Contract Assignment (Purchase Contract)

What is an Assignment of Contract in Real Estate?

A contract assignment is the transfer of a buyer’s rights and obligations under a real estate purchase contract to a new buyer before closing. The original buyer, called the assignor, usually receives an assignment fee from the new buyer, called the assignee. The seller’s price and terms stay the same; the assignee steps into the assignor’s place and closes the purchase.

Put simply, to assign a contract for the sale of real estate means to hand your position as buyer to someone else. Assignments, sometimes called purchase assignments, are most common in wholesaling, where an investor puts a property under contract and assigns it to a rehabber or landlord who will buy it, often with a rehab loan.

• Seller: Owns the property and signed the original purchase contract.
• Assignor: The original buyer, who transfers the contract.
• Assignee: The new buyer, who takes over the contract and closes.

How Does the Assignment Process Work?

Assigning a purchase contract typically follows these steps:

1. Sign an assignable purchase contract: The assignor signs a contract with the seller that allows assignment, often naming the buyer as “[Name] and/or assigns,” and deposits the earnest money the contract requires.
2. Find an assignee: The assignor markets the contract to buyers and agrees on an assignment fee, well ahead of the contract’s inspection, financing and closing deadlines.
3. Sign an assignment agreement: The assignor and assignee sign a written agreement transferring the contract. The assignee often pays a deposit toward the fee at signing.
4. Notify the seller and closing agent: The assignment agreement and the original contract go to the title or escrow company, and the seller is notified or signs a consent if the contract requires one.
5. Prepare to close: The assignee arranges financing, inspections and insurance within the original contract’s deadlines, which do not reset because of the assignment.
6. Close: The assignee closes directly with the seller on the original terms and takes title. The assignment fee is typically paid at closing and shown on the settlement statement, and the title company handles the title search and title insurance as in any purchase.

Example: An investor contracts to buy a house for $250,000 and assigns the contract to a rehabber for a $15,000 fee. The seller still receives $250,000. The rehabber pays the $250,000 price plus the $15,000 fee, a total acquisition cost of $265,000 before closing costs, and should run the deal on that full number with a tool like the fix and flip ROI calculator.

What Is in an Assignment Agreement?

An assignment agreement (also called an assignment of contract or assignment contract) is usually short, but it should cover:

• Parties: The legal names of the assignor and assignee, including any LLC or corporation that will take title.
• Original contract: The contract date, seller, property address and purchase price, often with a copy attached.
• Assignment and assumption: Language transferring all of the assignor’s rights and stating that the assignee assumes the buyer’s obligations under the contract.
• Assignment fee: The amount, any nonrefundable deposit paid at signing, and when the balance is paid, usually at closing.
• Earnest money: Whether the assignor’s deposit stays in escrow and is credited to the assignee at closing, and whether the assignee reimburses it.
• Deadlines and default: The closing date, any remaining contingency dates, and what happens to deposits if the assignee fails to close.
• Signatures: Signed and dated by the assignor and assignee, and by the seller when the contract requires consent.

What Makes a Contract Assignable?

Whether you can assign a purchase contract depends on its language:

• “And/or assigns”: Naming the buyer as “[Name] and/or assigns” signals that the buyer may transfer the contract. Many investors also add a clause that expressly permits assignment.
• Anti-assignment clauses: Some contracts bar assignment entirely or allow it only with the seller’s written consent. Assigning in violation of such a clause can put you in breach of the contract.
• Silent contracts: When a contract says nothing about assignment, whether it can be assigned depends on state law and the contract’s other terms. Get the seller’s written consent or an attorney’s opinion rather than assume.
• Seller consent: Even a contract that restricts assignment can be assigned if the seller agrees in writing. Being upfront with the seller about your intent to assign avoids disputes at the closing table.

Why Investors Assign Contracts

• Wholesaling: Investors secure a property under contract and assign it to another buyer for a fee.
• Low capital requirement: The assignor needs the earnest money, not the funds to close or renovate.
• Exiting a deal: An investor who can’t or doesn’t want to close can pass the contract to another buyer.
• Deal flow for buyers: Rehabbers and landlords use assignments to buy properties that never reach the open market.

The main risk for the assignor is timing. If no assignee is found before the contract deadlines, the assignor must close or risk losing the earnest money, and slower markets make buyers harder to find.

Assignment vs. Double Closing

A double closing is the main alternative to an assignment. Instead of transferring the contract, the investor buys the property and then resells it to the end buyer, often on the same day.

When Are Assignments Not Allowed?

Some purchases generally can’t be assigned, or can be assigned only with approval:

• Bank-owned (REO) properties: Many REO sellers use contract addenda that prohibit assignment and require the buyer named on the contract to close.
• Short sales: The short-sale lender must approve the buyer and terms, and many restrict assignments and quick resales.
• Contracts with anti-assignment clauses: Builders’ new-construction contracts and other seller-drafted forms frequently restrict assignment.
• Owner-occupant financing: Agency (Fannie Mae and Freddie Mac) and FHA owner-occupied purchase programs typically restrict assignments, so an end buyer planning to use one should check with their lender before signing.

Legal Cautions Before You Assign a Contract

Assignments are legal in many situations, but the rules vary by state and have been changing. Before you assign a contract:

• Check your state’s wholesaling rules: A growing number of states regulate wholesaling. Depending on the state, rules may require written disclosure to the seller, limit how a contract can be marketed, or require a real estate license. Review your state’s law with a real estate attorney.
• Disclose your intent: Tell the seller in writing that you may assign the contract. Misrepresenting your intent or hiding the assignment can lead to disputes or legal claims.
• Understand your continuing liability: Assigning a contract generally does not release the assignor from it unless the seller agrees to a release. If the assignee fails to close, the assignor’s earnest money may still be at risk.
• Put everything in writing: Document the assignment, fee and deposit terms, and have an attorney review the agreements.

Financing an Assigned Contract with LYNK Mortgage

LYNK Mortgage is a direct private lender that can finance investors buying on an assigned contract. Loans are business-purpose loans on non-owner-occupied investment property, made to LLCs and corporations in the areas shown on where we lend. Here is how an assignment is handled:

• Documents: The written assignment agreement is reviewed along with the original purchase contract.
• Assignment fee: The fee is part of the deal’s cost. Whether any of it can be financed, and how much, depends on program limits and review.
• Double closings: These are reviewed with both settlement statements.
• Appraisal: A third-party appraisal is required before closing.
• Cash to close: Closing costs are not financed within the loan-to-cost, and borrowed down payments are generally not allowed.

Send the assignment agreement with the purchase contract early so the review doesn’t hold up your closing. Buying a property you plan to renovate? See fix and flip loans for current terms and an instant online term sheet with only a soft credit pull. LYNK Mortgage also offers bridge loans, and both typically close in 7–15 days with a dedicated loan officer on every deal.