage will be under. It’s also accepted for a contract holder to sell their rights to buy a property for a fixed amount.
Depending on the purchase contract signed between the seller and assignor, the seller may be required to give their consent before the agreement is legally valid.
Table of Contents
- Simple Version
- Advanced Version
- Step 1 – Come to a Verbal Agreement
Step 2 – Share the Purchase Contract
Step 3 – create an assignment, step 4 – attach and close, sample : purchase contract, how to write.
Download: Adobe PDF , MS Word , OpenDocument
How to Assign a Purchase Contract (4 Steps)
This guide is for assignments when selling a purchase contract to a 3rd party .
Step 1 – Come to a Non-Binding Agreement
The buyer (assignor) in the original purchase contract and the new buyer (assignee) will need to come to an agreement. In most cases, the assignee will offer a fixed amount to buy the contract.
The assignor may need to require the assignee to sign a non-disclosure agreement (NDA) as the details included in the purchase contract are confidential.
After signing the NDA, the assignor should share the purchase contract with the assignee.
After the purchase contract is shared an assignment should be written and signed. If there is a payment as part of the assignment, it should be paid at the time of signing.
If the seller’s consent is required, the assignment will need their signature to be valid.
After the assignment is signed, it should be attached to the original purchase contract. The assignee will be recognized as the buyer and will be required to close on the property in accordance with the terms of the purchase contract.
Section 1 The Parties
(1) Effective Date For Purchase Contract. The calendar date considered the first day of this document’s effect on the Parties involved must be established in the first section.
(2) Assignor Of Real Estate Interest. The Party who shall release his or her interest on the concerned real estate upon the satisfaction of this agreement’s conditions must be identified with a record of his or her full name and mailing address. If Assignor is a Business Entity then make sure the name recorded is its entire legal name.
(3) Assignee Of Real Estate . The Party that will be able to express a rightful interest or claim on the real estate or real property through this document will need to be named. This will require a record of his or her name and address. Bear in mind, a Business Entity acting as the Assignee must have its legal identity including status suffix (if any) produced.
(4) Seller Of Real Estate. The Property Owner or the Party selling the concerned real estate requires his or her name presented.
(5) Date Of Purchase Contract. Furnish the time and date of the original purchase contract this agreement concerns.
Section 2 The Property
(6) Property Location. The concerned real estate must have its physical address (where it may be visited in person) documented.
(7) Property Description. In addition to the location of the concerned real estate, it is recommended that an adequate description be provided. For instance, define any type of structure on the property (i.e. residential building, office building with parking lot, etc.). Ideally, the property’s legal description can be reported here or attached to this agreement.
Section 3 Transfer
(8) Fixed Payment. The manner by which the Assignor releases his or her interest over the concerned real estate to the Assignee will need to be discussed in this paperwork. If this transfer of interest results from a payment from the Assignee to the Assignor then mark the “Fixed Payment” checkbox (found in the third section). This statement will require the exact “Payment Amount” and the maximum number of days after the Effective Date when this payment must be received from the Assignee in order for it to be on time and in compliance with this agreement.
(9) No Payment. Select the second checkbox if “No Payment” will be required of the Assignee to assume the real estate interest being discussed from the Assignor.
(10) Gift. If this transfer of interest is considered a gift from the Assignor to the Assignee then select the “Gift” checkbox.
(11) Other. There may be other circumstances or conditions the Assignee and Assignor have agreed to fulfill for this assignment to occur. For instance, the release of interest may be dependent on the termination of the Assignee from a shared Business Entity with the Assignor. In any case, if none of the statements made in the third section accurately define the basis for this assignment, select the “Other” checkbox and provide this definition to the space available.
(12) Required Seller Approval. This agreement has thus far dealt with the Assignor and the Assignee. If the Seller of the real estate must approve this assignment then the first statement made in Section IV should be selected and a report the number of days within the effective date of this agreement when such approval must be gained (from the Seller) will be required.
(13) No Seller Approval Requirement. Select the second statement made by Section IV if this agreement may require only the consent of the Assignor and the Assignee to be effective.
(14) Governing Law. Report the state that will hold authority over this assignment and the agreement being developed.
Section 10 Additional Terms
(15) Remaining Agreement Conditions. All the conditions and the terms that the Assignor and Assignee require to be complied with should be contained within this agreement before it is signed. Section X will supply the space for such information to be presented and will allow the title of additional paperwork that will be attached to be included. This area may be left unattended if the information produced thus far represents the full scope of the obligations each Party must live up to for this assignment to proceed to completion.
(16) Assignor Signature And Date. The Assignor making this assignment should sign his or her name and dispense the date this action was completed.
(17) Assignor Printed Name.
(18) Assignee Signature And Date. The Recipient of this assignment, the Assignee, should review this agreement then sign his or her name. The date of the Assignee signature must also be reported at the time of signing.
(19) Assignee Printed Name.
(20) Seller Signature And Date. If it has been indicated that the Seller must provide consent, then he or she must sign this paperwork upon its completion and a thorough review so that this assignment may proceed. His or her signature date will also be required.
(21) Seller Printed Name.
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Assignment Of Purchase And Sale Agreement
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What is an Assignment Of Purchase And Sale Agreement?
An assignment of purchase and sale agreement is a real estate transaction contract that defines the parties and terms of a real estate purchase. This agreement allows the original purchaser of a property to transfer or assign their rights in the deal to a third party. This agreement is often used in flipping houses.
Assignment of purchase and sale agreements allows the purchaser to take their rights and obligations under a purchase agreement and reassign them to a third party who will take on those responsibilities. Some contracts may have clauses that prohibit assignment or allow it under specific circumstances usually laid out in the agreement.
Common Sections in Assignment Of Purchase And Sale Agreements
Below is a list of common sections included in Assignment Of Purchase And Sale Agreements. These sections are linked to the below sample agreement for you to explore.
Assignment Of Purchase And Sale Agreement Sample
Reference : Security Exchange Commission - Edgar Database, EX-10.1.1 2 d245573dex1011.htm ASSIGNMENT OF PURCHASE AND SALE AGREEMENT , Viewed October 18, 2021, View Source on SEC .
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I am a startup veteran with a demonstrated history of execution with companies from formation through growth stage and acquisition. A collaborative and data-driven manager, I love to build and lead successful teams, and enjoy working full-stack across all aspects of the business.
Elbert Thomas is the founder of the Thomas Law Group, LLC. Elbert is proficient in contract creation, drafting, reviewing, and negotiating various business contracts and demand letters in industries such as construction, personal, professional services, non-profits, and real estate. In addition, Elbert is also experienced in start-ups, small business formation, drafting operating agreements, and estate planning.
Pico & Kooker provides hands on legal advice in structuring, drafting, negotiating, interpreting, managing and enforcing complex high value commercial transactions. Adept at navigating complex environments, Jonathan has extensive expertise advising clients on a wide range of long- and medium-term cross border and financial engagements, including public tender participation, PPPs, export sales agreements as well as policy and regulatory formulation. Jonathan and his co-founder, Eva Pico have represented and acted on behalf of lenders, global corporations and other market participants across a range of industries including financial services, infrastructure and transportation. As outside counsel, Pico & Kooker, has developed a strong rapport and working relationship with their clients and appropriately work with their in-house teams to increase consistency, processes and procedures. The company employs a unique approach as practical, business minded outside legal counsel who believe in proactively partnering with their clients to achieve desired results while managing and engaging key stakeholders. They listen to their clients to develop customized solutions that best meet their needs while aligning with their objectives, vision and values. Some representative transactions include advising the World Bank on project finance and portfolio options to address the costs and risks associated with integrating renewable power sources. Also advising them as legal counsel, Jonathan developed policies, regulation and models for emerging market governments entering into public-private partnerships. In addition to his work with the World Bank, Jonathan has worked with some of the world’s largest consulting firms, financial institutions and governmental organizations, including the United Nations, the governments of the US, UK and select African countries. Through out his career, he has worked with large, multinational corporations both by consulting in-house and acting as outside counsel on large cross-border transactions. He graduated from Georgetown University’s law school and was admitted practice as a lawyer in New York, England and Wales and, as a foreign lawyer, in Germany. He has written several articles for trade journals and has been cited by several business publications in worldwide. Jonathan is a native English speaker and has high proficiency in German and a functional understanding of Spanish.
I am a solo practitioner and the founding attorney at Uzay Law, PLLC, which provides legal services in immigration and contracts. I am licensed to practice law in Texas. Prior to practicing law, I worked as a producer and film consultant in New York for over fifteen years. I am fluent in English and Turkish.
As an entrepreneur at heart, I enjoy working with business owners and executives on a variety of corporate matters, including mergers and acquisitions, corporate financing, corporate governance, public and private securities offerings, privacy regulation and early-stage corporate matters including formation. As a lawyer and business professional, I understand the value of providing personal service and focused legal answers to clients navigating a rapidly changing regulatory environment. Whether in Aerospace, Consumer Goods, or Technology, I find great success in work collaboratively with clients to strategical structure their business or implementing strategic growth-oriented financing opportunities.
Experienced legal counsel to entrepreneurs, small businesses, and investors. Advising clients starting, buying, selling, operating, financing, and investing in businesses // U.S. Army Veteran // Ironman Triathlete, Marathoner, Open Water Swimmer, USAT Triathlon Coach // Lover of Dogs, Cribbage, Craft Beer, Bourbon, and Cigars
Licensed attorney in KY and Federally JD, 2006 University of Louisville MBA, 2006 University of Louisville BS, 2001 Berea College Licensed Title Agent Arbitrator and Certified Mediator Business Consultant Adjunct Professor, Law and Business
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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 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?
• Who Buys Real Estate Contracts?
• How To Assign A Contract In Real Estate?
• How Do Real Estate Wholesalers Get Paid?
• What Is An Assignment Clause In Real Estate?
• What Is Assignment Of Contract?
• Assignment Of Contract Template
• Assignment of Contract vs. Double Closing
• Assignment Of Contract: Pros & Cons
• Common Misconceptions About Assigning Real Estate Contracts
What Is An Assignment In Real Estate?
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.
How Does Assignment Of Contract Work?
The assignment of contract is one of the easiest exit strategies in all of real estate investing. With this being said, there are a number of steps to ensure a profitable and efficient contract assignment for your learning. Below are 6 simple steps on how to assign a real estate contract:
- Find the right investment property for sale
- Obtain the contract
- Submit the contract
- Discover an end buyer
- Assign the contract
Is It Legal To Assign A Real Estate Contract?
Yes, it is legal to assign real estate contracts. However, there are situations when assignments will not be enforced, such as:
- Not getting consent from all parties involved. It is important to get written consent from all parties involved on the contract.
Solution: Get written consent from all parties.
- When the existing contract says it is non-assignable. You cannot take it upon yourself to assign a contract that says it is non-assignable.
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.
- Properties that have certain restrictions. Some properties such as short sales , REOs , and HUD can have deed restrictions which do not allow you to perform an assignment of contract within a certain time period.
Solution: Close on 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.
Why Use A Real Estate Assignment Contract?
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, & 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, 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.
What Is An Assignment Fee In Real Estate?
An assignment fee is the compensation an assignor receives for selling the equitable interest in a real estate contract to another buyer (“the assignee”). This is also known as a “wholesale fee.”
Who Buys Real Estate Contracts?
Real Estate Investors, such as fix & flippers , typically buy real estate contracts from wholesalers so they can have properties to renovate and resell.
Download FREE Wholesale Real Estate Contracts (PDF)!
How To Assign A Contract In Real Estate?
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 that 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.
How Do Real Estate Wholesalers Get Paid?
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.
Important: 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.
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.
What Is Assignment Of Contract?
The real estate assignment contract is also known as the assignment of purchase and sale agreement. This is a separate legal document to the original contract.
The real estate assignment contract has the terms of the assignment, such as to who is the assignor/assignee, when the payment is taking place, and closing terms.
Assignment of Contract Template
Here is an example of an assignment of a contract below:
Here's another example of a real estate assignment contract PDF by The Judicial Title Insurance Company.
Assignment of Contract vs. Double Closing
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:
- that 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 can take place when the seller has an issue with the assignment of contract.
Double closing is when you close on the property (meaning you actually buy it), and then resell the property to the end buyer that you would have assigned the contract to originally.
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 Of Contract: Pros & Cons
Assignment contracts can be profitable and well structured, but with anything there can be some obstacles you may face 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 haggle of purchasing the property.
- Assignment contract is cheaper than double-closing : An assignment of 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 profit off of them.
- Networking : Assignors, who were once real estate investors, can increase their network by 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 turn 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.
Common Misconceptions About Assigning Real Estate Contracts
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
Utilizing an assignment of contract is a profitable real estate investment exit strategy. If you don’t want to buy, fix, and flip property, then you can always just wholesale it once it’s under contract by an assignment.
Assigning real estate contracts requires little to no capital, takes much less time to complete than other investment strategies, and is a great way to profit quickly from your deals.
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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.
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.
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Real Estate Assignment of Contract Explained
If you are thinking about purchasing real estate, there are several real estate investment strategies you could consider. This includes buying rental property , flipping houses, BRRRR investing, buy and hold, and real estate investment trusts (REITs). Another potentially lucrative strategy for making money in the real estate industry is wholesaling. This basically involves finding real estate deals that you don’t actually plan to purchase, but plan to transfer to an end buyer. This kind of transaction uses a principle referred to as assignment of contract .
What Is an Assignment of Contract in Real Estate?
Assignment of contract takes place when one party to a contract (the assignor) transfers the legal obligations of the contract to another party. The recipient of the assignment (the assignee) then assumes responsibility for the terms of the contract. In other words, you can flip real estate contracts and make money from a real estate deal without actually owning the income property .
Is an Assignment of Contract Legal ?
Yes, assignment of contract in real estate is legal. However, contract assignment will not be enforced in the following circumstances:
- There is no written consent – Before a real estate assignment contract is enforced, all the parties involved must give written consent.
- The contract doesn’t allow assignment – Some contracts come with an anti-assignment clause which prohibits any assignments.
- 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 that prohibit the assignment of real estate contract within a specific time period.
How Does Assignment Work in Real Estate?
Here are the common steps for assigning a contract:
Find investment property for sale
The first thing you need to do is find a motivated seller who is willing to sell their home at a price that is below market value. The main difference between a motivated seller and a regular seller is the former’s sense of urgency. Motivated sellers want to sell fast due to reasons such as divorce, living out-of-state, delinquent taxes , or job transfers. This sense of urgency could work to your advantage at the negotiation table.
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. You can visit Mashboard and find this info in minutes. Then, ask them if they are willing to sell and make an offer.
- Look for the county’s delinquent tax list – This list is a goldmine when it comes to finding motivated sellers in an area. Simply visit the county government’s website or offices to get the delinquent tax list.
- Mashvisor Property Marketplace – This is the best place to find cheap houses such as foreclosed homes, bank-owned homes, short sales, and auctioned homes. You can narrow down your search for off market properties using filters like location, budget, property type, miles, number of bathrooms, number of bedrooms, and desired cash on cash return. The inbuilt investment property calculator will help you estimate the rental income, occupancy rate, cash flow , cash on cash return , and cap rate.
Visit the Mashvisor Property Marketplace
Related: The Best Tool to Find Off Market Properties
Get the contract
You can easily download an assignment of contract template from the internet. However, it is advisable to have an attorney read and approve the document. This will assure you that the contract is legally sound and that you will have the support of the attorney in case you find yourself in litigation.
One crucial detail that needs to be included in the assignment of contract document is “ and/or assigns ” next to your name. It is this clause that authorizes you to transfer investment property to an interested buyer. Be sure to disclose this information to the seller, and explain the meaning of the clause if necessary. Give them assurance that they will still get the agreed-upon purchase amount.
Related: The Basics of a Wholesale Real Estate Contract and How to Prepare One
Submit the contract
Though the process of assignment of contract varies from state to state, you will generally be required to submit the contract to a closing attorney or title company for a title search. This search will look into the history of the home to ensure that there are no liens attached to the title.
Find an end-buyer
Finding buyers is an important step in the strategy of real estate assignment of contract.
You can find potential buyers using methods such as cold calling, posters and signs, newspaper ads, social media ads, Craigslist, or networking on real estate forums. 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.
Related: Here’s How to Find Cash Buyers for Real Estate
Assign the contract
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. Since the earnest money is nonrefundable, you are assured of making a profit, whether the deal closes or not.
As the assignor, you will get paid once the end buyer submits the funds for the deal. The difference between the agreed-upon value and the price you reach with the buyer will be your profit. For instance, if you agreed with the seller that you would purchase the property for $170,000 and you then assigned the contract to the buyer for $230,000, your profit (assignment fee) will be $60,000.
Real estate assignment of contract takes less time to complete compared to other real estate investment strategies and requires little or no capital. However, working with sellers and buyers that are not conversant with 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 therefore anticipate such scenarios and prepare accordingly.
Charles Mburugu is a HubSpot-certified content writer/marketer for B2B, B2C and SaaS companies. He loves writing on topics that help real estate investors and agents make better choices.
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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 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.
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THIS ASSIGNMENT OF REAL ESTATE PURCHASE AND SALE CONTRACT (this “Assignment”) is made and entered into as of the 8th day of June, 2011, by and between
An assignment of contract involves transferring a real estate contract from an original party (also known as the real estate wholesaler or
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
A purchase contract assignment is between a holder (assignor) that transfers their interest in buying real estate to someone else (assignee)
For value received, I,. as assignor, herby transfer and assign to. , as assignee, his heirs and assigns, all rights and interest in that contract between
An assignment of purchase and sale agreement is a real estate transaction contract that defines the parties and terms of a real estate purchase.
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
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
What Is an Assignment of Contract in Real Estate? ... Assignment of contract takes place when one party to a contract (the assignor) transfers the
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