Assignment of Contract

Understanding Assignment of Contract

Assignment of contract is the foundation of real estate wholesaling. An investor (the assignor) enters into a purchase contract with a seller, then assigns that contract to an end buyer (the assignee) for a fee. The investor profits from the assignment fee without needing to close on the property themselves.

The process works as follows: the investor finds a property, negotiates a purchase price with the seller, and signs a contract. The investor then finds a buyer willing to pay more than the contracted price. The investor assigns the contract to the new buyer, who closes directly with the original seller. The difference between the assigned price and the original contract price is the investor's assignment fee.

For tax-delinquent property investors, assignment is useful when they identify a deal but don't want to (or can't) close on it themselves. They can assign the contract to another investor with the capital to close, earning a fee for the deal sourcing and negotiation.

Not all contracts are assignable. Some contracts include anti-assignment clauses that prohibit transfer without the seller's consent. Investors should ensure their contracts explicitly permit assignment or use language like 'Buyer and/or assigns.'

Assignment fees are disclosed to all parties in most jurisdictions. The transparency of the fee can sometimes create friction—if the end buyer sees a large assignment fee, they may try to go directly to the seller. Professional wholesalers manage this through relationship building and contract protections.

Real-World Example

Texas-Specific Information