What is an Assignment of Contract?
An assignment of contract allows a buyer under an active real estate purchase agreement to transfer their contractual rights and obligations to another party before the transaction closes. This method is commonly used in wholesale real estate, where the initial buyer (the assignor) finds an investment-worthy property, secures it under contract, and then sells that contract to a third-party buyer (the assignee) for a fee. This is very commonly used in the profession of those who “wholesale” properties for a living.:
The major distinction is that the assignor never actually takes title to the property. Instead, they monetize their ability to find and contract deals, earning income by assigning those deals to end buyers who will either flip or hold the property.
Legal Framework and Contract Language
In most U.S. jurisdictions, real estate purchase agreements are assignable by default, unless the contract contains a clause that prohibits it. Contracts may state one of the following:
- “This contract is assignable without consent.”
- “This contract is assignable only with the written consent of the seller.”
- “This contract is not assignable.”
For assignments to be legally enforceable, the assignor must have an equitable interest in the deal, meaning a valid purchase agreement with enforceable terms. The assignment does not create a new contract; it transfers the existing one. To protect all parties, many assignments are documented using:
- An Assignment of Purchase and Sale Agreement
- An Addendum acknowledging the assignment and fee
- Disclosure forms outlining the assignor’s role in the transaction
Some states, like Illinois and Oklahoma, have tightened regulations around wholesaling and assignments, requiring real estate licenses or seller disclosures in certain cases. Investors should consult a local attorney to confirm what’s permitted.
How the Assignment of Contract Works in Practice
The process usually follows these steps:
- The investor finds a motivated seller and negotiates a purchase agreement, often below market value.
- The contract includes language allowing assignment or at least doesn’t restrict it.
- The investor markets the contract to cash buyers, rehabbers, or landlords in their buyer network, without marketing the actual property unless legally allowed.
- A buyer agrees to take over the contract, often at a higher price or with a clear assignment fee added.
- An assignment agreement is executed, transferring the rights to the end buyer.
- The closing takes place between the seller and the assignee. The assignor is paid an assignment fee on the settlement statement.
Example:
- Contract price: $210,000
- Assigned to buyer for: $225,000
- Assignment fee to investor: $15,000
- Seller still receives $210,000 as agreed
When to Assign and When Not To
Assignments work best in high-demand markets when the investor can identify a below-market deal and move quickly to line up a cash buyer. However, they may not be ideal in:
- Slow or declining markets where finding end buyers is more difficult
- Tight timelines, where assignment delays could risk losing the deal
- Heavily regulated states, where assignments require disclosures or licensure
- Retail transactions, where seller expectations and buyer financing don’t align with the wholesale model
Investors must also be cautious when entering into contracts they never intend to close. If a buyer cannot perform and cannot find an assignee, they may lose their earnest money deposit or face legal disputes.
Risks and Challenges in Assignment Deals
While assignment strategies are legal, they are not without risks:
- Seller Pushback: Some sellers may feel misled if they discover the property was not purchased by the person who signed the contract. Transparency is important.
- Contract Defaults: If the end buyer backs out, the assignor may still be held liable unless protected by a contingency or release clause.
- Legal Restrictions: Certain states require a real estate license to assign contracts regularly for profit.
- Title Company Limitations: Some title companies will not process assignment closings, especially if the paperwork lacks clarity or appears speculative.
- Reputation Risk: If an investor backs out frequently or misrepresents their intent, it can harm relationships with sellers, agents, and other investors.
Mitigating these risks requires clear contracts, full disclosures, and a strong buyer network.
Double Closing vs. Assignment
In some cases, investors opt for a double closing rather than an assignment. This means they briefly purchase the property themselves and immediately resell it, often on the same day. Double closings are used when:
- The seller prohibits assignment
- The buyer doesn’t want to see an assignment fee
- The investor wants to maintain confidentiality around the contract price
While double closings require additional funding (often through transactional lenders), they offer more control and privacy. Assignment remains the fastest and least expensive option when permitted.
Looking to Fund Your Assigned Deals with Certainty and Speed?
Unitas Funding supports real estate investors who use assignment strategies to secure high-potential properties. Our asset-based loans are built to close fast and with flexible terms.
Confident closings. Transparent terms. Ready capital.