If you’re interested in real estate investing, you’ve probably heard the term “real estate assignment contract.”
It’s one of those catchphrases that sounds complex… but really isn’t when it’s presented the right way.
Whew!
In fact, we’ve got one that you can use starting right now. It’s the one I’ve used (rinse & repeat) for 23+ years in my real estate wholesaling endeavors and still use today.
Truth be told, this is one of the most important, fundamental tools in your arsenal of real estate investing forms.
And if you feel in any way shaky about how to use it, don’t worry, I’ve got you covered…
I’m breaking down the A to Z of real estate assignment contracts without all the legalese AND sharing our very own assignment contract for you to use in your own business. You’re welcome!
AND! I’ve even got a nice little video down below (from younger JP), walking through the contract. Then, loads of super-useful details. When I say we’ve got you covered, I really mean it!
Oh, and Btw…
We’ve handed you goodies like our simple real estate contracts, an agreement for subcontractors, 47 MLS keywords for REI, one of our favorite real estate investor postcards & option agreement.
Walkthrough My Assignment of Contract
OK, let’s do this…
How to Download My Assignment of Contract
Ready to just grab mine yours, and start making money with it?
Awesome, just remember: You might want to have your local attorney and/or real estate pro—someone who knows the specific legal stuff for your state—review it before you go start making it rain dollar bills.
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What is an Assignment Contract in Real Estate?
In simple terms, a real estate assignment contract is an agreement where the original buyer of a property gives their contractual rights to someone else.
Said another way: it’s a legal document that records and legitimizes (grants enforceability to) the transfer of all your rights and interest in the deal over to your end-buyer — and stipulates how, when, and how much you get paid.
The document itself is a simple, easy-to-fill-out agreement between you and your end buyer… again, it simply assigns your purchase contract over to your new buyer — and you collect a fee in return for your interest in the deal.
The new buyer steps into your shoes and closes instead of you in exchange for an “assignment fee” you get for letting them enjoy your sweet deal instead of you.
Of course, this is a common practice, often referred to as “wholesaling,” used by many real estate investors… ok, probably all of them at some point or another. Depending on the deal, of course.
Assignment of Contract 101
This document, also called an Assignment of Real Estate Purchase and Sale Agreement, is for anyone who wholesales real estate for fast cash.
Essential ingredients are:
1. A motivated seller with a workable deal.
2. A hungry buyer with cash burning a hole in his pocket.
3. AND: The right paperwork to pull it off! An Assignment Contract.
I remember all too well how intimidating it can feel to piece-meal your REI forms and contracts together — from (sometimes questionable) places all over the interwebs.
So, I’m happy to provide you with a solid, proven assignment agreement here that you know real investors are actually using (like the guy writing this) and not just a stock template from someone’s hard drive.
What Is an Assignment Fee in Real Estate?
An assignment fee is the bread and butter of a real estate wholesaler’s income. Essentially, it’s the financial compensation you get for finding a great property, locking it down with a real estate assignment contract, and then passing that golden ticket to another buyer.
The fee is often calculated as the difference between the real estate assignment contract price with the original seller and the price you’ve negotiated with your new buyer.
For example, you’ve gotten a property under contract for $150k, and your agreement with your end buyer is for $180k.
That means, you’re pocketing a lovely $30k.
Chu-ching!
Are There Times You Can’t Assign a Purchase Contract?
Yep! You can’t typically do contract assignments with:
• Short sales or REOs — verbiage in those agreements makes them expressly non-assignable.
• Any other purchase contract that specifies the agreement is not assignable.
For those types of deals, you’ll have to wholesale with a simultaneous or double closing.
The ideal use for the assignment of contracts is when you’re working directly with mom-and-pop sellers. I’ve wholesaled many hundreds of these types of deals, and nearly all of them were done via contract assignment.
“And/or Assigns…” Needed?
Nope, not even.
Basic contract law: Any contract is, by default, assignable unless it explicitly states that it can’t be assigned.
So, all that “and/or assigns” stuff? Not needed. Myth busted.
What’s the Difference in an Assignment Contract vs. Double Close?
Great question!
Whelp, if you’ve been around the block, you might’ve heard of “double closing.” Unlike a real estate assignment contract, where you’re simply transferring your rights, a double close means you actually buy the property first.
You become the temporary owner before selling it to your end buyer. It’s more capital-intensive than a real estate assignment contract but can offer benefits.
Like what, you ask?
Privacy!
How?
Because there are 2 separate closings! So, your end buyer isn’t privy to details of your 1st deal with the seller. Since the end buyer doesn’t know how much you bought the property for, they won’t know how much you’re profiting from selling to them.
Sweet!
When/How Should the Seller Know I’m Assigning?
Again, there’s not a “right” answer here…
Some wholesalers let sellers know from the beginning that they’ll be assigning the deal to someone else at some point — then they’ll let them know when they have a buyer lined up and that it’s being assigned.
Other investors (myself included) are concerned that this could confuse or needlessly alarm an unknowledgeable seller who’s not already familiar with the world of real estate investing.
So, I typically tell my sellers that I have “funding partners” who will be looking at the deal to size it up… then whenever I’ve got a buyer locked in, I’ll let the seller know that:
- One of my funding partners has agreed to proceed and…
- He’s asked that I assign my contract over to him and close in his name, for simplicity’s sake.
For me, this is just much easier to explain and for the seller to understand than to try and give them a crash course on the fundamentals of wholesaling houses for quick cash.
Main point — don’t surprise your seller with an assignment — let them know about it one way or another. Most people hate surprises, and it’ll likely kill deals for you if they only find out in the 11th hour.
How Is an Assignment Contract for Real Estate Legal?
An assignment of contract for real estate is absolutely legal!
But! There are rules to follow. For instance…
• All parties in the original real estate assignment contract should consent to the assignment.
• Also, make sure the original real estate assignment contract doesn’t prohibit assignment.
• Properties like short sales, REOs, and HUD may have certain restrictions. Always consult a real estate attorney to review the original real estate assignment contract and the assignment agreement.
How to Assign a Contract for Real Estate in 2024
Ready to navigate the ins and outs of a real estate assignment contract?
Let’s dive into the comprehensive steps to ensure you’re on top of your assignment game.
Research Potential Properties
First up, you want to identify properties with promising investment returns.
How?
Lean on market research, online real estate databases, and historical data.
You’ll want properties that not only fit your budget but also have strong future value, whether through expected community developments or through existing demand.
Secure a Contract
Once you’ve zeroed in on the perfect property, the next step is to initiate negotiations with the seller. Your aim here is to land a purchase agreement.
Pro Tip: Make sure the real estate assignment contract you negotiate includes a clause that allows for its assignment!
Submit the Contract
After you’ve secured a real estate assignment contract, it’s crucial to validate all the details. Once everything checks out, submit the real estate assignment contract according to local real estate regulations or to relevant parties like title companies or legal advisors. This sets the wheels in motion.
Identify an End Buyer
The next phase involves tapping into your network or using marketing techniques like social media ads, flyers, or even good old word-of-mouth to find an end buyer interested in the property.
Your buyer should be reliable and financially secure to ensure a smooth transaction ahead.
Draft the Assignment Agreement
Now comes the pivotal moment of drafting an assignment agreement. This document should clearly spell out the transfer of all rights from you to the end buyer, including the agreed-upon assignment fee that you’ll receive once the deal is done.
Close the Deal
At this stage, you’re almost there…
All that’s left is the closing process, and this is where a title company or a real estate attorney comes into play. They’ll handle the paperwork, ensure all legal protocols are followed, and, most importantly, make sure that your assignment fee ends up in your pocket. Hooray.
So…
By mastering these steps, you’re well on your way to successfully completing a real estate assignment contract. It’s a nuanced process, but understanding each phase ensures that you can navigate it with confidence.
Assignment Contract in Real Estate: When & How Do I Get Paid?
There’s really no “right” answer in an absolute sense—you just need to make sure right from the start of any deal that it’s 100% clear when you expect to get paid.
You’ve basically got 3 options:
• Get your assignment fee upfront (when the contract is first assigned)
• Get paid entirely at closing (which seems reasonable to me)
• Get it paid into escrow in advance pending closing (I’ve never done that)
Historically, I’ve always just had it paid to me from funds dispersed at the final closing. But if I’m dealing with a new investor-buyer, I’ll have them put some earnest money down in the amount of my assignment fee… and I have that EMD held in escrow by the closing attorney until the deal actually closes.
Of course, as the middleman, it would be great to get paid right away, step out, and move on to the next deal.
But… think about it from your investor-buyer’s perspective: How big of a risk is it for them to take? What if you walk away with their money, and then the deal falls apart for some reason?
If I were in their shoes, I’d probably not do the deal unless the assignment fee was paid at closing, along with the purchase. Since if I were them, that’s the way I do it. It just seems reasonable to me. But, ultimately, it’s a call you can make for yourself, even on a deal-by-deal basis if you want.
When/How Should the Seller Know I’m Assigning?
Again, there’s not a “right” answer here…
Some wholesalers let sellers know from the beginning that they’ll be assigning the deal to someone else at some point — then they’ll let them know when they have a buyer lined up and that it’s being assigned.
Other investors (myself included) are concerned that this could confuse or needlessly alarm an unknowledgeable seller who’s not already familiar with the world of real estate investing. So, I typically tell my sellers that I have “funding partners” who will be looking at the deal to size it up… then whenever I’ve got a buyer locked in, I’ll let the seller know that:
1. One of my funding partners has agreed to proceed and…
2. He’s asked that I assign my contract over to him and close in his name, for simplicity’s sake.
For me, this is just much easier to explain and for the seller to understand than to try and give them a crash course on the fundamentals of wholesaling houses for quick cash.
Main point — don’t surprise your seller with an assignment — let them know about it one way or another. Most people hate surprises, and it’ll likely kill deals for you if they only find out in the 11th hour.
Benefits an Assignment Contract for Real Estate
Navigating the complexities of real estate can often feel like you’re walking through a maze, but understanding the pros and cons of a real estate assignment contract can be your road map to success.
First, the pros:
• Low Capital Requirement: Simply put, you don’t need to purchase the property outright, which significantly lowers your financial risk.
• Quick Turnaround: Essentially, you’re finding an end buyer and letting them handle the heavy lifting while you walk away with a nice chunk of change.
• Cost-Effective Wholesaling: Since there’s only one set of closing fees, you’re not just cutting through red tape; you’re also cutting costs.
• Strong Selling Point: Promising an easy and smooth transaction can be a great selling point when negotiating with property owners.
• Simplicity: The process is straightforward — you find a buyer, sign an agreement, put earnest money into escrow, and then take a back seat.
• Opportunities for Repeat Business: If done correctly and transparently, real estate assignment contracts can pave the way for future deals with the same buyers.
Disadvantages of an Assignment Contract for Real Estate
Now, let’s address the cons:
• Dependence on Buyers: Your entire profit hinges on finding a committed end buyer. If, for some reason, the buyer falls through or backs out, you’re back to square one.
• Limited Control: Since you don’t actually own the property, your influence is restricted to the conditions set forth in the original real estate assignment contract. You’re not in the driver’s seat for this ride.
• Visibility of Assignment Fee: Transparency’s great and all, but having your assignment fee out in the open can also be a pitfall. Sellers and buyers might reconsider their positions if they see you making a substantial profit.
• State Legal Restrictions: Real estate laws vary by state, and local regulations can sometimes be a hurdle. Realtors and other industry players may lobby against wholesalers, so know your local laws.
• Limited Property Options: Some properties, notably short sales and bank-owned homes, come with no-assignment clauses, restricting your options for wholesaling.
Assignment Contract in Real Estate Tips
Communicate what’s going on very clearly with your title company. Make sure they understand that either (a) you’ve already been paid your fee (if you have) or (b) you are getting paid an assignment fee from the closing proceeds.
In other words, make sure they understand if they’re supposed to be cutting you a check at closing rather than the seller paying you. I once had a title company make the mistake of thinking the seller would be paying my fee instead of them at closing. Guess who never got paid on that deal? (Don’t be that guy.)
Don’t call your assignment fee a “finder’s fee.” If you’re finding properties for new buyers and collecting finder’s fees, then you’re acting as a real estate agent and you need a license.
Call it an “assignment fee” any/everywhere applicable. That’s the legal and proper way to name it—and it could keep you out of hot water should an agent decide you’re infringing on their turf.
Final Thoughts: Assignment Contract in Real Estate in 2024
Okie dokie…
As you can see, an assignment of contract for real estate offers a nifty way to get into the real estate game without significant capital or risk. Hooray!
They’re legal, profitable, and doable… if you know the ropes. (Rope details above!)
Interested in taking it to the next level?
Swipe & Deploy…
Download the document here… No strings attached.
Just be sure to have your local attorney and/or real estate pro — someone who knows the specific legal stuff for your state — review it before you go start making it rain dollar bills!
