what is assignment in real estate example

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.

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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:

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.

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An assignment clause (AC) is an important part of many contracts, especially for real estate. In this article we discuss:

• What is an Assignment Clause? (with Example)
• Anti-Assignment Clauses (with Example)
• Non-Assignment Clauses
• Important Considerations
• How Assets America ® Can Help

Frequently Asked Questions

What is an assignment clause.

An AC is part of a contract governing the sale of a property and other transactions. It deals with questions regarding the assignment of the property in the purchase agreement. The thrust of the assignment clause is that the buyer can rent, lease, repair, sell, or assign the property.

To “assign” simply means to hand off the benefits and obligations of a contract from one party to another. In short, it’s the transfer of contractual rights.

In-Depth Definition

Explicitly, an AC expresses the liabilities surrounding the assignment from the assignor to the assignee. The real estate contract assignment clause can take on two different forms, depending on the contract author:

• The AC states that the assignor makes no representations or warranties about the property or the agreement. This makes the assignment “AS IS.”
• The assignee won’t hold the assignor at fault. It protects the assignor from damages, liabilities, costs, claims, or other expenses stemming from the agreement.

The contract’s assignment clause states the “buyer and/or assigns.” In this clause, “assigns” is a noun that means assignees. It refers to anyone you choose to receive your property rights.

The assignment provision establishes the fact that the buyer (who is the assignor) can assign the property to an assignee. Upon assignment, the assignee becomes the new buyer.

The AC conveys to the assignee both the AC’s property rights and the AC’s contract obligations. After an assignment, the assignor is out of the picture.

What is a Lease Assignment?

Assignment Clause Example

This is an example of a real estate contract assignment clause :

“The Buyer reserves the right to assign this contract in whole or in part to any third party without further notice to the Seller; said assignment not to relieve the Buyer from his or her obligation to complete the terms and conditions of this contract should be assigning default.”

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Assignment provision.

An assignment provision is a separate clause that states the assignee’s acceptance of the contract assignment.

Assignment Provision Example

Here is an example of an assignment provision :

“Investor, as Assignee, hereby accepts the above and foregoing Assignment of Contract dated XXXX, XX, 20XX by and between Assignor and ____________________ (seller) and agrees to assume all of the obligations and perform all of the duties of Assignor under the Contract.”

Anti-Assignment Clauses & Non-Assignment Clauses

An anti-assignment clause prevents either party from assigning a contract without the permission of the other party. It typically does so by prohibiting payment for the assignment. A non-assignment clause is another name for an anti-assignment clause.

Anti-Assignment Clause Example

This is an anti-assignment clause example from the AIA Standard Form of Agreement:

” The Party 1 and Party 2, respectively, bind themselves, their partners, successors, assigns, and legal representatives to the other party to this Agreement and to the partners, successors, assigns, and legal representatives of such other party with respect to all covenants of this Agreement. Neither Party 1 nor Party 2 shall assign this Agreement without the written consent of the other.”

Important Considerations for Assignment Contracts

The presence of an AC triggers several important considerations.

Assignment Fee

In essence, the assignor is a broker that brings together a buyer and seller. As such, the assignor collects a fee for this service. Naturally, the assignor doesn’t incur the normal expenses of a buyer.

Rather, the new buyer assumes those expenses. In reality, the assignment fee replaces the fee the realtor or broker would charge in a normal transaction. Frequently, the assignment fee is less than a regular brokerage fee.

For example, compare a 2% assignment fee compared to a 6% brokerage fee. That’s a savings of $200,000 on a $5 million purchase price. Wholesalers are professionals who earn a living through assignments.

Frequently, the assignor will require that the assignee deposit the fee into escrow. Typically, the fee is not refundable, even if the assignee backs out of the deal after signing the assignment provision. In some cases, the assignee will fork over the fee directly to the assignor.

Assignor Intent

Just because the contract contains an AC does not obligate the buyer to assign the contract. The buyer remains the buyer unless it chooses to exercise the AC, at which point it becomes the assignor. It is up to the buyer to decide whether to go through with the purchase or assign the contract.

Nonetheless, the AC signals the seller of your possible intent to assign the purchase contract to someone else. For one thing, the seller might object if you try to assign the property without an AC.

You can have serious problems at closing if you show up with a surprise assignee. In fact, you could jeopardize the entire deal.

Another thing to consider is whether the buyer’s desire for an AC in the contract will frighten the seller. Perhaps the seller is very picky about the type of buyer to whom it will sell.

Or perhaps the seller has heard horror stories, real or fake, about assignments. Whatever the reason, the real estate contract assignment clause might put a possible deal in jeopardy.

Chain of Title

If you assign a property before the closing, you will not be in the chain of title. Obviously, this differs from the case in which you sell the property five minutes after buying it.

In the latter case, your name will appear in the chain of title twice, once as the buyer and again as the seller. In addition, the latter case would involve two sets of closing costs, whereas there would only one be for the assignment case. This includes back-to-back (or double) closings.

Enforceability

Assignment might not be enforceable in all situations, such as when:

• State law or public policy prohibits it.
• The contract prohibits it.
• The assignment significantly changes the expectations of the seller. Those expectations can include decreasing the value of the property or increasing the risk of default.

Also note that REO (real estate owned) properties, HUD properties, and listed properties usually don’t permit assignment contracts. An REO property is real estate owned by a bank after foreclosure. Typically, these require a 90-day period before a property can be resold.

How Assets America Can Help

The AC is a portion of a purchase agreement. When a purchase involves a commercial property requiring a loan of $10 million or greater, Assets America ® can arrange your financing.

We can finance wholesalers who decide to go through with a purchase. Alternatively, we can finance assignees as well. In either case, we offer expedient, professional financing and many supporting services. Contact us today for a confidential consultation.

What rights can you assign despite a contract clause expressly prohibiting assignment?

Normally, a prohibition against assignment does not curb the right to receive payments due. However, circumstances may cause the opposite outcome. Additionally, prohibition doesn’t prevent the right to money that the contract specifies is due.

What is the purpose of an assignment of rents clause in a deed of trust and who benefits?

The assignment of rents clause is a provision in a mortgage or deed of trust. It gives the lender the right to collect rents from mortgaged properties if the borrower defaults. All incomes and rents from a secured property flow to the lender and offset the outstanding debt. Clearly, this benefits the lender.

What is in assignment clause in a health insurance contract?

Commonly, health insurance policies contain assignment of benefits (AOB) clauses. These clauses allow the insurer to pay benefits directly to health care providers instead of the patient. In some cases, the provider has the patient sign an assignment agreement that accomplishes the same outcome. The provider submits the AOB agreement along with the insurance claim.

What does “assignment clause” mean for liability insurance?

The clause would allow the assignment of proceeds from a liability award payable to a third party. However, the insured must consent to the clause or else it isn’t binding. This restriction applies only before a loss. After a first party loss, the insurer’s consent no longer matters.

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Assets America guided us every step of the way in finding and leasing our large industrial building with attached offices. They handled all of the complex lease negotiations and contractual paperwork. Ultimately, we received exactly the space we needed along with a lower than market per square foot pricing, lease length and end of term options we requested. In addition to the real estate lease, Assets America utilized their decades-long financial expertise to negotiate fantastic rates and terms on our large and very unique multimillion dollar equipment purchase/lease. We were thankful for how promptly and consistently they kept us informed and up to date on each step of our journey. They were always available to answer each and every one of our questions. Overall, they provided my team with a fantastic and highly professional service!

Assets America was responsible for arranging financing for two of my multi million dollar commercial projects. At the time of financing, it was extremely difficult to obtain bank financing for commercial real estate. Not only was Assets America successful, they were able to obtain an interest rate lower than going rates. The company is very capable, I would recommend Assets America to any company requiring commercial financing.

Assets America was incredibly helpful and professional in assisting us in purchasing our property. It was great to have such knowledgeable and super-experienced, licensed pros in our corner, pros upon which we could fully rely. They helped and successfully guided us to beat out 9 other competing offers! They were excellent at communicating with us at all times and they were extremely responsive. Having them on our team meant that we could always receive truthful, timely and accurate answers to our questions. We would most definitely utilize their services again and again for all of our real estate needs.

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Ronny was very friendly and though we were unable to make something happen at the moment he gave me some direction to go.

My business partner and I were looking to purchase a retail shopping center in southern California.  We sought out the services of Ronny, CFO of Assets America.  Ronny found us several commercial properties which met our desired needs.  We chose the property we liked best, and Ronny went to work. He negotiated very aggressively on our behalf. We came to terms with the Seller, entered into a purchase agreement and opened escrow.  Additionally, we needed 80 percent financing on our multimillion-dollar purchase.  Assets America also handled the commercial loan for us.  They were our One-Stop-Shop. They obtained fantastic, low, fixed rate insurance money for us.  So, Assets America handled both the sale and the loan for us and successfully closed our escrow within the time frame stated in the purchase agreement.  Ronny did and performed exactly as he said he would. Ronny and his company are true professionals.  In this day and age, it’s especially rare and wonderful to work with a person who actually does what he says he will do.  We recommend them to anyone needing any type of commercial real estate transaction and we further highly recommend them for any type of commercial financing.  They were diligent and forthright on both accounts and brought our deal to a successful closing.

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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.

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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

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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.

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What Is an Assignment of Contract? [How It Works In Real Estate]

What Is an Assignment of Contract?

One intriguing strategy in real estate investing that often stirs interest among newbie investors is the assignment of contracts. This approach, which allows an investor to pass the contractual rights and obligations of a property purchase contract to another buyer, is seen to provide highly profitable opportunities.  

If you are an investor who wants to try this technique to achieve financial freedom, this blog is for you! Here, we'll delve into the nitty-gritty of contract assignment, explaining its mechanism, benefits, potential pitfalls, and the crucial steps involved. We hope that after reading this blog, you can navigate the real estate market with confidence!

What Is an Assignment of a Contract in Real Estate?

In real estate wholesaling, an investor agrees to buy a personal property, often at a below-market price, then assigns the contract to a different buyer, often another investor, for a higher price. 

The difference between the contracted price and the price paid by the end buyer represents the wholesaler's profit, known as the assignment fee. 

For example, an investor might secure a contract to purchase a personal property for $100,000, then find an end buyer or new party willing to pay $120,000 for the same property. By assigning the contract to the end buyer, the investor earns a $20,000 assignment fee. 

However, it's crucial to note that not all real estate contracts can be freely assigned. Some contracts may include a "no assignment" clause that prevents the transfer of the contract to another party. 

Thus, an investor needs to ensure that assigning contractual rights is allowed before proceeding with this strategy. If an assignment clause is not present in the contract, the investor may need to negotiate with the original party or owner to include in the contract rights it or find an alternate method to transfer the property to a new party.

In essence, an assignment contract is a way for real estate investors to connect sellers and buyers, while generating a profit from the transaction without needing to purchase, own, or manage the property themselves. It's a strategy that requires careful planning, thorough due diligence, and an understanding of real estate laws and market conditions.

Assignment Contract vs. Double Closing

Both assignment contracts and double closings are strategies used in real estate investing, particularly wholesaling, but they function differently.

As previously discussed, an assignment of contract involves the wholesaler (assignor) transferring their contractual rights in a property purchase agreement to another party (assignee), typically another investor. 

The wholesaler never actually purchases the property . Instead, they sell their contract to buy the property. The assignee pays an assignment fee to the wholesaler, then proceeds to close the deal with the original seller. In this arrangement, the end buyer is aware of the wholesaler's profit.

Meanwhile, double closing , also known as a "simultaneous close," involves the wholesaler actually purchasing the property before quickly reselling it to the end buyer. This is perhaps the main difference between the two.

Essentially, there are two separate transactions: one where the wholesaler buys from the original seller and another where the wholesaler sells to the end buyer. 

Both transactions of the contract occurs back-to-back, even on the same day. The wholesaler uses the funds from the end buyer to pay the original seller and keeps the difference as profit. This approach allows the wholesaler's profit to remain hidden from all parties.

Is an Assignment Contract Considered Legal?

Yes, an assignment contract is generally considered legal in real estate transactions. It is a common practice, especially in real estate investing and wholesaling.

However, the legality can depend on several factors, including the terms of the original contract and the laws in a particular area.

Some contracts may disallow assignment through a clause that "prohibits the assignment of the contract without the consent of the other party." In such cases, assignment of the written contract without consent would violate public policy and could potentially lead to legal repercussions. This may also encourage litigation.

Additionally, while an assignment contract is generally legal, some states in the U.S. have specific rules and regulations about how real estate contract assignments and wholesaling, more generally, should be conducted. 

Some require specific disclosures to be given to the other party to the contract or have particular rules about how the transaction can be advertised. Some do not also allow material alteration, In some jurisdictions, regular wholesaling activity might require a real estate license, contract expiration date for commercial contracts, etc.

Pros and Cons of Assignment of Contract in Real Estate

The assignment of contracts in real estate comes with its own set of advantages and disadvantages, which investors need to consider carefully before entering any deal.

To help you decide if this real estate investing strategy is indeed for you, read the following pros and cons.

Pros of Assignment of Contract

• Less Capital Required: Because the wholesaler is simply assigning the contract and not actually purchasing the property, less capital is required compared to traditional real estate transactions.
• Profit Potential: Assigning a contract can be profitable, especially when properties are secured under market value and the seller and buyer guarantees performance. The difference between the contract agreement price from the assignee and the purchase price the end buyer pays can result in significant earnings.
• Faster Transactions: Assignments often lead to faster transactions as the assignor is not taking possession of the property. They don't have to do heavy obligations such as a title search, contact a company to make repairs, etc. Once a suitable assignee is found, the existing contract can be assigned and the transaction completed.

Cons of Assignment of Contract

• Dependent on Buyers: Wholesalers are reliant on finding end buyers and getting a closing date. If an assignee can't be found in time, the wholesaler may be forced to back out of the deal or risk legal consequences.
• Limited Control: The wholesaler doesn't own the property and therefore has limited control over it. They can't make improvements or changes to increase its value since it isn't part of their obligations.
• Transparency of Profit: In an assignment, the assignee can see how much profit the assignor is making, which could potentially lead to negotiations or dissatisfaction in the obligations. But, of course, the assignor warrants that the fee is fair.
• Legal Considerations: You cannot assign rights to all types of contracts, and the federal government law may have specific regulations around how assignments work. Wholesalers must be aware of the legal landscape to ensure they conduct business following the law and that the two parties they will involve know the legal term of transfer.

Steps in Contract Assignment in Real Estate

Contract assignment in real estate can be a profitable strategy when done correctly. Each step in this process requires careful attention to detail and due diligence so as not to break the law. It is ideal to consult with a real estate attorney or other professionals before doing any transfer of property.

Nevertheless, here are the steps typically involved in a contract assignment in real estate.

Step 1. Find the Right Investment Property

The first step in contract assignment is identifying a suitable investment property. You need to find a property that can be purchased under market value and resold at a profit. 

This could be a distressed property, a foreclosed property, or simply a property that a seller needs to unload quickly. Market research and property analysis are critical at this stage.

Step 2. Prepare the Real Estate Contract 

Once a property has been identified, you need to prepare a real estate purchase agreement. This is the contract agreement that you will eventually assign to another buyer. It's crucial that this original contract either expressly allows for assignment or at least does not prohibit it.

If you are using a template from others or it has a trade name, make sure you are not going against the intellectual property law. There are already certain claims in the past about this, so be cautious.

Step 3. Submit the Contract

After preparing the original contract, it needs to be submitted to the seller. The seller may accept the contract as is, reject it outright, or propose changes. If changes are proposed, negotiations will take place until an agreement is reached. 

Step 4. Find an End Buyer Who Will Accept the Contractual Obligations

With an accepted contract in hand, you can now seek an end buyer to whom the contract will be assigned.

This could be another investor or a traditional homebuyer. Marketing the original contract can involve networking, advertising on real estate platforms, or working with a real estate agent.

Step 5. Assign the Contract to an End Buyer

After identifying an end buyer, you will assign or transfer the existing contract agreement to them (this may be an individual or a real estate company).

This involves an assignment agreement, which transfers your contractual rights and obligations under the original purchase contract agreement to one party or the end buyer (real estate company or investor).

The assignment agreement should clearly outline the original terms of the assignment, including the assignment fee that you, as the assignor, will receive.

Step 6. Collect the Fee

After the assignment agreement has been signed and transferred on the closing date, you can collect the assignment fee from one party. This is your profit from the assignment contract transaction.

The closing process then proceeds between the original seller and the end buyer, without any further involvement on your part. The property ownership will be transferred to the end buyer and you would no longer have any responsibilities or duties with them.

Final Thoughts: What are Assignment Contracts? [How Does Assignment of Contract Work in Real Estate]

Whether you're a seasoned real estate wholesaler or just starting, it's clear that understanding assignment contracts and how they function within the real estate sector can open doors to new opportunities and potentially profitable ventures. 

With the right approach, a keen understanding of the property market, negotiation skills, thorough due diligence, and creativity, these contracts can be your main income stream.

If you want to find leads on properties that you can assign to another buyer, reach out to us at Property Leads . We offer highly motivated seller leads in your target area for a very reasonable price. We guarantee a high conversion rate since we generate our leads through SEO.

Fill out our form below to start finding the best contract reassignment deals!

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Real Estate Assignment Contract

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Last updated April 17th, 2023

• Purchase Agreements »

A real estate assignment contract  allows a real estate buyer to transfer their purchasing rights and responsibilities to someone else before the closing date. Typically, the new buyer pays a fee to the original buyer for the assignment. The form specifies the amount and due date of the assignment fee (if applicable), as well as all other details of the transaction, including the new buyer’s  liabilities , payment requirements , and rights under the purchase agreement . 

Download:  PDF ,  Word (.docx) ,  OpenDocument

REAL ESTATE ASSIGNMENT CONTRACT

1. THE PARTIES . This Real Estate Assignment Contract (“Assignment”) is entered into on [MM/DD/YYYY] (“Effective Date”), by and between:

Assignor : [ASSIGNOR’S NAME] (“Assignor”) with a mailing address of [ADDRESS] , and

Assignee : [ASSIGNEE’S NAME] (“Assignee”) with a mailing address of [ADDRESS] .

The Assignor and Assignee are each referred to herein as a “Party” and, collectively, as the “Parties.”

2. ORIGINAL AGREEMENT . The Assignor is the purchasing party to that certain purchase and sale agreement, dated [MM/DD/YYYY] , for the real property located at [PROPERTY ADDRESS] , and as more particularly described therein (“Original Agreement”).

3. ASSIGNMENT . The Assignor hereby transfers, assigns, and sets over to the Assignee all contractual rights, title, interests, and obligations in and to the Original Agreement on the Effective Date, pursuant to the terms of the Original Agreement

4. CONSIDERATION . For the sum of any dollar amount stipulated herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree to the following: [DESCRIBE PAYMENT OR OTHER CONSIDERATION] .

5. ASSUMPTION . By executing this Assignment, the Assignee accepts and assumes the transfer and ownership of all liabilities, obligations, and claims that currently exist or may in the future regarding the Assignment. As of the Effective Date, the Assignee agrees to comply with and assume all terms, payments, conditions, covenants, and any other duties and obligations as part of this Assignment and those set forth in the Original Agreement.

6. REPRESENTATIONS . The Parties acknowledge that they have a full understanding of the terms of this Assignment. The Assignor further warrants and represents that they own the rights transferred in this Assignment and has prior consent to execute this Assignment under the terms of the Original Agreement or otherwise through the written consent of the selling party under the Original Agreement; in the latter case, the written and signed consent of said party shall be attached to this Assignment. The Parties agree to provide and complete any obligations under this Assignment and the Original Agreement.

Assignor Signature : ___________________ Date:  [MM/DD/YYYY] Print Name: [ASSIGNOR’S NAME]

Assignee Signature : ___________________ Date:  [MM/DD/YYYY] Print Name:  [ASSIGNEE’S NAME]

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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 .

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Novation Vs. Assignment in Real Estate: Your Best Strategies

Novation vs. assignment in real estate: what are they and how should you use them? Novation is a legal tool that replaces one obligation or party with another. This does not simply add or change an existing contract. It replaces one legal agreement with another. All parties to the original document must agree to the changes.  Assignment, on the other hand, only transfers rights; it does not change ownership.

• You do this when obligations in the agreement change 
• It nullifies and replaces the old contract 
• An assignment is different because it does not change the obligations and therefore does not require a new document

For complex contracts with multiple parties, this process can get complicated. For most residential house sales, though; it is a rather simple legal structure. 

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What is Novation in Real Estate?

What is novation in real estate? The definition is an agreement that nullifies one contract and replaces it with another. You may think this seems like a complicated process. It is. However, when you talk about complex financial deals with many parties it is important.  

Commercial or industrial contracts are very complex. They require a detailed process for changes. As each party negotiates different aspects of the deal, the agreement commonly changes. When the changes affect obligations, the parties need to agree on the new terms. Novation is the legal structure that makes this possible. 

Residential sales are not as complicated. Nonetheless, you still need a legal structure to deal with issues when they arise. You still need these agreements in certain situations, even if you aren’t buying a large industrial property. 

Novation of Contract 

A novation of contract in real estate is simply the termination of the agreement. Usually, the two parties want to change the terms, or one party wants to be replaced with another. In these cases, the contract as a whole or in part needs to be nullified. Each party must agree to the new terms, and sign a new contract, or clause within the document. 

Novation Agreement 

A novation agreement does one of two things. It may:  

• Transfer the contractual obligation from one party to another 
• Replace one obligation for another 

In either case, the obligations declared in the contract change. Therefore, the parties involved must consent to the change. 1   

Tenancy Agreement in Real Estate 

A tenancy agreement allows a person or business to occupy a property for a specific period. Most leases range from 6 – 12 months, but they can be longer. The lease defines the terms of the agreement between the landlord and the tenant. These usually include: 

If one party wants to terminate or novate, the agreement both parties must agree. 2   

Mortgage Novation 

A mortgage novation changes or amends the original home loan contract between the borrower and the bank. Just like other novation agreements, it is a legal document that both parties must sign and submit as a public record. Common reasons to novate a mortgage contract include amending the: 

• Amount of the loan 
• Term, or duration 
• Settlement system (fixed or variable interest rate) 
• Interest rate 

There may be other reasons to novate a mortgage, but these are the most common. Sometimes the bank will allow a change in the contract with an amendment. However, most of the time the borrower must sign a new contract. We usually refer to this as a refinance. 

Novation Agreement Template  

A novation agreement template may be a good place to start if you need to novate a contract.  Template Roller  has an excellent template to use, and they also provide nine guidelines for writing your novation agreement. However, for complicated contracts, you should consult an attorney. These can get very complicated quickly, and you do not want to leave yourself vulnerable because you left something out. 

Examples of Novation in Real Estate 

Even in a relatively small property transaction between two parties, nullification is an important legal structure. Here are some examples where it comes into play: 

• The buyer encounters a financial situation where they need to change the amount of the earnest money deposit, and the seller agrees. 
• The seller added a deck to his property without a permit and needs time beyond the agreed-upon dates to fix the problem. 
• The home inspection finds a foundation problem that affects the structure of the house, and the parties renegotiate the price of the house. 

Parties novate contracts because of changes in terms. Practically, for residential properties, this usually means the dates or money amounts change. 

When Should You Novate a Contract?  

You should novate a contract if you agree to new terms. Buyers and sellers sometimes need to change the terms of their agreement. 

• Sellers sometimes want buyers to put down more earnest money. 
• Inspection problems may force new terms. 
• Surveys can change the terms of the agreement. 

The document has contingencies for these issues. Buyers and sellers may renegotiate, but when both parties agree the old contract is nullified . 3   

How to Novate a Contract  

You novate a contract by renegotiating terms, getting agreement from all other parties, and signing new papers. While for most of us this may be a strange word, it is simply a legal term for switching out documents. Novation does create a new contract. The parties must discard the old one. This is because the new agreement may: 

• Replace an old obligation 
• Add a new obligation 
• Replace or add a party to the agreement 

All parties must sign new documents if the obligations of the agreement change. This includes money transactions, time allowances, and the parties that are responsible. Once the new contract goes into effect, it nullifies the old agreement. 

What is an Assignment Clause in Real Estate?

An assignment clause in a real estate contract allows the buyer to rent, lease, sell, repair, or assign the property to a third party. Assign in the case means to hand off the benefits and obligations of the contract to a third party. This almost always happens in commercial, not residential, real estate.  

Commercial and industrial property contracts are always complicated. Intermediaries find appropriate properties for business ventures and negotiate the real estate transaction. They, then, assign the property to the business venture for a fee. 4   

Non-Assignment Clause 

For residential houses, almost all contracts have a non-assignment clause. This prohibits the buyer from assigning the contract to another party. Banks do this because they thoroughly vet a buyer before offering them a mortgage. They do not want to risk a new unvetted, buyer defaulting on the loan.   

Assignment Clause Example 

An example of an assignment clause in real estate can help clarify its meaning and point out the differences from novation.  Assets America  offers a very succinct and clear example: “The Buyer reserves the right to assign this contract in whole or in part to any third party without further notice to the Seller; said assignment not to relieve the Buyer from his or her obligation to complete the terms and conditions of this contract should be assigning default.” 

Assignment of Sales Agreement 

An assignment of sales agreement is a real estate wholesaling strategy where a buyer sells a third party the right to assume a sales contract. These usually take place with new construction. The investor inserts the assignment of sales agreement into the purchase contract, so they can sell it to a third party for a commission.  

These arrangements can be profitable for a skilled investor. However, they carry the risk that if you cannot find a buyer you are on the hook for buying the property. You will lose whatever deposit you put down. Further, if you back out the seller may even sue. Therefore, do not enter these transactions as a novice. Only experienced investors should engage these investments. 5

Assignment Examples 

Residential real estate examples of assignment are also common. Let’s look at a couple: 

• A tenant sublets their apartment 
• A contractor signs a contract and then hires another professional to do some of the work 

Tenants often sublet their apartments, and landlords may or may not have a problem. However, the original tenant must pay for any damages the other person may cause. Likewise, the contractor who made the original deal must ensure that his subcontractor does the work satisfactorily.  

Difference Between Assignment and Novation in Real Estate 

Assignment and novation are similar, but there are important differences. Novation transfers obligations and rights, and it requires a new document. Assignment only transfers rights. It doesn’t require a new agreement because the contract still obligates all the original parties.  

• An assignment does not require the consent of the third party 
• The original contract remains valid with an assignment 
• The assignor is responsible if the assignee does not fulfill the obligations  

Basically, novation requires a new document because one party hands off its obligations to another. Assignments do not require a new agreement because the assigner is still obligated to the terms of the contract. 6  

Final Thoughts on Novation Vs. Assignment in Real Estate

Simply put, the definition of novation in real estate is replacing something in a contract with something else. These can get very complicated in financial, commercial, and industrial contracts. However, for most residential house sales there are only two parties, and the buyer and seller usually don’t have many issues that require a new contract. So, even though it’s a different word, you shouldn’t be afraid of it. Having said that, it does happen.  

• Financial situations may change 
• Contingency issues arise 

Residential contracts have clauses that allow you to renegotiate or cancel an agreement under certain conditions. Most of the time both parties want to continue, but when the terms change, they must sign a new document. If you find yourself in this position, then you should sit down with your attorney or title agent and let them help you negotiate new terms.  

References 

• Up Counsel  
• Smart Move  
• Assets America  
• Rocket Lawyer  
• Upcouncel.com  

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• Dec 13, 2023

Understanding Assignment of Contract in Real Estate Wholesaling

Real estate wholesaling is a popular strategy for new investors who want to get their feet wet. The term "wholesaling" refers to the process of buying homes and reselling them quickly without making any significant repairs. One crucial aspect of this strategy is the assignment of contract, which allows the wholesaler to profit from the transaction without ever owning the property.

What is Assignment of Contract?

In simple terms, an assignment of contract in real estate is a legal agreement that allows the investor (or 'assignor') to transfer their rights and obligations of the property purchase contract to another party (or 'assignee'). This means that the assignee steps into the shoes of the assignor and completes the transaction with the original seller.

The assignor's primary role is to find a motivated seller, negotiate a purchase price, and then find a buyer willing to pay a higher price for the property. The difference between the contract price with the seller and the amount paid by the end buyer is the wholesaler's profit.

How Does it Work?

Here are the basic steps involved in an assignment of contract:

1. Find a Motivated Seller: The first step is to find a homeowner who wants to sell their property quickly. This could be due to various reasons such as financial distress, job relocation, divorce, or a need to liquidate assets.

2. Negotiate a Purchase Price: Once a motivated seller is identified, the wholesaler negotiates a purchase price and signs a purchase agreement with the seller. This agreement includes an "assignment clause" which gives the wholesaler the right to assign the contract to another buyer.

3. Find an End Buyer: The wholesaler then finds an end buyer who is willing to buy the property at a higher price. This could be a rehabber looking for a fix-and-flip opportunity, or a landlord seeking rental properties.

4. Assign the Contract: The wholesaler then executes an assignment agreement with the end buyer, transferring all rights and obligations of the original contract to them. The assignee pays an assignment fee to the wholesaler, which is typically the difference between the original purchase price and the price the end buyer agrees to pay.

5. Close the Deal: Finally, the deal is closed with the help of a title company or attorney. The original seller receives the agreed-upon price from the original contract, the end buyer gets the property, and the wholesaler walks away with the assignment fee.

How to Fill Out an Assignment of Contract

Download the Assignment of Contract for Free

REIPro is a comprehensive tool for real estate investors that not only provides essential contracts like the Assignment of Contract but also includes detailed training videos. With REIPro's Contract Writer, users can easily fill in the blanks to customize their documents and then download, print, or email them as needed. This platform makes it simpler for investors to understand and implement complex strategies such as contract assignments in real estate wholesaling. Click here to access the Assignment of Contract.

Legalities and Ethics

While the assignment of contract is a legitimate real estate strategy, it's not without controversy. Some people view wholesalers as middlemen who profit without adding value. However, ethical wholesalers can provide a valuable service by connecting motivated sellers with investors.

It's also important to note that the legality of contract assignment can vary by state. In some jurisdictions, you may need a real estate license to wholesale properties. Therefore, it's crucial to understand your local laws and regulations before getting started.

In conclusion, assignment of contract is a powerful tool in real estate wholesaling. It allows investors to profit from real estate transactions without needing to buy, own, or repair properties. As with any investment strategy, education and due diligence are vital to success.

Remember, the goal is to create win-win situations for all parties involved: a quick sale for the distressed seller, a good deal for the end buyer, and a fair profit for the wholesaler. 

• Wholesaling

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What is an Assignment Contract in Wholesale Real Estate?

The most successful real estate investors are ones who market to and work directly with homeowners to buy property. When investors talk directly to sellers, they have several options for closing lucrative real estate deals. For real estate investors who don’t have a lot of time or money to invest in any single property, wholesaling is an attractive option.

Wholesaling real estate is a great way to get into real estate investing, and it’s a strategy that allows you to invest without putting down any upfront capital of your own. 

But how? 

In real estate wholesaling, a wholesaler contracts an off-market home with a seller, then finds an interested third-party buyer to purchase the contract at a higher price. The wholesaler then keeps the difference as profit. This process of selling a contract before the wholesaler purchases the property themselves is called an assignment of contract . 

What is an assignment of contract? 

An assignment of contract is a transfer of contractual obligations from one party to another. In real estate, an investor makes a deal with a property owner, and then sells the contract to a third party before the home closes. The investor collects an assignment fee for finding the deal. 

You may have dealt with situations that are similar to an assignment of contract. For example, if the mortgage on your home has ever transferred from one company to another, you’ve been privy to an assignment of mortgage, where your original mortgage company has transferred their contractual obligations to a new company. 

Do I need to put down any of my own money using an assignment of contract? 

No! The benefit to wholesaling with an assignment of contract in real estate is that you don’t need to use any of your own money in order to profit from a real estate transaction. Minimal costs to wholesalers include building a quality list of leads (often distressed properties) through driving for dollars, and sending mail to those leads. 

What is the difference between assignment of contract and double closing? 

Unlike an assignment of contract in real estate, double-closing involves two separate transactions with the seller and buyer. In double closing, a wholesaler purchases a home in their name, and then sells the property within 30 days without making any updates to the home. The benefit of double closing is that a wholesaler can keep their own profit undisclosed to both the seller and the buyer. The downside is that the investor has to put up their own money in order to close the first part of this real estate deal.

How do I find someone to buy my contract?

Finding buyers to purchase your real estate contracts may seem daunting, but there are lots of investors and entrepreneurs who are looking for their next deal. A great way to start building a buyers list is to go to local REI meet-ups and exchange business cards with investors who are actively making deals. You can also post on social media to get the word out about your business. As you’re out driving for dollars, keep an eye out for signs that say “For Rent.” You may be able to connect with those owners to see if they’re interested in growing their rental portfolio.  

Is an assignment of contract in real estate legal? 

Yes - but it’s important to research and keep an eye on the wholesaling regulations in your state. In Illinois, for example, non-licensed investors are allowed to wholesale one real estate deal every 12 months. Investors in Illinois who want to do more wholesaling deals than one per year need to obtain a license. In Oklahoma, real estate investors are required to obtain a license in order to sell an assignment of contract and must abide by all state real estate laws. Be sure to review the laws in your state and keep up to date on local real estate investing news in your area. 

Can I make money wholesaling?

Yes! Just take a look at a few DealMachine customer success stories. Real estate investor Ramin Qudus made $50,000 on a wholesaling deal during his 7-day trial with DealMachine. Rita Grimes talked with our Director of Community Experience, Elise Knaack, about how she was able to make $178,000 in the first half of 2021 through wholesaling and driving for dollars. Just one week after Ashley and Anthony Warren started marking to their D4D leads, they had their first deal under contract for $62,000. 

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David Lecko is the CEO of DealMachine. DealMachine helps real estate investors get more deals for less money with software for lead generation, lead filtering and targeting, marketing and outreach, and acquisitions and dispositions.

Assignment Of Leases And Rents

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What is an assignment of leases and rents.

The assignment of leases and rents, also known as the assignment of leases rents and profits, is a legal document that gives a mortgage lender right to any future profits that may come from leases and rents when a property owner defaults on their loan. This document is usually attached to a mortgage loan agreement.

Assignment of leases and rents allows lenders to a degree of financial protection in case a loan default occurs. This document is an agreement made between a borrower and a lender of mortgage loans. It often details an exact amount the lender will be entitled to if a default happens.

Common Sections in Assignments Of Leases And Rents

Below is a list of common sections included in Assignments Of Leases And Rents. These sections are linked to the below sample agreement for you to explore.

Assignment Of Leases And Rents Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.9 10 d368735dex109.htm ASSIGNMENT OF LEASES AND RENTS , Viewed October 4, 2021, View Source on SEC .

Who Helps With Assignments Of Leases And Rents?

Lawyers with backgrounds working on assignments of leases and rents work with clients to help. Do you need help with an assignment of leases and rents?

Post a project  in ContractsCounsel's marketplace to get free bids from lawyers to draft, review, or negotiate assignments of leases and rents. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.

Meet some of our Assignment Of Leases And Rents Lawyers

I grew up in Beaumont, Texas. I attended Baylor University for college and the The University of Texas School of Law for law school. I gained extensive experience in many areas of transactional law through my former position as corporate counsel at National Western Life Insurance Company and my current position as an Associate at Nance & Simpson, LLP.

Senior experienced contracts/transactions attorney in the Software Technology space. Also very versed in general corporate legal matters relating to business operations.

As a lawyer of 27 years, I have a great deal of experience handling many different types of legal projects. Starting with a simple estate plan or the purchase of a personal residence, and moving all the way to complex estate plans and real estate transactions. I regularly advise small business owners and real estate investors.

Trusted contracts attorney specializing in real estate and business law. I handle leases, land purchase contracts, investment valuations, cease and desist letters, and operating agreements.

I am a Berkeley Law 2020 graduate. I have experience working in finance and operations, plaintiff and defense litigation, and have been involved in multiple start-ups.

Jeanilou M.

Jeanilou G.T. Maschhoff has over 20 years of comprehensive business operations, finance, and development experience in addition to being a licensed attorney in California and Hawaii. She zealously works as a Trusted Advisor, Business/Brand Consultant, and Advocate for small businesses, non-profit organizations, and personal brands. She is dedicated to helping female business owners and professionals in the entertainment, beauty, fashion, and wellness industries make their goals a reality. She uses her diversified expertise to provide a holistic approach to addressing business and legal needs. Acting as a trusted advisor and outsourced general counsel, she assists on an array of business and personal matters. Passionate about social justice and assisting underrepresented populations, Jeanilou started her legal career working in the non-profit sector working towards access to justice and gender equity. She continues to assist non-profit organizations in many capacities and actively looks to partner businesses with charitable causes, creating a synergistic effect that benefits not only the organizations involved but our society as a whole. As an early adopter of the virtual practice of law, Jeanilou has been assisting law firms and solo practitioners adjust to the remote delivery of legal services and helping businesses explore Web 3.0.

30 year practitioner. Seasoned but not old. Wide variety of practice areas, including criminal, domestic and civil law.

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• Government & Policy

Assignee: What it is, How it Works, Types

Michelle P. Scott is a New York attorney with extensive experience in tax, corporate, financial, and nonprofit law, and public policy. As General Counsel, private practitioner, and Congressional counsel, she has advised financial institutions, businesses, charities, individuals, and public officials, and written and lectured extensively.

Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.

What Is an Assignee?

An assignee is a person, company, or entity who receives the transfer of property, title, or rights from another according to the terms of a contract. The assignee receives the transfer from the assignor. For example, an assignee may receive the title to a piece of real estate from an assignor.

Key Takeaways

• An assignee is a person, company, or entity who receives the transfer of property, title, or rights from a contract.
• The assignee receives the transfer from the assignor.
• An assignee may be the recipient of an assignment, a liability, or appointed to act in the stead of another person or entity.
• The assignee typically will hold the rights of power of attorney only for a specified time or for particular circumstances.
• Once the time has expired or the circumstances have been resolved, the assignee would automatically relinquish those rights.
• Not all assignment contracts are required to be made in writing, but they often are.

How an Assignee Works

An assignee may be the recipient of an assignment, a liability, or appointed to act in the stead of another person or entity. For example, an executor of an estate may be appointed through a will left by a decedent.

Types of Assignees

Assignee in real estate.

An assignee is the recipient of a title when a deed is signed to confer ownership of property in a transaction. A tenant might choose to transfer their property rights to an assignee who would assume duties for paying rent and tending to the property. There may be limits to the rights and liabilities that are granted to an assignee based on the nature of the transfer or assignment of rights.

For example, an assignee might take on the property rights from a tenant who vacated a rental property, but the tenant may still be liable if the assignee does not make rent payments on time. An assignee who takes title and ownership of real estate might not have certain rights to use the property any way they wish. There may be rights of ingress and egress that must be negotiated with adjacent property owners who hold surrounding land parcels. The assignee could receive certain rights that run with the land when they are granted the title.

Assignment by Power of Attorney

Power of attorney may be assigned to a person to tend to certain affairs for a person while they are out of the country or not capable of taking action for themselves. The assignment of power of attorney can grant broad rights or be limited in scope by the terms set by the assignor. The rights could be for the specific handling of a contract or business deal that the assignor cannot be present for.

The assignee typically will hold the rights of power of attorney only for a specified time or particular circumstances. Once the time has expired or the circumstances have been resolved, the assignee would automatically relinquish those rights. It is possible that the terms of power of attorney might allow an assignee to act in their self-interest rather than for the interests of the assignor.

Assignee in an Insurance Policy

In the context of a life insurance policy, interest in a policy can be transferred from the policyholder to a lender or relative by assignment of the policy. In this case, the policyholder is the assignor and the person in whose favor the policy has been assigned is called the assignee.

Assignee in a Contract

When one party to a contract—the assignor—hands off the contract's obligations and benefits to a different party—the assignee—this is known as an assignment of contract. In this situation, the assignee assumes all the rights and responsibilities of the contract from the assignor. All, or a portion, of a letter of credit can be assigned to a third party to pay vendors and suppliers.

Assignee in a Loan

An assignee is a person or a company that buys your loan. For example, an auto dealer that extends credit to individuals may sell their loans to a bank. In this case, the bank is the assignee and the auto dealer is the assignor. If your loan has been sold, you owe money to whoever owns your loan. In the event that responsible parties fail to meet their loan obligations, the assignee has a lien on the vehicle and can repossess it.

Not all assignment contracts are required to be made in writing, but they often are. Assignment contracts may also need to be notarized and witnessed in order to be valid. The assignment of property and collateral for loans must be in writing. Note that not all rights, contracts, or other property are assignable; many contracts, particularly real estate leases and personal service agreements, explicitly prohibit assignment. 

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