November 11, 2024 | 2.5 Minute Read
Over the years, I’ve wholesaled hundreds of properties, using a single simple document to assign properties to other investors. The assignment agreement allows an investor, often referred to as the “assignor” or “wholesaler,” to transfer their rights in a real estate purchase contract to another party, known as the “assignee,” or “buyer,” before the property sale is closed.
So, the wholesaler secures a property at a favorable price and then assigns the contract to another buyer at a higher price, the difference is the wholesaler’s fee.
A solid assignment agreement includes:
Closing Date – The closing must occur by a specified date.
Assignment Fee – The assignee agrees to pay an assignment fee to the assignor, excluding additional closing costs.
Deposit – A deposit will be paid to the closing agent upon inspection approval. This is a hard deposit, meaning no refund should the assignee not close.
Closing Costs – The assignee covers all closing costs and uses the assignor’s designated firm for escrow, title insurance, and settlement.
Contract Acceptance – The assignee agrees to adhere to the terms of the original sales contract. The original contract is sent to the assignee along with the assignment agreement after the assignee accepts the agreed upon price.
Further Assignment – The assignee cannot reassign the contract without the assignor’s written consent. You want to avoid a daisy chain.
Property Condition – The assignor does not warrant the property’s condition or title.
Default Terms – If the assignee fails to close, the assignor can terminate the contract, retain deposit funds, and reclaim the original contract rights.
Contract Review – The assignee confirms they have reviewed the original contract and accepts its terms.
Authorized Signature – The assignee is an authorized representative of a business who can sign on its behalf. Therefore, this person is appearing at closing to sign.
An assignment agreement offers several benefits, particularly to minimize risk and create maximize flexibility:
Low Capital Requirement: It allows a wholesaler to secure a property under contract without committing large amounts of capital upfront. Instead of purchasing the property, the wholesaler assigns their interest in the contract to a new buyer for a fee.
Quick Profits Without Ownership: By assigning a contract, the wholesaler can earn a profit on the deal without ever taking ownership. This is especially helpful for wholesalers who want to focus on quick transactions rather than long-term holds.
Reduced Risk: Since the wholesaler doesn’t actually purchase the property, they avoid risks associated with ownership, such as repair costs, property management, and market fluctuations. The new buyer takes on these responsibilities instead.
Increased Deal Flow: Assigning contracts allows wholesalers to handle multiple deals simultaneously, increasing their potential for profit and scaling their business more quickly than if they focused solely on purchasing and selling properties.
Flexible Exit Strategies: An assignment agreement can be an excellent exit strategy if the original buyer decides not to proceed with the purchase, as it allows for easy transfer to another interested party without needing to cancel the contract.
If your wholesaling or planning to start, you need an assignment agreement that will serve your best interests. We’ve got you covered. I have been using the same assignment agreement for the last 20 plus years revising it as necessary. It is the most detailed, thorough, comprehensive and simple assignment agreement you will find anywhere.
Here’s a link to the Assignment Agreement.