how does an assignment contract work

Assignment of Contract

Jump to section, what is an assignment of contract.

An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.

How Does Assignment of Contract Work?

An assignment of contract is simpler than you might think.

The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.

When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement . Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer. However, the general rule is that contracts are freely assignable unless there is an explicit provision that says otherwise.

In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment ” to notify any other contract signers of the change.

The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. If the assignment is valid, the assignor is not required to obtain the consent or signature of the other parties to the original contract for the valid assignment to take place.

Check out this article to learn more about how assigning a contract works.

Contract Assignment Examples

Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:

Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.

Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.

Here is an article where you can find out more about contract assignments.

Nicholas M.

Assignment of Contract in Real Estate

Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts .

This process is called real estate wholesaling.

Real Estate Wholesaling

Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.

The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.

This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.

This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.

But how do real estate wholesalers find these properties?

It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:

Direct mailers
Place newspaper ads
Make posts in online forums
Social media posts

The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.

Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to another person, they are always upfront about during the preliminary phases of the sale.

In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.

After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.

Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.

If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.

One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.

On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.

Learn more about assignment of contract in real estate by checking out this article .

Who Handles Assignment of Contract?

The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract , post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.

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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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Wholetailing: A Guide For Real Estate Investors

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What Is an Assignment of Contract?

Assignment of Contract Explained

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Assignment of contract allows one person to assign, or transfer, their rights, obligations, or property to another. An assignment of contract clause is often included in contracts to give either party the opportunity to transfer their part of the contract to someone else in the future. Many assignment clauses require that both parties agree to the assignment.

Learn more about assignment of contract and how it works.

What Is Assignment of Contract?

Assignment of contract means the contract and the property, rights, or obligations within it can be assigned to another party. An assignment of contract clause can typically be found in a business contract. This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark , and copyright) agreements.

How Does Assignment of Contract Work?

An assignment may be made to anyone, but it is typically made to a subsidiary or a successor. A subsidiary is a business owned by another business, while a successor is the business that follows a sale, acquisition, or merger.

Let’s suppose Ken owns a lawn mowing service and he has a contract with a real estate firm to mow at each of their offices every week in the summer. The contract includes an assignment clause, so when Ken goes out of business, he assigns the contract to his sister-in-law Karrie, who also owns a lawn mowing service.

Before you try to assign something in a contract, check the contract to make sure it's allowed, and notify the other party in the contract.

Assignment usually is included in a specific clause in a contract. It typically includes transfer of both accountability and responsibility to another party, but liability usually remains with the assignor (the person doing the assigning) unless there is language to the contrary.

What Does Assignment of Contract Cover?

Generally, just about anything of value in a contract can be assigned, unless there is a specific law or public policy disallowing the assignment.

Rights and obligations of specific people can’t be assigned because special skills and abilities can’t be transferred. This is called specific performance. For example, Billy Joel wouldn't be able to transfer or assign a contract to perform at Madison Square Garden to someone else—they wouldn't have his special abilities.

Assignments won’t stand up in court if the assignment significantly changes the terms of the contract. For example, if Karrie’s business is tree trimming, not lawn mowing, the contract can’t be assigned to her.

Assigning Intellectual Property

Intellectual property (such as copyrights, patents, and trademarks) has value, and these assets are often assigned. The U.S. Patent and Trademark Office (USPTO) says patents are personal property and that patent rights can be assigned. Trademarks, too, can be assigned. The assignment must be registered with the USPTO's Electronic Trademark Assignment System (ETAS) .

The U.S. Copyright Office doesn't keep a database of copyright assignments, but they will record the document if you follow their procedure.

Alternatives to Assignment of Contract

There are other types of transfers that may be functional alternatives to assignment.

Licensing is an agreement whereby one party leases the rights to use a piece of property (for example, intellectual property) from another. For instance, a business that owns a patent may license another company to make products using that patent.

Delegation permits someone else to act on your behalf. For example, Ken’s lawn service might delegate Karrie to do mowing for him without assigning the entire contract to her. Ken would still receive the payment and control the work.

Do I Need an Assignment of Contract?

Assignment of contract can be a useful clause to include in a business agreement. The most common cases of assignment of contract in a business situation are:

Assignment of a trademark, copyright, or patent
Assignments to a successor company in the case of the sale of the business
Assignment in a contract with a supplier or customer
Assignment in an employment contract or work for hire agreement

Before you sign a contract, look to see if there is an assignment clause, and get the advice of an attorney if you want to assign something in a contract.

Key Takeaways

Assignment of contract is the ability to transfer rights, property, or obligations to another.
Assignment of contract is a clause often found in business contracts.
A party may assign a contract to another party if the contract permits it and no law forbids it.

Legal Information Institute. " Assignment ." Accessed Jan. 2, 2021.

Legal Information Institute. " Specific Performance ." Accessed Jan. 2, 2021.

U.S. Patent and Trademark Office. " 301 Ownership/Assignability of Patents and Applications [R-10.2019] ." Accessed Jan. 2, 2021.

Licensing International. " What is Licensing ." Accessed Jan. 2, 2021.

Assigning Real Estate Contracts: Everything You Need to Know

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. 3 min read updated on February 01, 2023

Updated July 10, 2020:

How Contract Assignment Works

The first thing you need to do for contract assignment is to find a motivated seller. This is a person who owns a property, and for some reason, needs to sell in a hurry. This is generally because of a problem they are having, such as needing to move to a new home quickly. You'll need to be able to tell the difference between this sort of seller and someone who isn't in so much of a hurry to sell, and perhaps just wants to know what the property is worth.

You can find motivated sellers by placing ads in the newspaper, marketing on the internet, or sending direct mail. A combination of strategies works best.

The next thing you need to do is to obtain an assignment contract document. You can find templates on the web, but it's a good idea to have an attorney look it over before signing anything. That way, you will know that everything is completely legal. You will also be able to use that attorney if things don't work out as planned.

After the contract is signed, you submit it to a title company or an attorney who handles real estate closings . They will then do a title search. This ensures there are no existing liens against the property. This step is crucial because you do not want to buy a property that has a problem with the title. The title company is objective and independent and therefore makes sure everything is fair and legal.

At this point, you may search for a buyer. This will require more marketing strategies and can be a difficult process, but when you do find a buyer, you can move on to the next step - closing on the property. You'll need to collect a non-refundable deposit known as “earnest money” to make sure the buyer won't back out. If the buyer does change their mind, you get to keep the earnest money. This amount can be determined by you or the buyer.

Next, you get paid! The amount you receive will cover the amount you agreed to pay the property seller, along with an amount you get to keep in return for finding the buyer and making the transaction happen.

While this process takes place, you should make sure the seller understands how the process works , and that you will make a profit from the transaction. Otherwise, either the seller or buyer may decide they don't like the idea of your profiting from the sale and may back out. Reassure the seller that they are still getting the amount agreed upon for the sale.

Most contract assignments are done for $5,000 profit or less, but you can do it for a higher amount if you choose. If problems arise, it's possible to do a double or simultaneous closing, thereby keeping both parts of the sale separate and anonymous. Some title companies may not agree to do this, so if it becomes an issue, you should discuss it in advance.

Drawbacks of Contract Assignment

Contract assignment, or wholesaling, can be a profitable venture , but there are a few pitfalls to watch out for, such as:

You cannot make any repairs or renovations to the property because you do not own it at any point.
You cannot offer any type of financing to the buyer.
You must get the sale accomplished within a short amount of time before the contract expires.
The process of closing on the property is detailed and can be complicated.
You must find a buyer who is willing to pay in cash because it's hard to find a lender who will approve a mortgage for an assigned contract.

You also need to check the laws in your state, because in some states it is not legal to market a property that you don't own.

If you need more information or help with assigning real estate contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Assignment of Contract in Real Estate [And Or Assigns]

Assignment of Contract in Real Estate

Most people think that the only way to start real estate investing is to either:

Pay a down payment of 10-20% from your own savings and finance the rest
Partner with another investor and do a joint venture

The common thread between the options?

A large amount of money paid upfront, coming from your own pocket.

If you don't have a large amount of cash put away, you wonder how you'd ever get your start.

Are you just doomed to watching as investment opportunities pass you by?

Of course not!

There is a third option, a legitimate way of investing in real estate without a money down: real estate assignment contracts.

With assignment contracts, you are not purchasing the property outright; instead, what you are doing is getting the exclusive right to purchase a property within a certain timeframe, an investing strategy referred to as wholesaling.

Some wholesalers choose to put up an earnest money when securing the right to buy a property from a seller, but it is not required . All you have to do is to show up with a real estate contract and an offer to purchase the property for a specified amount by a specified closing date.

However, not all real estate contracts are written the same.

For wholesaling to be a lucrative investing strategy, you have to add a special provision to the purchase agreement before presenting it to the seller: t he assignment clause .

What Is an Assignment Clause in a Real Estate Contract?

An assignment clause in a purchase and sale agreement in real estate gives the original buyer (the assigning party) the ability to "assign" or transfer the rights to purchase a property to a new buyer (the assignee).

This is done by affixing the phrase "and/or assigns" next to your name in the real estate contract.

This means that on the buyer's name, it should say: John Smith and/or assigns .

As long as the seller agrees and signs the assignment contract, then it constitutes their written consent to sell the property to someone other than you.

However, if you forget to put the assignment clause, then you cannot assign the contract to someone else.

When you assign the contract to the new buyer, all the contractual obligations are transferred also, and the end buyer gets full ownership privilege once the transaction is completed.

As there is no free lunch in this economy, you get to collect an assignment fee for your troubles.

What Is an Assignment Clause in a Real Estate Contract?

Who Will Buy the Real Estate Assignment Contract?

In today's hot real estate market , house flippers, landlords, or simply buy-and-hold investors would not pass up investment opportunities such as the chance to buy real estate for lower than the market value.

For best results, it is recommended that you sell the assignment contract to all cash buyers for the following reasons:

They have the necessary liquidity to be able to close quickly, sometimes in as short as a week;
They are not dependent on financing from banks or traditional lenders, eliminating the uncertainty that they might not move forward with the deal;
They will buy the property as is, with no need to negotiate for repairs or ask concessions from the seller.

Sellers who enter in assignment contracts with a wholesaler are typically motivated sellers, which means they are stuck with a problem property that is either costing them money (major structural damage) or is in danger of being lost (foreclosure or bankruptcy).

In any case, they need to sell fast , and this is where cash buyers can be really helpful.

How Does Assignment Work?

Generally, the entire process of real estate investing via assignment agreement goes as follows:

Find a Property Which Can Be Bought for Lower Than Market Price

Distressed properties, such as those on the brink of foreclosure, can be bought for a huge discount and thus, present an attractive investment opportunity.

First identify an area you're interested in, then scout homes showing visible damage or neglect. You can then get in touch with owners for a potential purchase.

Make an Offer on the Property

To make a suitable offer on one property you have your eye on, do your due diligence by running comps.

This means looking at comparables ("comps"), or recently sold properties similar to your target purchase in order to establish a basis for your offer. Browsing online listings, or simply driving around the neighborhood and asking around are a good source of information on comparables.

Present the Purchase Agreement With “And or Assigns” Verbiage Built In

Once you're confident with your offer, present a purchase and sale agreement to the owner. It should contain the buyer and seller information, property details, purchase price, closing date, and other contingencies both parties agree on.

Don't forget to include the assignment clause, as if you forget that, the contract prohibits you from assigning the contract to another investor and you'll be on the hook to buy the property.

Assign the Contract to an End Buyer

After the original contract is signed, you, as the buyer, reserves the right to purchase the property up to a time stated in the contract.

You can then find another buyer to assign the contract to if you don't intend to go ahead with the purchase yourself.

Collect Your Assignment Fee Once the Real Estate Transaction Is Completed

Once the keys and the cash change hands, you are compensated with an assignment fee at the close.

Pros And Cons Of Having Successors And Assigns Clause In Real Estate Contracts

Pro #1: you have control over the transaction.

Having the phrase "and or assigns" after your name in the assignment contract template gives you the flexibility of transferring your purchase rights to another buyer for a fee.

In case you change your mind later on and decide to purchase and flip the property yourself for a higher profit, you are also free to do so.

Pro #2: You Can Put Together Real Estate Deals And Earn Without Having To Spend A Dime

Real estate wholesaling is also known as "contract flipping".

Compared to a full blown house flipping where you have to buy the property and spend for repairs and upgrades prior to selling it for a higher price, with assignment contracts you don't have to do anything to the property before you earn.

The only investment you have to make is your time and effort in finding motivated sellers.

Sometimes, you don't even have to set foot on the property nor even see it with your own eyes before you sell your buying rights to another investor!

Such is the power of a real estate assignment contract.

Pro #2: You Can Put Together Real Estate Deals And Earn Without Having To Spend A Dime

Pro #3: The Parties Involved Can Have Huge Savings On Realtor's Fees

The buyer's and seller's agent will each get 3% commission off the purchase price. For illustrative purposes, say a house sells for $300,000, realtor fees are a whopping $18,000 (6% of the purchase price).

On the other hand, a real estate wholesaler's assignment fee typically maxes out at $7,000 , making it attractive for house flippers and other investors. They get a nice investment property at a discount without breaking sweat since it's a wholesaler who found it for them.

For the owner, this means they pocket more money since they don't have to take anything off the price they have agreed to sell for.

Pro #3: The Parties Involved Can Have Huge Savings On Realtor's Fees

Pro #4: Only One Closing Cost Needs To Be Paid

After the assignment of contract to the new buyer takes place, you immediately take yourself out of the equation, and the transaction ultimately happens between the seller and the end buyer.

This means the following:

only one set of paperwork is to be filed;
only the buyer and seller's names appear in the property chain of title; and,
only one transaction takes place, so the closing cost only needs to be paid once.

Pro #5: The Wholesale Deal Is Completely Transparent

Honesty and transparency are the hallmarks of a good business person.

If you're a newbie venturing out into your first deal, there's no one yet to vouch for you so you're relying on your word to build your reputation.

It is better to inform the seller beforehand that you intend to transfer the purchasing rights for a profit so that they wouldn't be shocked if another person shows up at the closing table.

Pro #6: You Develop a Network of Real Estate Sellers, Buyers, and Investors

There is a well-known saying that goes: "Your network is your net worth."

And it is very true in this line of business. Since wholesaling is mainly facilitating the sale of investment properties between buyers and sellers , you need to have a lot of social capital, which means you need to know a lot of people.

Wholesaling real estate allows you to rapidly expand your network, opening up plenty of opportunities for you down the line.

Con #1: If One Party Backs Out Of The Deal, It Would Reflect Poorly On You

In flipping assignment contracts, what you are selling is something intangible.

As such, it is heavily dependent on the reliability of the parties at both ends of the deal to uphold the terms of the contract. If either one defaults and the sale falls through, you're the one who is going to look bad.

That's why it is important to have a buyers list ready so that you can have some wiggle room if something unexpected happens.

Or even better, have a backup financing option so you can buy the property yourself if your buyer backs out.

Con #2: Certain Real Estate Properties Are Not Eligible For Assignment Contracts

HUD homes and real estate owned (REO) properties typically have anti assignment clauses preventing them from being bought and sold through a contract assignment.

Con #3: Sellers May Think You're Taking Advantage Of Them

The assignment fee that you are set to receive from the deal is written into the contract for the involved parties to see.

This may turn buyers and sellers off: buyers might feel like they're paying for more than the property is actually worth; and sellers might feel like they missed out on some serious money while a wholesaler gets to make money in their financial distress.

Con #4: You Don't Get Owner's Rights

Although you have the exclusive right to buy the property, ultimately, what you have is just a piece of paper. You cannot touch the property, you cannot live in it, you cannot do any upgrades--the list of restrictions go on.

For distressed properties in a state of disrepair, it can be a challenge to sell it even to the most seasoned of house flippers.

Con #5: You Have to Deal With the Time Pressure Element

The contract states the closing date by which you have to find a buyer. This is due to sellers usually rushing to offload a property that's causing them problems, so they're operating on a short timeframe.

If you are just starting out and your network is still quite small, finding a buyer within a short period of time can be difficult.

Con #5: You Have to Deal With the Time Pressure Element

Frequently Asked Questions: Real Estate Assignment Contracts

Do you need a license to be a real estate wholesaler.

The only thing you need to keep in mind to keep everything above board and avoid legal trouble is that you'll have to be the buyer or the seller in the transaction.

Never sell the property in behalf of the owner --that's akin to acting as a real estate agent, and you're going to need a license for that.

This is where having the and or assigns verbiage is useful because you can definitely make money from real estate without having to purchase the property yourself.

Once you got the exclusive right to buy the property, you can transfer said contractual rights to another buyer in exchange for a small fee who will then be the one to fulfill the terms of the original contract.

What Do I Do if the Buyer Backs Out From the Contract Assignment to Purchase the Property?

Real estate wholesaling typically goes like this: you find a buyer and everything seems to be going well and they're set to close in a few days and you're about to get that assignment fee.

Unfortunately, the buyer calls you to say that they aren't going ahead with the deal.

Are you on the hook to buy the property?

The answer is yes, unless you want to breach the contract and ruin your reputation as a wholesaler.

But, as long as you did your due diligence, crunched the numbers, and found that the property is a great buy, you shouldn't be worried about losing money.

You're guaranteed to make money eventually, maybe not as fast as if it was a straight up wholesale transaction, but there's nothing to be scared of about getting "stuck" with the property in the meantime as you look for a buyer.

What is Double Closing?

When you choose the double closing method, there is an extra step to the ones outlined above : fund the real estate purchase yourself using your own cash, or through hard money loans. Although it has a higher interest rate versus traditional options, hard money loans are favored by real estate investors due to fast approvals and interest-only payment options.

In any case, with double closing, you buy the property at the price you and the seller agreed upon beforehand, and then afterward, you sell it to your end buyer .

Sometimes, double closing can even happen on the same day if you time it right!

This means, the seller and the end buyer ultimately never have to meet. They may not even be aware of the other party, so you don't have to worry about protecting your profits from the scrutiny of either party, and no one would walk away from the transaction feeling ripped off .

That's not to say wholesaling is essentially ripping off people, not at all!

You put together the deal, you connected a motivated buyer with an all cash buyer , of course you deserve just compensation for your efforts in the form of an assignment fee. Sellers walk away with the cash to start anew, and the real estate investors gain a property they intend to make money off on.

Everybody wins!

The downside to double closing versus a real estate assignment contract is having to pay the closing costs twice . This is because ownership is transferred to you, regardless of how brief it is.

And it isn't just the cost that is doubled, you also double the paperwork !

If you figure that a double close is not for you, then you're better off doing a real estate assignment contract. That way, you're able to collect your fee without paying a cent in closing costs!

Final Thoughts: Assigning Contracts In Real Estate

Now that you have perfected your real estate contract, you feel like you're ready to embark on your first wholesale deal.

The first step that you need to take is to find the right investment property. The typical criteria are as follows:

must be in a good location;
must have a good future prospect of urban development (hello, land appreciation!); and,
must be selling at a discount.

While it may sound like a tall order, with Property Leads , we can help you find the property you're looking for!

We are the only pay-per-lead platform that uses SEO to generate the motivated seller leads that has the highest chances of conversion. This means you need to talk to fewer sellers but you'll end up closing more, resulting in more profits for you!

If you're interested on taking your real estate investing business to the next level, sign up below and we'll quickly arrange a call with you to have high quality leads delivered straight to your inbox!

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Assignment of Contract (What It Is And How It Works: Best Overview)

Looking for Assignment of Contract ?

What is the assignment of a contract in simple terms?

How does it work?

In this article, I will break down the meaning of contract assignment so you know all there is to know about it!

Keep reading as I have gathered exactly the information that you need!

Let me explain to you what assignment of contract means and why it matters!

Are you ready?

Let’s get started!

Table of Contents

What Is Assignment of Contract

The assignment of contract refers to instances where one party to a contract transfers its rights and obligations to another party.

In other words, one contracting party exits the contract and another party steps in the exiting party’s shoes.

For instance, Mary and Joe are parties to a contract.

Joe assigns his rights and obligations under the contract to Tim.

The original contract now continues between Mary and Tim where Joe has stepped out.

The party assigning the contract is called the “assignor” and the third party stepping in to the assignor’s shoes is the “assignee”.

Be sure to keep reading as I will explain to you how the assignment works and it’s important that you know more about the assignor’s liability when assigning the contract.

Assignment Under Contract Law

Under contract law , the assignment of a contract is considered to include the assignment of rights and the delegation of the party’s duties to another.

This means that the assignor’s rights are passed on to the assignee.

In addition to that, the assignor’s duties under the contract are also assigned to the assignee.

Assignment Under Property Law

In property law, the assignment of contract generally takes place between landlords and tenants.

Typically, a person (the tenant) will sign a lease with another party (the landlord) to rent an apartment or premises.

If the tenant wishes to leave the premise without breaching the terms of the contract, an assignment may be an option.

In that case, the tenant will assign its rights and duties under the lease agreement to another party (a new tenant).

How Assignment of Contract Works

To better understand the assignment of contract, let’s look more closely at how it works.

Contract Assignment Clause

One of the first things you should consider when contemplating an assignment of a contract is to find the contract assignment clause in your contract.

In most commercial contracts, the parties will include an assignment clause governing the possible assignment by the parties.

Some contracts will authorize the assignment, others will limit assignment to specific situations, while some contracts entirely prohibit assignments.

Be sure to read the contract assignment to see how your contract regulates assignments.

Consent To Assignment of Contract

In most cases, a contracting party looking to assign the contract to another party will need to get the consent of the other contracting party.

If the staying party consents to the assignment, the assignor can proceed with the assignment of the agreement to a third party (or assignee).

However, if the staying party does not consent to the assignment, then the other party must remain in the contract and observe its contractual obligations.

Assignor’s Liability

Assigning a contract does not necessarily mean that the assignor will be released of all liability under the contract.

Depending on the assignment clause language, the assignor may have the right to assign the contract but continue to remain liable under the contract.

In the event the assignor may continue to remain liable under the contract, it’s important that an assignment agreement be signed where the staying party releases and discharges the assignor of future contract liability .

Assignment Enforceability

Under the assignment law, when a contract is assigned as per the terms of the contract, the assignment will be legally enforceable.

However, assignment contracts are not enforceable if the contract prohibits the assignment, the assignment agreement is not materially consistent with the obligations under the original contract, or the assignment violates public policy or the law in some way.

In addition, a contract cannot be assigned if the assignor is not formally in a contract.

There are also instances where the contract requires that a party with special skills or unique characteristics render the services or perform the obligations, and an assignment would not work.

Keep reading as I will now give you an example of contract assignment so you can see how it works in practice.

Contract Assignment Process

The actual contract assignment process is fairly straightforward for most contracts.

Contract Assignment Steps

Here are the steps you’ll need to take to assign a contract:

See if the contract has an assignment clause
Make sure that the assignment clause authorizes assignments
If the assignment is authorized, follow the assignment logistic provided in the contract
If the assignment is prohibited, you may want to speak to the other contracting party to see if you could get consent to assign the contract

In some cases, all you may need to do is to give notice of assignment to provide the details of the assignment if the contract allows for an assignment this way.

In other cases, you may want to have an assignment agreement signed by the staying party, the exiting party, and the third party detailing the terms and conditions of the assignment.

Assignment Agreement Content

When a contract assignment agreement is needed, you should make sure that you include all the right information for the assignment to be valid and enforceable.

In most cases, the assignment of the contract is simple where you may find an assignment of contract form online to complete.

For simple assignment contracts, here is the content that you should expect:

Identification of the parties (original contract parties and assignee)
Contract assignment effective date
Original contracting party’s consent to the assignment
Assignee’s acceptance of the assignment
Assignor’s release and discharge of obligations going forward
Governing law
Signature block for the three parties

Alternatives To Assignment Contracts

What are the alternatives to a contract assignment?

Here are the main alternatives to a contract assignment:

Novation

Licensing refers to situations when a party authorizes another party to use a property or asset (whether tangible or intangible).

Delegation is when someone authorizes another to act on its behalf under a contract.

Novation is when a new party takes on a contracting party’s rights and obligations where the existing party’s rights are relinquished and all liability under the original contract wiped out.

Assignment of Contract vs Delegation of Contract

What is the difference between the assignment of a contract and the delegation of a contract?

The “assignment” of contract refers to a situation where one contracting party “transfers” the contract to a third party.

Once the assignment is completed, the assignor will no longer be in a contract with the other contracting party and the assignee will take the assignor’s place.

For example, Party A and Party B are part of a service contract.

Party B assigns the contract to Party C.

Going forward, the contract will be between Party A and Party C.

On the other hand, a delegation is when a party to a contract subcontracts parts of a contract to another party.

The party delegating the contract to another remains a contracting party and will remain responsible for the contract even though the obligations were delegated to another.

For example, a general contractor may delegate the plumbing work in a project to a plumber.

Although the general contractor has delegated part of the project to a subcontractor, it remains a contracting party and will remain responsible for the overall project.

Assignment of Contract Example

Let’s look at a few examples of when a contract may be assigned to another.

Assignment of Contract In Bankruptcy

You have entered into a contract with a company providing you with phone services.

The company goes bankrupt.

In the context of the bankruptcy, another phone company buys out a portion of the bankrupt’s book of business and your contract is in the pool of assets purchased.

The bankruptcy trustee assigns your contract from the bankrupt phone company to the new phone company.

Assignment of Contract In Real Estate

In real estate, some investors engage in assignment transactions where they do not actually buy the property but enter into a purchase contract that it then assigns to another.

In essence, the real estate investor enters into a real estate purchase agreement defining the terms and conditions relating to the purchase of a property.

Following the executing of the real estate purchase agreement and prior to the “closing” of the transaction, it assigns the contract to another party in an attempt to make a profit without ever actually owning the property.

Assignment of Contract In Corporate Restructuring

In the corporate world, companies tend to restructure their operations to ensure they are legally and operationally optimized.

In the context of a corporate restructuring transaction, a company may assign a contract to another entity within its group, a subsidiary, or an affiliate.

Assignment of Agreement Takeaways

So there you have it folks!

What Does Assignment of Contract Mean

“Assignment of contract” is a legal term used to refer to situations where a party to an existing contract transfers its contractual obligations to another party.

Following the assignment , the assignee becomes responsible to execute the contractual obligations in favor of the party staying in the original contract.

If you are looking to assign a contract, you may want to consult with a qualified contract attorney who can assess your rights and obligations.

Keep in mind that a simple assignment of a contract does not necessarily mean that the assignor is released from liability under the original contract.

Now that you know what is an assignment of contract, how it works, and what it entails, good luck with your transaction!

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10 Essential Things to Know About Real Estate Assignment Sales (for Sellers)

— We take our content seriously. This article was written by a real person at BREL.

What’s an assignment?

An assignment is when a Seller sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract. The Buyer of an assignment is essentially stepping into the shoes of the original purchaser.

The original purchaser is considered to be the Assignor; the new Buyer is the Assignee. The Assignee is the one who will complete the final sale with the Builder.

Do assignments only happen with pre-construction condos?

It’s possible to assign any type of property, pre-construction or resale, provided there aren’t restrictions against assignment in the original contract. An assignment allows a Buyer of a any kind of home to sell their interest in that property before they take possession of it.

Why would someone want to assign a condo?

Often with pre-construction sales, there’s a long time lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.

Another common reason why people want to assign a contract is financial. Sometimes, the original purchaser doesn’t have the funds or can’t get the financing to complete the sale, and it’s cheaper to assign the contract to a new purchaser, than it is to renege on the sale.

Lastly, assignment sales are also common with speculative investors who buy pre-construction properties with no intention of closing on them. In these cases, the investors are banking on quick price appreciation and are eager to lock in a profit now, vs. waiting for the original closing date.

What can be negotiated in an assignment sale?

Because the Assignee is taking over the original purchaser’s contract, they can’t renegotiate the price or terms of the contract with the Builder – they are simply taking over the contract as it already exists, and as you negotiated it.

In most cases, the Assignee will mirror the deposit that you made to the Builder…so if you made a 20% deposit, you can expect the new purchaser to do the same.

Most Sellers of assignments are looking to make a profit, and part of an assignment sale negotiation is agreeing on price. Your real estate agent can guide you on price, which will determine your profit (or loss).

Builder Approval and Fees

Remember that huge legal document you signed when you made an offer to buy a pre-construction condo? It’s time to take it out and actually read it.

Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder (we’ve seen everything from $750 to $7,000).

There may be additional requirements as well, the most common being that the Builder has to approve the assignment.

Marketing Restrictions

Most pre-construction Agreements of Purchase & Sale from Toronto Builders do not allow the marketing of an assignment…so while the Builder may give you the right to assign your contract, they restrict you from posting it to the MLS or advertising it online. This makes selling an assignment extremely difficult…if people don’t know it’s available for sale, how they can possibly buy it?

While it may be very tempting to flout the no-marketing rule, BE VERY CAREFUL. Buyers guilty of marketing an assignment against the rules can be considered to have breached the Agreement, and the Builder can cancel your contract and keep your deposit.

We don’t recommend advertising an assignment for sale if it’s against the rules in your contract.

So how the heck can I find a Buyer?

There are REALTORS who specialize in assignment sales and have a database of potential Buyers and investors looking for assignments. If you want to be connected with an agent who knows the ins and outs of assignment sales, get in touch…we know some of the best assignment agents in Toronto.

What are the tax implications of real estate assignment?

Always get tax advice from a certified accountant, not from the internet (lol).

But in general, any profit made from an assignment is taxable (and any loss can be written off). The new Buyer or Assignee will be responsible for paying land transfer taxes and any HST that might be due.

How much does it cost to assign a pre-construction condo?

In addition to the Builder assignment fees, you will likely have to pay a real estate commission (unless you find the Buyer yourself) and legal fees. Because assignments are more complicated, you can expect to pay higher legal fees than you would for a resale property.

How does the closing of an assignment work?

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. On the second closing (between the Builder and the Assignee), the Assignee pays the remaining amount to the Builder (usually with the help of a mortgage), and pays land transfer taxes. Title of the property transfers from the Builder to the Assignee at this point.

I suppose it could be said that there is a third closing too, when the Buyer takes possession of the property but doesn’t yet own it…this is known as the interim occupancy period. The interim occupancy occurs when the unit is ready to be occupied, but not ready to be registered with the city. Interim occupancy periods in Toronto range from a few months to a few years. During the interim occupancy period, the Buyer occupies the unit and pays the Builder an amount roughly equal to what their mortgage payment + condo fees + taxes would be. The timing of the assignment will dictate who completes the interim occupancy.

Assignments vs. Resale: Which is Better?

We often get calls from people who are debating whether they should assign a condo they bought, or wait for the building to register and then sell it as a typical resale condo.

Pros of Assigning vs. Waiting

Get your deposit back and lock in your profit sooner
Avoid paying land transfer taxes
Avoid paying HST
Maximize your return if prices are declining and you expect them to continue to decline
Lifestyle – sometimes it just makes sense to move on

Cons of Assigning vs Waiting

The pool of Buyers for assignment sales is much smaller than the pool of Buyers for resale properties, which could result in the sale taking a long time, getting a lower price than you would if you waited, or both.
Marketing restrictions are annoying and reduce the chances of finding a Buyer
Price – What is market value? If the condo building hasn’t registered and there haven’t been any resales yet, it can be difficult to determine how much the property is now worth. Assignment sales tend to sell for less than resale.
Assignment sales can be complicated, so you want to make sure that you’re working with an agent who is experienced with assignment sales, and a good lawyer.

Still thinking of assignment your condo or house ? Get in touch and we’ll connect you with someone who specializes in assignment sales and can take you through the process.

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Raj Singh says:

What can be things to look for, especially determining market value for an assigned condo? I’m the assignee.

Sydonia Moton says:

Y would u need a lawyer when u buy a assignment property

Gideon Gyohannes says:

Good clear information!

Who pays the assignment fee to the developer? Assignor or Assignee?

Thanks Gideon 416 4591919

Melanie Piche says:

It’s almost always the Seller (though I suppose could be a point of negotiation).

Fiona Rourke says:

If there are 2 names on the agreement and 1 wants to leave and the other wants to remain… does the removing of 1 purchaser constitute an assignment

Brendan Powell says:

An assignment is one way to add or remove people from a contract, but not the only way…and not the simplest. Speak to your lawyer for advice on what makes the most sense for your specific situation. For a straightforward resale purchase you could probably just do an amendment signed by all parties. If it’s a preconstruction purchase with various deposits paid, etc it could be more complicated.

Katerina says:

Depends on the Developer. Some of them remove names via assignments only.

Haroon says:

Is there any difference in transaction process If assigner or seller of a pre constructio condo is a non resident ? Is seller required to get a clearance certificate from cRA to complete the transaction ?

Nathalie says:

Hello , i would like to know the exact steps for reassignment property please.

Amazing info. Thanks team. I may just touch base with you when my property in Stoney Creek is completed in. 2020. I may need to reassign it to someone Thanks

Victoria Bachlowa says:

If an assignor renegs on the deal and refuses to close because they figured out they could get more money and the assignment was already approved by the builder and all conditions fulfilled what can the Assignee do. I have $33,000 dollars in trust in the real estate’s trust fund. They sent me a mutual release which I have not signed. The interim occupancy is Feb. 1 and the closing is schedule for Mar. 1, 2019. I have financing in place, was ready to move in Feb. 1 and I have no where to live.

Definitely talk to your lawyer right away. They’ll want to look at your agreement of purchase and sale and will be able to advise you.

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. Can I assume that these closing happen at the same time? I’m not sure how and when I would be paid as the Assignor.

What happens to the deposits or any profits already paid if the developer cancels the project after an assignment?

Hi, Did you get answer to this? I did an assignment sale last year and now the builder is not completing apparently and they are asking for their money back. Can they do that? After legal transactions, the lawyer simply said “the deal didn’t go through”. Apparently builder and the person who assumed the assignment agreed on taking out the deal. What do I have to pay back after it was done a year ago

This is definitely a question for your lawyer – as realtors we are not involved in that part of the transaction. I would expect that just as the builder would have to refund your deposits, you would likely need to do the same…but talk to your lawyer. As to whether the builder can cancel a project, yes they always reserve that right (but the details of how and under what circumstances would be in your original purchase agreement). It’s one of the annoying risks in buying preconstruction!

I completed the sale of my assignment in Dec 2015 however the CRA says I should be reporting the capital income in 2016 when the assignee closed his deal with the developer in July 2016. That makes no sense to me since I got all my money in Dec 2015. Can you supply any clarification on that CRA policy please?

You’d have to talk to the CRA or an accountant – we’re real estate agents,so we can’t give tax advice.

Hassan says:

Hello, You said that there are two closings. The first one between the assignor and the assignee and the second one between the builder and the new buyer (assignee). My question is that in the first closing does the assignee have to pay the assignor the deposit they have paid and any profit in cash or will the bank add this to the assignee’s mortgage?

The person doing the assigning usually gets their money at the first closing.

Kathy says:

What is the typical real estate free to assign your contract with the builder ?

Hi Kathy While we do few assignments (as they are rarely successful, and builders do not make it easy), in past we have charged more or less the same as we do for a typical resale listing. While there are elements to assignments that should be easier than a resale (eg staging), many other aspects of assignments are much MORE time-consuming, and the risk much higher since attempts to find a buyer for assignments are often unsuccessful. It’s also important to note that due to the extra complication, lawyer’s fees to assign are typically higher than resale as well–although more $ for the purchase side vs the sale side.

Mitul Patel says:

If assignee has paid small amount of deposit plus the original 25% deposit that the assignor has paid to the builder and gets the Keys to the unit since interim possession has been completed, when the condo registration is done and assignee is getting mortgage from the Bank or Pays the remaining balance to the Builder using his savings and decides not to pay the Balance of the Profit amount to Assignor, what are the possibilities in this kind of scenario?

You’d need to talk to a lawyer to find out the options.

David says:

How much exactly do brokers get paid at sale of Assignment? i.e. Would the broker’s fee be a % of your assignment selling price or your home’s selling price? I’m really looking for a clear answer.

I am using this website’s calculator associated with selling your home in Ontario. But there is no information on selling assignments. https://wowa.ca/calculators/commission-calculator-ontario

Realtors set their own commission, so there is no set fee- that website is likely the commission that that agent offers. We often see commissions of 4-5% for assignments. The fee is a % of the price of the assignment – for example, you originally bought for $500K; you’re now assigning for $600K – commission would be payable on the $600K.

Candace says:

Question: if i bought a pre construction condo, can i sell it as soon as it closes or do i have to live in it for 1 year after closing in order to avoid capital gains taxes?

Or does the 1 year start as soon as you move in?

I would suggest you talk to your accountant re: HST credit implications and capital gains, but if you sell it for more than you paid for it, capital gains usually apply.

You mention avoid paying HST when you assign your property. What is the HST based on? It’s not a commercial property that you would pay HST. Explain. Thanks.

HST and assignments are complex and this question is best answered specific to your situation by your accountant and real estate lawyer. In some cases HST is applicable on assignment profits – more details can be found on the CRA website here:

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-120/assignment-a-purchase-sale-agreement-a-new-house-condominium-unit.html

If you are a podcast listener, the true condos podcast is also a great resource.

https://truecondos.com/cra-cracking-down-on-assignments/

heres one for your comment, purchase pre construction from builder beginning of 2021, to be finished end of 2021, (semi detached) here we are end of 2022, both units are now ready. Had one assigned but because builder didnt accept within certain time frame(they also had a 90 day clause wherein we couldnt assign prior to 90 less firm closing date (WHICH MOVED 4 TIMES). Anyrate now we have a new assinor but the builder says we are in default from the first one and wants 50k to do the assignment (the agreement lists the possibility of assigning for 12k) Also this deal would include us loosing our whole deposit and paying the 12k(plus fees) would be in addition too the 130k we are already loosing. The second property we are trying to close but interest rates are riducous, together with closing costs(currently mortgage company is asking that my wife be added to that one, afraid to even ask this builder. Any advice on how to deal with this asshole greedy builder? We are simply asking for assignment as per contract and a small extension for the new buyer(week or two) Appreciate any advice. Thank you

Dealing with builders/developers can be extremely painful, much worse than resale transactions in our experience. Their contracts are written to protect THEM. Unfortunately all I can say is follow the advice of your lawyer.

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Contract Assignments

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What is a Contract Assignment?

In a contract assignment, one of the two parties to a contract may transfer their right to the other’s performance to a third party. This is known as “contract assignment.” Generally, all rights under a contract may be assigned. A provision in the contract that states the contract may not be assigned usually refers to the delegation of the assignor’s (person who assigns) duties under that contract, not their rights under the contract.

In modern law, the phrase “assignment of contract” usually means assignment of both rights and duties under a contract.

Who are the Various Parties Involved in a Contract Assignment?

How is a contract assignment created, when is a contract assignment prohibited, which parties are liable to each other in a contract assignment, are there issues with multiple assignments, should i hire a lawyer for contract assignments.

In a contract, there are two parties to the agreement, X and Y. The parties may agree to let X assign X’s rights to a third party . Once the third party enters the picture, each party has a special name. For instance, suppose X, a seller of bookmarks, contracts with Y, a purchaser of bookmarks. Y desires to have Y’s right to X’s performance (the sale of bookmarks on a monthly basis) to another person.

This third person, Z, is called the assignee. X is called the obligor , and Y is called the assignor , since Y has assigned its right to X’s performance . X, the obligor, is obligated to continue to perform its duties under the agreement.

There are no “magic words” needed to create an assignment. The law simply requires that the would-be assignor have an intent to immediately and completely transfer their rights in the agreement. In addition, writing is typically not required to create an assignment. As long as X and Y both adequately understand what right is being assigned, an assignment is created.

Words that indicate a transfer is to take place suffice, such as “I intend to transfer my rights under this agreement,” or, “I intend to give my rights to Z,” or “I intend to confer an assignment on Z.” In addition,consideration,which is a bargained-for exchange required for a contract to be valid, is not required for assignment.

In certain instances, an assignment of contract rights can be prohibited. If the contract contains a clause prohibiting assignment of “the contract,” without specifying more, the law construes this language as barring only delegation of the assignor’s duties, not their rights. If the assignment language states “assignment of contractual rights are prohibited,” the obligor may sue for damages if the assignor attempts to assign the agreement. If the contract language states that attempts to assign “will be void,” the parties can bar assignment.of rights.

Under modern contract law, the phrase “I assign the contract” is usually interpreted to mean that one is assigning rights and duties. What is an assignment of duties? An assignment of duties occurs where Y, called the obligor or delegator, promises to perform for X, the obligee. Y then delegates their duty to perform to Z, the delegate. Under the law, most duties can be delegated.

There are exceptions to this rule. Delegation can be prohibited when:

The duties to be performed involve personal judgment and special skill (e.g., a portrait, creation of a custom-made dress).
“Personal judgment” is the exercise of some kind of superior judgment when it comes to determining how, when, or where to do something. Examples of individuals who exercise personal judgment include talent scouts and financial advisors. Special skill is the unique ability to create a good or perform a service. A delegator can be prohibited from delegating duties when it is that specific delegator’s services are sought. For example, if the services of a specific famous chef are sought, and the original agreement was entered into on the understanding that the chef was hired for their specific talent, the delegator may not delegate the services;
The assignment fundamentally changes risks or responsibilities under the agreement;
The assignment is over future rights associated with a future contract that does not currently exist;
Delegation would increase the obligation of the obligee. For example, if a shoe manufacturer contracts to deliver soles to a store in the same town as the shoe factory, the other party cannot assign the delivery to a different store in another state. Doing so would impose a greater obligation on the obligee than was originally contemplated;
The obligee had placed special trust in the delegator. For example, assume that you have hired a patent attorney, based on that attorney’s significant skill and expertise, to obtain a valuable patent. You have placed special trust in this person, hiring them instead of other patent attorneys, because of their unique expertise. In such a situation, the attorney may not delegate his duties to another attorney (delegate), since the attorney was hired because of one person’s special capabilities;
The delegation is of a promise to repay a debt; or
The contract itself restricts or prohibits delegation. If the contract states, “any attempt to delegate duties under this contract is void,” a delegation will not be permitted.

In a contract involving assignment of rights, the assignee may sue the obligor. This is because the assignee, once the assignee has been assigned rights, is entitled to performance under the contract. If the obligor had a defense that existed in the original contract between obligor and assignor, the obligor may assert that defense against the assignee. Examples of such defenses include the original contract was not valid because of lack of consideration, or because there was never a valid offer or acceptance).

An assignee may also sue an assignor. Generally, if an assignment is made for consideration,it is irrevocable. Assignments not made for consideration, but under which an obligor has already performed, are also irrevocable. If an assignor attempts to revoke an irrevocable assignment,the assignee may sue for “wrongful revocation.”

In circumstances involving delegation of duties,an obligee must accept performance from the delegate of all duties that may be delegated. The delegator remains liable on the agreement. Therefore, the obligee may sue the delegator for nonperformance by the delegate. The obligee may sue the delegate for nonperformance, but can only require the delegate to perform if there has been an assumption by the delegate. An assumption by the delegate is a promise that the delegate will perform the delegated duty, which promise is supported by consideration.

Assignments that are not supported by consideration are revocable. If an initial assignment is revocable, a subsequent assignment can revoke it. If a first assignment is irrevocable, because consideration was present,the first assignment will usually prevail over a subsequent assignment. This means the person who can claim the assignment was first made to them will prevail over someone who claims a subsequent assignment.

If, however, the second person paid value for the assignment, and entered into the assignment without knowing of the first assignment, the “subsequent”assignee is entitled to proceeds the first judgment against the obligor (the original party who still must perform), in the event such a judgment is issued,

If you have an issue with assignment of rights or duties under a contract, you should contact a contract lawyer for advice. An experienced business lawyer near you can review the facts of your case, advise you of your rights, and represent you in court proceedings.

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Prior to joining LegalMatch, Daniel worked as a legal editor for a large HR Compliance firm, focusing on employer compliance in numerous areas of the law including workplace safety law, health care law, wage and hour law, and cybersecurity. Prior to that, Daniel served as a litigator for several small law firms, handling a diverse caseload that included cases in Real Estate Law (property ownership rights, residential landlord/tenant disputes, foreclosures), Employment Law (minimum wage and overtime claims, discrimination, workers’ compensation, labor-management relations), Construction Law, and Commercial Law (consumer protection law and contracts). Daniel holds a J.D. from the Emory University School of Law and a B.S. in Biological Sciences from Cornell University. He is admitted to practice law in the State of New York and before the State Bar of Georgia. Daniel is also admitted to practice before the United States Courts of Appeals for both the 2nd and 11th Circuits. You can learn more about Daniel by checking out his Linkedin profile and his personal page. Read More

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How Assignments Really Work ?

What is an Assignment in Real Estate?

An assignment is a transaction of a home where the buyer of the property (the assignor) allows another buyer (the assignee) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale before the original buyer closes on the property. Where most resale real estate deals close in 30 to 60 days, assignments are most commonly found in pre-sales, where there’s a long closing.

How Do You Know if You Can Assign a Home?

The Agreement of Purchase and Sale of a home, either pre-sale or resale, will outline whether you can or cannot assign the home.

If you can assign the Agreement of Purchase and Sale:

It’s typical to find the assignment will come with certain terms. Typical terms include:

A time frame of when you can and/or cannot assign the contract An assignment fee applied by the seller, usually for administrative costs Marketing restrictions on when and where you can market the Agreement of Purchase and sale for assignment Are There Tax Implications on Assignments?

Generally, the assignor pays a tax on the profit of the assignment as part of income tax. As the assignee takes responsibility of all terms in the Agreement of Purchase and Sale, the assignee pays the taxes associated with the sale of the home, such as Goods and Services Tax (GST) and Property Transfer Tax (PTT). As each scenario differs, before making a decision, be sure to speak to a licensed Realtor.

Are There Risks Involved?

It’s important to know that if a contract is assigned, and the assignee does not follow through on completing on the sale of the home, the responsibility to close on the Agreement of Purchase and Sale usually defaults back to the assignor.

Looking for more information on Assignements. Contact Natalie Genest for current assignement listings. [email protected]

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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Assignment is a legal term whereby an individual, the “assignor,” transfers rights, property, or other benefits to another known as the “ assignee .” This concept is used in both contract and property law. The term can refer to either the act of transfer or the rights /property/benefits being transferred.

Contract Law

Under contract law, assignment of a contract is both: (1) an assignment of rights; and (2) a delegation of duties , in the absence of evidence otherwise. For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C. That is, this assignment is both: (1) an assignment of A’s rights under the contract to the $50; and (2) a delegation of A’s duty to teach guitar to C. In this example, A is both the “assignor” and the “delegee” who d elegates the duties to another (C), C is known as the “ obligor ” who must perform the obligations to the assignee , and B is the “ assignee ” who is owed duties and is liable to the “ obligor ”.

(1) Assignment of Rights/Duties Under Contract Law

There are a few notable rules regarding assignments under contract law. First, if an individual has not yet secured the contract to perform duties to another, he/she cannot assign his/her future right to an assignee . That is, if A has not yet contracted with B to teach B guitar, A cannot assign his/her rights to C. Second, rights cannot be assigned when they materially change the obligor ’s duty and rights. Third, the obligor can sue the assignee directly if the assignee does not pay him/her. Following the previous example, this means that C ( obligor ) can sue B ( assignee ) if C teaches guitar to B, but B does not pay C $50 in return.

(2) Delegation of Duties

If the promised performance requires a rare genius or skill, then the delegee cannot delegate it to the obligor. It can only be delegated if the promised performance is more commonplace. Further, an obligee can sue if the assignee does not perform. However, the delegee is secondarily liable unless there has been an express release of the delegee. That is, if B does want C to teach guitar but C refuses to, then B can sue C. If C still refuses to perform, then B can compel A to fulfill the duties under secondary liability.

Lastly, a related concept is novation , which is when a new obligor substitutes and releases an old obligor. If novation occurs, then the original obligor’s duties are wiped out. However, novation requires an original obligee’s consent .

Property Law

Under property law, assignment typically arises in landlord-tenant situations. For example, A might be renting from landlord B but wants to another party (C) to take over the property. In this scenario, A might be able to choose between assigning and subleasing the property to C. If assigning , A would be giving C the entire balance of the term, with no reversion to anyone whereas if subleasing , A would be giving C for a limited period of the remaining term. Significantly, under assignment C would have privity of estate with the landlord while under a sublease, C would not.

[Last updated in May of 2020 by the Wex Definitions Team ]

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Contract Law: Property Law in Contractual Obligations

model of wooden home with a gavel behind

In the complex world of legal frameworks, the interplay between contract law and property law is both fascinating and crucial for professionals navigating the fields of real estate, intellectual property, and beyond. Understanding this relationship not only empowers legal practitioners but also entrepreneurs, investors, and anyone involved in the drafting, negotiating, or executing of contracts related to property.

Property law addresses the rules and statutory requirements related to the ownership and transfer of property. This can include real property, like land and buildings, and personal property—both tangible items like goods and intangible ones like intellectual property rights.

Contract law governs how agreements between parties are formed, interpreted, and enforced. It's the backbone of commercial dealings, ensuring that parties can rely on the commitments they make to each other. Contracts can range from simple purchase agreements to complex multi-party joint ventures, each with its nuances and legal requirements.

This post explores how contract law and property law work together and the different ways they interact.

Common Property-Related Provisions in Contracts

Contracts are often used to set the terms and record the understanding of property transactions. These include the sale of property, restrictions on the use of property, the lease of property and more. However, the rules of property law differ in small areas from the rules of contract law. You can particularly see this when the eternal nature of property meets contractual obligations in breach of contract.

Sale and Purchase Agreements and Penalties Such as Specific Performance

Under the Statute of Frauds, most states require the “sale and purchase agreements” for real estate to be in writing. This makes their contractual nature easy to see. This document finalizes the terms and conditions of the sale and assignment of contract rights. It also lays out the terms and conditions that apply after they sign the document but before they complete the sale. Realtors are careful when drawing up contracts to cover most contingencies. If the matter goes to court over breach of contract, the parties may be required to perform their contractual obligations, including specific performance, if that is just. 1

Property Use and Restrictions

Parties often contract for property use and restrictions on it. Deeds record these non-possessory interests as restrictive covenants. Covenants, such as home color restrictions and landscape requirements, are listed in homeowners association documents as contractual obligations. The contract may list specific performance as the remedy, and your client may have to repaint their house or re-landscape their yard.

The city can exercise contracts, as with zoning laws and building codes. Easements may offer another party a pathway through your property, such as a utility easement running electric lines to your house. A lien is a loan, the payment of which is tied to the sale of your property. They write these limitations into the land deed.

Changing or eliminating deed restrictions is difficult to nearly impossible. A few will expire over time, but most will not. The seller has to disclose deed restrictions as part of the sales contract, and the buyer should look over them carefully. 2 These restrictions can outlive the parties who originally signed the contract, and as such, they become subject to property law and are not simply contracts. 3

Landlord-Tenant Contracts and Lease Terms

You can contract leases, as well, in both residential and commercial forms. Leases are contracts, contractual obligations, between landlords and tenants that set the terms upon which the parties share the property. Common residential lease terms (the assignment of contract rights) include the names of all the parties leasing the property, limits on occupancy, term of the tenancy, rent, deposits and fees, repairs and maintenance, entry to rental property, restrictions on tenant illegal activity and pet clauses. 4 Commercial lease terms can also include exclusive use, improvements, taxes, covenants, obligation to repair, transfer structure and personal exposure. 5

Key Considerations for Property Law in Contracts Avoiding Breach of Contract

Because property and contract law interweave, lawyers must be at the top of their game when examining sales and purchase agreements, leases, and land-use restrictions. Anything less could lead to contract disputes and potential breach of contract.

Legal Counsel and Contract Review Meeting Contractual Obligations

During the process of selling or buying a home, a real estate attorney works for the seller or the buyer, but not both. Some states even require parties to use an attorney. During real estate transactions, lawyers can draft and complete contracts, write amendments to standard contracts, complete title searches, and conduct closings. 6 Out of all of this, the lawyer’s most important function is to review the contract to ensure that the terms are favorable to the party they represent and that there are no surprises.

Due Diligence in Property Transactions To Avoid Contract Disputes

Legal due diligence is a process by which the contracting parties make certain that they have all the information and need no more documents. In property transactions, this means that they have the original deed and all the covenants and restrictions attached to it, including homeowners association agreements.

The due diligence period is the time between the signing and the closing when the purchaser’s team must verify that everything is right. This is the time for inspections, title checks, appraisals and surveys. 7 This is the time to lay out all the documents together and confirm that you have a full understanding of the home or building your client is purchasing.

Regulatory Compliance and Zoning Laws in Assignment of Contract Rights

The property will also have to comply with all zoning laws and other regulations that apply to the property based on its location. They may include these with the deed, or they may not. Zoning may affect a client’s plans if they want to run a business from home, add a mother-in-law suite to their garage or even park an RV in their driveway. 8

Elevate Your Legal Career With an Online Master of Studies in Law

The intricate dance between contract law and property law underscores the complexity of legal dealings in property transactions. As the backbone of many commercial and personal agreements, a thorough understanding of their interplay is essential for anyone involved in drafting, interpreting, or executing property-related contracts. For legal practitioners, investors, and business professionals alike, mastering this interplay is not just about preventing disputes—it’s about unlocking opportunities and facilitating seamless transactions in a legally compliant manner.

The evolving nature of both contract law and property law, driven by changes in technology, society, and the economy, means that the landscape is continually shifting. Staying abreast of these changes through dedicated study and professional growth is crucial for anyone looking to thrive in these intersecting realms of law.

If you are a professional looking to grow your understanding of the law, but not practice it as an attorney, consider the University of Pittsburgh School of Law’s Online Master of Studies in Law (MSL) program . Property and contracts are just two of the courses included in the core curriculum for the MSL program.

The Online MSL courses are completely asynchronous and taught by world-renowned Pitt Law faculty and industry experts. You will also go through the program with a cohort of like-minded professionals, which maximizes opportunities for collaboration, support, networking, and more. Set yourself apart as a leader when you choose to pair the core MSL curriculum with one of our in-demand specializations to learn what matters most to your career. Choose from Health Care Compliance , Human Resources Law , International Business Law , Corporate Compliance , and Sports, Entertainment, and Arts Law .

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How Wholesalers Use Assignment of Contract

Lex levinrad.

Assigning a contract is a very useful tool for wholesalers that would like to assign their rights to a property for a small profit. An assignment of contract form is used to transfer beneficial interest in the property to the new buyers (assignee) from the existing buyer (assignor).

How Does The Assignment Of Contract Work?

Assume your name is Jack Smith and you have signed a contract to purchase a property located at 123 Main St in Fort Lauderdale Florida. Your purchase price on your contract is $40,000 but you would like to make a quick $5,000 profit and sell this contract (or assign it) to another buyer. Let's say that you are successful in locating a buyer for this property that is willing to purchase the property for $45,000 which is $5,000 more than what your purchase contract states.

You tell this buyer that you have a contract to purchase this property for $40,000 and you will assign all rights to purchase this property for a fee of $5,000 to him/her. This fee is called an assignment fee.

The buyer agrees to the assignment fee and you have a one page form called an assignment of beneficial interest form or assignment of contract form (use an attorney to draw up this form) , which states that you are giving up all rights to purchase this property and assigning it to the new buyer in exchange for an assignment fee of $5,000.

What Are The Benefits Of Doing This?

Well, firstly you are essentially flipping a property without ever closing on it or really owning it which means that you do not have to come up with any cash or pay any closing costs or incur any liability or expense. You are not really flipping the property you are actually flipping the contract that gives you the right to purchase the property. This is what wholesalers do and it can be extremely lucrative.

The only money that you will actually need to put down will be the deposit that you give to the seller or put on the contract as a deposit held in escrow (escrow is preferred). A true wholesaler would never put more than $10 or $100 down in order to reduce their risk.

What Is The Risk To The Wholesaler?

If the Wholesaler cannot find a buyer to purchase the house at a higher price, they will need to cancel the contract. When they do cancel the contract their deposit can be forfeited. Purchase contracts have an inspection period which is the time period that the buyer is allowed to inspect the property. Regular buyers use this inspection period to bring in their general contractor or inspector to complete an inspection of the property. However, wholesalers use this inspection period to try and market the property and find a buyer.

If the wholesaler cannot find a buyer for this property then they can simply cancel the contract within the inspection period and get their deposit back. If there is a problem or delay in getting the deposit returned (like the seller won't give it back), or if the buyer has cancelled after the expiration of the inspection period then the deposit will not be returned and will be forfeited. It is for this reason that you should use the least amount possible when placing a deposit on a property that you plan on assigning. A deposit of $10 or $100 is the most you should use for deposit on an assignable contract.

There is one key point for you to keep in mind if you are going to be assigning a contract. You must use the words “and or assigns” after your name. This means that on the purchase contract the buyers name should be Jack Smith and or assigns not just Jack Smith. If you don't use those words “and or assigns” then your contract will not be assignable. You should also check off the clause that says that the contract is assignable, which is a separate item that is further down in the purchase contract.

Another important point is that you will not be able to use the assignment method with bank owned properties and short sales. Banks do not want assignable contracts because they don't want wholesalers tying up their bank owned properties and trying to flip them. If you are making an offer on an REO or short sale or any property where the bank is the seller then you will have to use the double closing method for these properties.

A disadvantage to the assignment of contract method is that your buyer will see how much profit you make so, if your profit is really huge it could potentially create a problem with your buyer trying to reduce the purchase price. For example, if you purchased the property for $15,000 and tried to sell it for $45,000 with a $30,000 assignment fee then you might encounter a lot of resistance from the buyer who thinks you are marking up the property excessively. This could be avoided by using the double closing method where the buyer does not see how much you paid until after the transaction has closed (public records).

I find that it is often preferable to double close on all transactions regardless of who the seller is and I use as low a deposit as possible depending on whether the seller is a private party or a bank (banks require at least $1,000 deposit). This way you will have many more options available to you when you are flipping the property.

If the property is owned by an individual (not a bank), then an assignment of contract can be a really low cost entry into wholesaling for beginners. All you need to get started is a purchase contract, $10 and a distressed seller.

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What Is An Assignment of Contract?
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COMMENTS

Assignment of Contract: What Is It? How It Works
An assignment of contract is simpler than you might think. The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party. When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement.
What Is An Assignment Of Contract In Real Estate?
An assignment of contract in real estate is when the original party who has a piece of real estate transfers their contractual obligations to that of a new party. Assigning real estate contracts is a common way to "flip" real estate without having to come out of your pocket with any capital. Utilizing a real estate assignment contract to ...
What Is an Assignment of Contract?
An assignment of contract occurs when one party to an existing contract (the "assignor") hands off the contract's obligations and benefits to another party (the "assignee"). Ideally, the assignor wants the assignee to step into his shoes and assume all of his contractual obligations and rights. In order to do that, the other party to the ...
Assignment of Contract In Real Estate Made Simple
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.
A Guide to Assignment of Contract in Real Estate
An assignment of contract occurs on a property that is currently under contract, and has not yet been purchased. First, the assignor finds a property, and enters into a sales agreement with the buyer to purchase the property. The home's price, closing date, seller, and buyer are listed in this contract. When the original buyer finds a new ...
What Is an Assignment of Contract?
How Does Assignment of Contract Work? An assignment may be made to anyone, but it is typically made to a subsidiary or a successor. A subsidiary is a business owned by another business, while a successor is the business that follows a sale, acquisition, or merger.
Assignment of Contract Rights: Everything You Need to Know
Assignment of rights changes the foundational terms of the agreement. The assignment is illegal in some way. If assignment of contract takes place, but the contract actually prohibits it, the assignment will automatically be voided. When a transfer of contract rights will somehow change the basics of the contract, assignment cannot happen.
What Is an Assignment of Contract? [How It Works In Real Estate]
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 ...
Assignment Of Contracts
Assignment of contracts is the legal transfer of the obligations and benefits of a contract from one party, called the assignor, to another, called the assignee. The assignor must properly notify the assignee so that he or she can take over the contractual rights and obligations. This can be done using a document called an assignment agreement ...
Assigning Real Estate Contracts: Everything You Need to Know
How Contract Assignment Works. The first thing you need to do for contract assignment is to find a motivated seller. This is a person who owns a property, and for some reason, needs to sell in a hurry. This is generally because of a problem they are having, such as needing to move to a new home quickly.
Real Estate Assignment Contract: What Investors Need to Know
Real Estate Assignment Contract: What Investors Need to Know. Learn what a real estate assignment contract is, how to use it, and what the benefits are. Discover how you can leverage assignment contracts to make a profit.
Assignment of Contract in Real Estate [And Or Assigns]
With assignment contracts, you are not purchasing the property outright; instead, what you are doing is getting the exclusive right to purchase a property within a certain timeframe, an investing strategy referred to as wholesaling. ... How Does Assignment Work? Generally, the entire process of real estate investing via assignment agreement ...
Real Estate Assignment of Contract Explained
The real estate assignment of contract is a strategic act that offers several benefits to buyers and sellers. The assignment of contract has gained prominence as a valuable tool in real estate transactions. It presents a great alternative to traditional buying and selling approaches. It opens doors to lucrative opportunities and flexible real ...
Assignment of Contract (What It Is And How It Works: Best Overview)
The "assignment" of contract refers to a situation where one contracting party "transfers" the contract to a third party. Once the assignment is completed, the assignor will no longer be in a contract with the other contracting party and the assignee will take the assignor's place. For example, Party A and Party B are part of a ...
10 Things To Know About Assignment Sales in Real Estate
An assignment is when a Seller sells their interest in a property before they take possession - in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren't actually selling the property (because they don't own it yet) - they are selling their promise to purchase it ...
Four Smart Ways To Use A Real Estate Contract Assignment
Four Smart Ways To Use A Real Estate Contract Assignment. There are good reasons for homebuyers to understand real estate contract assignments. Contract assi...
Contract Assignments
In a contract assignment, one of the two parties to a contract may transfer their right to the other's performance to a third party. This is known as "contract assignment.". Generally, all rights under a contract may be assigned. A provision in the contract that states the contract may not be assigned usually refers to the delegation of ...
How Assignments Really Work
If you can assign the Agreement of Purchase and Sale: It's typical to find the assignment will come with certain terms. Typical terms include: A time frame of when you can and/or cannot assign the contract. An assignment fee applied by the seller, usually for administrative costs. Marketing restrictions on when and where you can market the ...
Understanding Assignment of Contract in Real Estate Wholesaling
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.
assignment
Assignment is a legal term whereby an individual, the "assignor," transfers rights, property, or other benefits to another known as the " assignee .". This concept is used in both contract and property law. The term can refer to either the act of transfer or the rights /property/benefits being transferred.
Contract Law and Property Law in Contracts: Understanding Their
Common residential lease terms (the assignment of contract rights) include the names of all the parties leasing the property, limits on occupancy, term of the tenancy, rent, deposits and fees, repairs and maintenance, entry to rental property, restrictions on tenant illegal activity and pet clauses. 4 Commercial lease terms can also include ...
Wholesale Real Estate Contract
A wholesale real estate assignment contract is the legal document that facilitates the transfer of the right to purchase a property from the wholesaler to an end buyer. Once the seller and wholesaler have entered into equitable conversion, an Assignment of Real Estate Purchase and Sale Agreement is drafted.
How Wholesalers Use Assignment of Contract
An assignment of contract form is used to transfer beneficial interest in the property to the new buyers (assignee) from the existing buyer (assignor). How Does The Assignment Of Contract Work? Assume your name is Jack Smith and you have signed a contract to purchase a property located at 123 Main St in Fort Lauderdale Florida.

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Find a Property Which Can Be Bought for Lower Than Market Price

Make an Offer on the Property

Present the Purchase Agreement With “And or Assigns” Verbiage Built In

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Collect Your Assignment Fee Once the Real Estate Transaction Is Completed

Pros And Cons Of Having Successors And Assigns Clause In Real Estate Contracts

Pro #2: You Can Put Together Real Estate Deals And Earn Without Having To Spend A Dime

Pro #3: The Parties Involved Can Have Huge Savings On Realtor's Fees

Pro #4: Only One Closing Cost Needs To Be Paid

Pro #5: The Wholesale Deal Is Completely Transparent

Pro #6: You Develop a Network of Real Estate Sellers, Buyers, and Investors

Con #1: If One Party Backs Out Of The Deal, It Would Reflect Poorly On You

Con #2: Certain Real Estate Properties Are Not Eligible For Assignment Contracts

Con #3: Sellers May Think You're Taking Advantage Of Them

Con #4: You Don't Get Owner's Rights

Con #5: You Have to Deal With the Time Pressure Element

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PROPERTY LEADS

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