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How Do Assignments Work in Real Estate?

As real estate investors consider different investing strategies, they often hear about wholesaling. One of the most important parts of completing a wholesale deal is to assign the process to another investor. So how do assignments work?

Assignment, a legal process, entails granting—or assigning—one party’s rights and responsibilities in a contract to a third party. This third party “steps into the shoes” of the person they replace, fulfilling the remaining contract responsibilities through the real estate closing process.

In the following article, I’ll expand on real estate assignments and how they relate to wholesaling. Specifically, I’ll cover each of the following topics:

What Are Real Estate Assignments

• How Assignments Relate to Wholesaling

Advantages to Real Estate Assignments

Disadvantages to real estate assignments, final thoughts on assignments.

As stated above, assignment constitutes a specific legal action involving contracts. Prior to executing an assignment, an actual contract between two parties must exist. After signing a contract, one party (the “assignor”) transfers—or assigns—his or her obligations and benefits under the contract to a third party (the “assignee”).  In simple terms, the assignee “steps in the shoes” of the assignor and assumes all associated contractual rights and responsibilities.

While assignment can occur with any type of contract, it plays a key role in real estate investing. You may not think much of the phrase, but when a property seller and buyer go “under contract,” they have, quite literally, entered a legal contract. As such, the potential for contract assignment exists, with the buyer assigning his or her rights and obligations regarding the home purchase to a third-party buyer. Following assignment, this third-party buyer then becomes responsible for the remainder of the closing process, purchasing the property him- or herself.

NOTE: I say the potential for the assignment above, because if a contract explicitly prohibits assignment, then buyers cannot assign their contract rights. When purchasing a bank-owned property, the bank-seller typically includes this sort of clause in their sales contracts.

How Assignments Work in Wholesaling

The above process of assignment serves as the foundation of the real estate wholesaling strategy. Broadly speaking, wholesalers make money by getting a property under contract and then assigning it to someone else for a fee. Here’s what it looks like, step-by-step:

• Step 1: The wholesaler goes under contract to purchase a home, typically a distressed property.
• Step 2 : The wholesaler then shops the contract/deal around to potential buyers, generally house flippers.
• Step 3 : With a third-party buyer confirmed, the wholesaler assigns the new buyer the contract rights and obligations, and this new buyer then carries out the remainder of the closing process and actually purchases the home.

For example, assume you go under contract with a seller to purchase a property for $100,000. If your goal is to wholesale—and not actually purchase—that property, you can then find a motivated buyer (typically a house flipper), and assign him or her your contract rights for a $5,000 assignment fee (the actual fee amount will be driven by your market and the nature of the deal). This buyer (the “assignee”) then continues the closing process in your place. In this scenario, you earn a $5,000 fee without the risk associated with buying, renovating, and selling a property—an appealing prospect.

The above description should definitely make some of the major advantages to assignments and wholesaling obvious. If you’re considering this strategy, here’s a fairly comprehensive list of the benefits of wholesaling:

• Speed: With a wholesale deal, you’re only involved for as long as it takes to find a third-party buyer to whom you can assign the contract. Typically, it only takes one to two weeks to collect your check.
• Simplicity: Unlike house flips, with wholesaling, you only need to 1) make an offer, 2) assign the contract to a third party, and 3) collect your check—a straightforward, simple process.
• No rehab period: While home flippers typically command higher profits than wholesalers, the actual rehab work can be a tremendous pain, often requiring more time, money, and effort than initially budgeted.
• No financing requirements: As wholesalers don’t actually purchase these properties, they don’t need to apply for financing and meet the associated requirements. No loan deadlines or interest payments exist with wholesaling.
• Profit: Even though wholesalers don’t command the same returns as home flippers, these deals still result in solid profits.  They take far less time and work, which means that, relative to your actual time commitments, you’ll realize great returns.
• Fewer out-of-pocket costs: With a wholesaling deal, in addition to your general marketing expenses, you’ll only need to put down some earnest money for the deal. However, $500 will generally more than suffice, and you can add a clause stating that you’ll only provide your earnest money once the seller accepts the offer, meaning you know the deal will move forward.

While plenty of advantages exist to real estate assignments and the wholesale investing strategy, investors should also have a thorough understanding of the associated drawbacks before diving headfirst into a deal. Here are some of the potential pitfalls to consider:

• Not having a buyer : It seems obvious to state, but a successful wholesale deal depends upon actually finding a buyer to whom you can assign your contract. Most contracts have a specific date by which the wholesaler’s new buyer needs to close. If wholesalers fail to find a buyer within the designated timeline, the deal falls apart and they lose their earnest money.
• Unpredictable income: This drawback actually applies to a house flipping as well, but it’s worth noting here. If you don’t complete any wholesaling deals, you don’t have any income. And while established wholesalers can build up a pipeline of deals, somewhat smoothing income, it takes time to reach this status. During these initial stages, new wholesalers need to remain particularly diligent with their finances.
• Massive marketing efforts: Successful wholesalers don’t just casually ask around about potential deals. To build an established system, people need to undertake significant marketing efforts to find both motivated sellers and future investors to whom you can assign contracts.
• Legal compliance: When dealing with contract law and assignments, buyers face a host of compliance issues not necessarily relevant to a standard deal. For example, listing a “property for sale” instead of “interest in a real estate transaction for sale” could possibly lead to an illegal transaction.

For many new real estate investors, the initial capital requirements of building a property portfolio can seem absolutely prohibitive. Understanding the assignment and wholesaling world represents a great strategy for these folks. With little up-front capital, wholesalers can begin finding and executing profitable deals. And while these deals may not bring in the same returns as a house flip, if done successfully, wholesaling can be an outstanding strategy for building that initial capital.

Furthermore, wholesaling doesn’t represent an either/or strategy. In other words, if you build a successful wholesaling system, you can still flip houses or undertake a buy-and-hold strategy on the side. This actually represents a great hybrid investment strategy. By funneling a portion of your wholesaling profits into down payments for a portfolio of rental properties, you can generate current cash flow while still reaping the long-term wealth-building benefits of having tenants pay down your mortgages.

Learn how to make money flipping real estate with us by attending our next webinar .

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How to Use Real Estate Assignment Contracts for Investing

Real estate assignment contracts can lead to easy money

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• Definition of an 'Assign'

What an Assignment Conveys

Profiting by referring it along, building a buyer list.

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Jim Kimmons is a real estate broker and author of multiple books on the topic. He has written hundreds of articles about how real estate works and how to use it as an investment and small business.

Visualize a real estate purchase contract with just a few extra words added to your name as the buyer. It would look something like this:

"Buyer: John J. Doe, and/or assigns."

That's it. You've provided for a real estate assignment contract. It seems simple, and it is, and it opens up many opportunities for profits in real estate investing .

Who or What Is an 'Assign'?

Your "assigns" would be anyone to whom you want to pass your purchase rights. Maybe you've effectively locked up a property with a purchase contract. You can now go ahead and buy it, flip it, rehab and rent it, or apply any other strategy that's legal.

Or you can also pass it along to someone else for profit, never actually buying it yourself. This is an assignment contract.

Control is all in your court at the beginning; you don't have to turn the deal over to anyone else if you decide not to, or until such time as it best suits you financially if you decide to go ahead with the assignment. The downside is that if you can't find anyone to take over the contract and that was your intention, you'll be legally obligated to consummate the sale yourself.

You're not just passing your purchase rights along. You're also passing your obligations in the contract. This means that you're no longer involved in the transaction at all after the assignment takes place.

You don't have any right to make claims against the seller if there are problems with the deal moving forward, however. The person or company to whom you've assigned the deal to is now responsible for taking the deal through to closing. 

Of course, this assumes that you've actually assigned the contract to another party. Until that time, you're on the hook. The contract is a legal document, governed by individual state laws, so the seller might have various means of recourse if you don't assign the contract and you don't follow through and close on the property.

You probably won't be receiving your fee or profit until closing, so you might be understandably nervous as you wait for the deal to close.

A Note About State Laws

A few states won't let you transfer liability in this way, so you might want to check with an attorney in your area to make sure you understand the laws in your jurisdiction before you jump in with both feet.

HUD homes and real estate owned properties or foreclosures generally aren't open to assignment in any state.

The simplest way to profit in this situation is to locate one or more buyers in your buyer database, show them the value in the deal, and take a referral or "bird-dog" fee for bringing it to them.

Bird-dogging doesn't involve getting technically involved in the deal at all. It's more or less an arrangement where you locate the property, then say, "Here you go, Investor," and the investor takes it from there, personally entering into a purchase contract with the seller—in exchange for a fee to you, of course.

You'll then assign your rights to the deal, and they'll go forward to closing.

They'll pay you your fee at or after closing. You could profit handsomely, even though all you had at risk was whatever earnest money deposit was required. And that risk is pretty low if you know who your buyers are likely to be before you contract the property, assuming the value is there.

You'll also begin to build and maintain an active investor buyer list for your customer pool. This is critical because you really want to be sure you have a ready buyer or two for a home before you commit that earnest money. You should be covered pretty well if you do a good job of building your list .

The list should include both fix-and-flip and rental property investors who have an interest in buying depending on the condition of the property. 

Rental investors normally want a house ready for occupancy, or at least with only cosmetic or minor repairs necessary.

Back-to-Back Closings for a Flip Sale

You can also take on the purchase personally and immediately selling it to another investor or a retail buyer. You might want to take this approach because your profits would be more significant.

Unfortunately, you can no longer use the funds from one deal to close on another in simultaneous closings since the mortgage crisis in 2007. Lenders just won't allow it. But you can explore resources for short-term funding, such as a relative, your own cash, or a hard money lender.

You only need the money long enough to close the purchase and resell. This might be hours, but it should never be more than a day or two.

A Great Real Estate Investment Strategy

Ideally, you've perfected your techniques and you can locate really great deep discount real estate deals with others. There are many ways to get to a good deal early, and your value to your buyer-customer is that you've got the property in your control. They'll only get it if you pass it along.

You can make this work well for you by honing two tasks: First, have a really good buyer database with information about what each is looking for, and second, learn and put into play various strategies for locating great property deals before they become general knowledge.

Using real estate assignment contracts can be your ticket to real estate investing profits with little of your own money at risk if you get these two things in line and operating for you.

Assignment of Contract – Assignable Contract Basics for Real Estate Investors

What is assignment of contract? Learn about this wholesaling strategy and why assignment agreements are the preferred solution for flipping real estate contracts.

Beginners to investing in real estate and wholesaling must navigate a complex landscape littered with confusing terms and strategies. One of the first concepts to understand before wholesaling is assignment of contract, also known as assignment of agreement or “flipping real estate contracts.”  

An assignment contract is the most popular exit strategy for wholesalers, and it isn’t as complicated as it may seem. What does assignment of contract mean? How can it be used to get into wholesaling? Here’s what you need to know.

What Is Assignment of Contract?

How assignment of contract works in real estate wholesaling, what is an assignment fee in real estate, assignment of agreement pros & cons, assignable contract faqs.

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Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer.

This strategy is also known as flipping real estate contracts because that’s essentially how it works:

• The wholesaler finds a property that’s already discounted or represents a great deal and enters into a contract with the seller,
• The contract contains an assignment clause that allows the wholesaler to assign the contract to someone else (if they choose to!), then
• The wholesaler can assign the contract to another party and receive an assignment fee when the transaction closes.

Assignment of contract in real estate is a popular strategy for beginners in real estate investment because it requires very little or even no capital. As long as you can find an interested buyer, you do not need to come up with a large sum of money to buy and then resell the property – you are only selling your right to buy it .

An assignment contract passes along your purchase rights as well as your contract obligations. After the contract assignment, you are no longer involved in the transaction with no right to make claims or responsibilities to get the transaction to closing.

Until you assign contract to someone else, however, you are completely on the hook for all contract responsibilities and rights.

This means that you are in control of the deal until you decide to assign the contract, but if you aren’t able to get someone to take over the contract, you are legally obligated to follow through with the sale .

Assignment of Contract vs Double Closing

Double closing and assignment of agreement are the two main real estate wholesaling exit strategies. Unlike the double closing strategy, an assignment contract does not require the wholesaler to purchase the property.

Assignment of contract is usually the preferred option because it can be completed in hours and does not require you to fund the purchase . Double closings take twice as much work and require a great deal of coordination. They are also illegal in some states.

Ready to see how an assignment contract actually works? Even though it has a low barrier to entry for beginner investors, the challenges of completing an assignment of contract shouldn’t be underestimated. Here are the general steps involved in wholesaling.

Step #1. Find a seller/property

The process begins by finding a property that you think is a good deal or a good investment and entering into a purchase agreement with the seller. Of course, not just any property is suitable for this strategy. You need to find a motivated seller willing to accept an assignment agreement and a price that works with your strategy. Direct mail marketing, online marketing, and checking the county delinquent tax list are just a few possible lead generation strategies you can employ.

Step #2: Enter into an assignable contract

The contract with the seller will be almost the same as a standard purchase agreement except it will contain an assignment clause.

An important element in an assignable purchase contract is “ and/or assigns ” next to your name as the buyer . The term “assigns” is used here as a noun to refer to a potential assignee. This is a basic assignment clause authorizing you to transfer your position and rights in the contract to an assignee if you choose.

The contract must also follow local laws regulating contract language. In some jurisdictions, assignment of contract is not allowed. It’s becoming increasingly common for wholesalers to assign agreements to an LLC instead of an individual. In this case, the LLC would be under contract with the seller. This can potentially bypass lender objections and even anti-assignment clauses for distressed properties. Rather than assigning the contract to someone else, the investor can reassign their interest in the LLC through an “assignment of membership interest.”

Note: even the presence of an assignment clause can make some sellers nervous or unwilling to make a deal . The seller may be picky about whom they want to buy the property, or they may be suspicious or concerned about the concept of assigning a contract to an unknown third party who may or may not be able to complete the sale.

The assignment clause should always be disclosed and explained to the seller. If they are nervous, they can be assured that they will still get the agreed-upon amount.

Step #3. Submit the assignment contract for a title search

Once you are under contract, you must typically submit the contract to a title company to perform the title search. This ensures there are no liens attached to the property.

Step #4. Find an end buyer to assign the contract

Next is the most challenging step: finding a buyer who can fulfill the contract’s original terms including the closing date and purchase price.

Successful wholesalers build buyers lists and employ marketing campaigns, social media, and networking to find a good match for an assignable contract.

Once you locate an end buyer, your contract should include earnest money the buyer must pay upfront. This gives you some protection if the buyer breaches the contract and, potentially, causes you to breach your contract with the seller. With a non-refundable deposit, you can be sure your earnest money to the seller will be covered in a worst-case scenario.

You can see an assignment of contract example here between an assignor and assignee.

Step #5. Receive your assignment fee

The final step is receiving your assignment fee. This fee is your profit from the transaction, and it’s usually paid when the transaction closes.

The assignment fee is how the wholesaler makes money through an assignment contract. This fee is paid by the end buyer when they purchase the right to buy the property as compensation for being connected to the original seller. Assignment contracts should clearly spell out the assignment fee and how it will be paid.

An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer.

The standard real estate assignment fee is $5,000 . However, it varies by transaction and calculating the assignment fee may be higher or lower depending on whether the buyer is buying and holding the property or rehabbing and flipping.

The assignment fee is not always a flat amount. The difference between the agreed-upon price with the seller and the end buyer is the profit you stand to earn as the assignor. If you agreed to purchase the property for $150,000 from the seller and assign the contract to a buyer for $200,000, your assignment fee or profit would be $50,000.

In most cases, an investor receives a deposit when the Assignment of Purchase and Sale Agreement is signed with the rest paid at closing.

Be aware that assignment agreements can have a bad reputation . This is usually the case when the end buyer and seller are unsatisfied, realizing they could have sold higher or bought lower and essentially paid thousands to an investor who never even wanted to buy the property.

Opting for the standard, flat assignment fee is much more readily accepted by sellers and buyers as it’s comparable to a real estate agent’s commission or even much lower and the parties can avoid working with an agent.

Real estate investors enjoy many benefits of an assignment of contract:

• This strategy requires little or no capital which makes it a popular entry to wholesaling as investors learn the ropes.
• Investors are not added to the title chain and never own the property which reduces costs and the amount of time the deal takes.
• An assignment of agreement is easier and faster than double closing which requires two separate closings and two sets of fees and disclosures.
• Wholesaling can be a great tool to expand an investor’s network for future opportunities.

As with most things, there are important drawbacks to consider. Before jumping into wholesaling and flipping real estate contracts, consider the downsides .

• It can be difficult to work with sellers and buyers who are not familiar with wholesaling or assignment agreements.
• Some sellers avoid or decline assignment of contract offers because they are suspicious of the arrangement, think it is too risky, or want to know who they are selling to.
• There is a limited time to find an end buyer. Without a reliable buyer’s list, it can be very challenging to find a viable end buyer before the closing date.
• The end buyer may back out at the last minute. This may happen if they do not have owner’s rights until the contract is assigned or they do not want to pay an assignment fee.
• Not all properties are eligible for wholesaling like HUD and REO properties. There may be anti-assignment clauses or other hurdles. It is possible to get around this by purchasing the property with an LLC which can then be sold, but this is a level of complication that many wholesalers want to avoid.
• Assignors do not have owner’s rights. When the property is under contract, investors cannot make repairs or improvements. This makes it harder to assign a contract for a distressed property in poor condition.
• It can be hard to confirm an end buyer is qualified. The end buyer is responsible for paying the agreed upon price set by the seller and assignor. Many lenders do not handle assignment agreements which usually means turning to all-cash end buyers. Depending on the market, they can be hard to find.

In the worst-case scenario, if a wholesaling deal falls through because the end buyer backs out, the investor or assignor is still responsible for buying the property and must follow through with the purchase agreement. If you do not, you are in breach of contract and lose the earnest money you put down.

To avoid this worst-case scenario, be prepared with a good buyer’s list. You should only put properties under contract that you consider a good deal and you can market to other investors or homeowners. You may be able to get more time by asking for an extension to the assignment of contract while you find another buyer or even turn to other wholesalers to see if they have someone who would be a good fit.

What is the difference between assignor vs assignee?

In an assignment clause, the assignor is the buyer who then assigns the contract to an assignee. The assignee is the end buyer or final buyer who becomes the owner when the transaction closes. After the assignment, contract rights and obligations are transferred from the assignor to the assignee.

What Is an assignable contract?

An assignable contract in real estate is a purchase agreement that allows the buyer to assign their rights and obligations to another party before the contract expires. The assignee then becomes obligated to meet the terms of the contract and, at closing, get title to the property.

Is Assignment of Agreement Legal?

Assignment of contract is legal as long as state regulations are followed and it’s an assignable contract. The terms of your agreement with the seller must allow for the contract to be assumed. To be legal and enforceable, the following general requirements must be met.

• The assignment does not violate state law or public policy. In some states and jurisdictions, contract assignments are prohibited.
• There is no assignment clause prohibiting assignment.
• There is written consent between all parties.
• The property does not have restrictions prohibiting assignment. Some properties have deed restrictions or anti-assignment clauses prohibiting assignment of contract within a specific period of time. This includes HUD properties, short sales, and REO properties which usually prohibit a property from being resold for 90 days. There is potentially a way around these non-assignable contracts using an LLC.

Can a non-assignable contract still be assigned?

Even an non-assignable contract can become an assignable contract in some cases. A common approach is creating an agreement with an LLC or trust as the purchaser. The investor can then assign the entity to someone else because the contractual rights and obligations are the entity’s.

Assignment agreements are not as complicated as they may sound, and they offer an excellent entry into real estate investing without significant capital. A transaction coordinator at Transactly can be an invaluable solution, no matter your volume, to keep your wholesaling business on track and facilitate every step of the transaction to closing – and your assignment fee!

Adam Valley

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5. Is it ethical

Now that we got the “ legal ” question out of the way…

What about “How ethical is it to wholesale”.

Type that into the web and you’ll get thrown into a black hole of comments and forums chatter you won’t ever be able to get out of.

Here’s the bottom line of why it gets so much controversy and what it has to do with assignment fees…

Wholesalers are going around marketing “We buy houses CASH” when in reality, they aren’t buying it cash… they’re assigning the contract for a fee.

This is where everyone gets their tights all tied up in a bunch (did I just make up a word?! Yes! I did). Because if you say you’re going to close it with cash, but you have to walk away from the seller because you can’t find a buyer… how would you feel leaving a seller (who seriously needed to close yesterday), hanging)?

Some with a conscious would feel pretty bad… others don’t care.

So it’s up to you how you feel about the ethics side of things.

Can you close the deal yourself if you can’t find a cash buyer , via a hard money lender or partner? Or will you feel comfortable walking away from the deal? Or will you be confident enough to go up to the seller and tell her the truth, that you intended on selling the contract to a cash buyer but it seems that your priced it too high, can we renegotiate?

The underlying problem with “walking away” from a buyer is not pricing it right.

If you have a good deal, cash buyers will be all over it and be HAPPY to pay you an assignment fee.

Here’s a video on ethical wholesaling:

6. How much should a fee be?

New wholesalers typically aren’t sure what they should charge. But it’s going to vary from deal-to-deal, and market to market.

A decent wholesaling fee can range from $10,000 to $30,000.

There are occasions when you hear about $100,000 assignment fees. And they do happen. It’s just a matter of negotiating a good deal.

While there isn’t a “set fee” that wholesalers should charge, it all depends on how good of a deal you can negotiate, and how high you can mark up the contract for an end buyer.

So there are two components that determine how much you can get paid for an assignment fee:

• Seller’s price.
• End buyers price.

Later, in another section, I talk about how you can increase your assignment fee… for now, let’s just cover how much your can charge.

Earlier I mentioned that your market might have an influence on how much you can charge. And that has more to do with how low of a discount, sellers are willing to take AND how competitive it is in your market.

Here’s an example:

If a seller talks to three wholesalers, one offers $200,000 while the others offer $180,000, she most likely will go with the higher offer. Well, now those wholesalers might enter into bidding wars in the market, by creeping up their MAOP (Max allowable offer price).

When wholesalers start raising their Max offers (because the market is demanding it), AND if the end buying price (what cash buyers are willing to pay for that deal) does move up with it…

Then you start seeing wholesalers’ assignment fees start shrinking down. We’ll go over later some techniques for helping with this natural occurrence in the market.

Here’s an example of a real wholesaler using our handwritten mailers, in a case study where he made anywhere from $4k fees to $22,500

7. Who pays for it?

Typically, in a traditional real estate wholesaling model, the end buyer (the cash buyer) is paying for your assignment fee.

For example: You negotiate with the seller to buy the property for $100,000. And the end buyer agrees to buy this deal for $120,000. He enters into escrow and pays the $120,000. You get the difference between the seller price and the end buyer price.

8. Does the seller or buyer see the fee?

In a typical assignment transfer, yes your assignment fee will be inside the closing statements.

After a property closes escrow, every party involved will get “closing statements” that look might look like this (depending on your state and the companies you use):

One of the line items may show up as “Assignment Fee” (or something similar), and show the amount.

Buyers will see these, as well as sellers.

However, a cash buyer (usually) understands that wholesaling is A LOT of work and that you should get paid for it. A good cash buyer understands that.

Sellers, most likely, won’t understand what an “assignment fee” is when they see this doc (they most likely won’t even read it).

On the rare occasion that they actually do ask what that line item is, you can tell the truth like this: “We work with partners and lenders all the time, and sometimes we end up selling the property during escrow to these partners, instead of keeping it ourselves. In this case we ended up selling to them”.

There’s a way to circumvent this potential problem of an assignment fee showing up on the closing documents…

And that’s by doing a double close instead of an assignment.

Let me explain in the next section…

9. Alternatives to an assignment?

As mentioned in the previous section, an assignment fee can have some cons to it. The primary being that sellers AND buyers can see how much you’re getting paid.

However, there is another “tool” you can use that hides this from both parties, and that’s called the “double close” (sometimes referred to as a “simultaneous closing” or “back to back” closing. As the name implies, there are 2 separate closings, not 1 (like our assignment fee transaction).

Here’s an explanation:

• The homeowner (party A) agrees to sell to a wholesaler (Party B) for $100,000
• They enter escrow
• While in escrow, Party B finds a cash buyer (Party C)
• Party C agrees to buy that property for $150,000
• They enter a second escrow agreement (different from the first)
• Party C funds the escrow account to buy the property at $150,000
• Party B uses those funds (minus his “assignment fee”) to pay the purchase from Party A

A little confusing?

Maybe this infographic helps:

We won’t go into too much detail about this as this is an article on the assignment fee… But just know that there is an alternative to hiding your fee but using a double close.

The con to this is that you pay a little more because you’re in fact doing 2 closes, not 1. So the times you might want to a double close vs an assignment fee is when you negotiated a very good deal and want to conceal the big check you’ll be getting.

10. Assignment fees and agents?

Anyone can get paid an assignment fee for this kind of “wholesaling” transaction. There’s no law that says agents can’t. However, that agent/broker needs to pay careful attention to their State RE commission laws as they’re put under serious scrutiny if they walk any fine lines.

For instance, if you’re buying the property and wholesaling it AND you’re licensed… in most states, you have to express to the seller that you are a licensed real estate agent but you are NOT representing them, and instead the principle of the transaction.

If you’re an agent wondering if you can (or should) do this, first contact your broker or RE Commission office to find out more.

Secondly, you might want to reconsider doing this as in some markets agent commission fees are higher than typical wholesaling fees. This is rare, but there are some hot markets where wholesalers have to keep raising their prices to win the deal, and therefore lower their assignment fee.

11. How to increase your assignment fees?

As mentioned in a previous section, your fee is greatly dependent on the kind of deal you negotiate.

So if you get a deal at $100,000 and another investor (cash buyer) is willing to pay $150,000 for it, you walk with a $50,000 assignment fee (assuming no closing costs are removed from this).

There are 4 factors to increasing your assignment fees…

• Become a better marketer If you improve your knowledge and skill set in marketing, you can essentially get to motivated sellers before anyone else.In the next section, we cover how to find these properties, which has everything to do with marketing, but one way (that we specialize in) is using handwritten mail to gain the best response rates from sellers.
• Become a better negotiator If you study and practice good salesmanship you can effectively win deals even if you’re offer is “low” . If you have no experience in sales, this will take time, but there are loads of resources available online (free and paid) that you can take advantage of. But, if you’re planning to stay in this entrepreneurship game for the long haul I HIGHLY suggest you study sales on a regular basis.
• Know you numbers Getting better and better at knowing what your market demands in terms of prices, rehab costs , etc… will help determine a more accurate price at a faster rate. Why does this matter to getting paid a higher assignment fee? It’s 2 reasons: First, if you know that cash buyers are willing to pay X, you can raise your asking price from end buyers, or on the flip side of that if, you know that a house needs some major repairs you can use that negotiated a lower price with the seller…Secondly, if you are really good with numbers, you can give an offer faster than your competition who has to take 1-2 days to send an offer in. In competitive markets “ Speed to lead ” wins and the person who can act fastest is usually the one who takes the trophy.
• Build a thriving buyers list The second component of the assignment fee and wholesaling business is selling the contract to a cash buyer.And, if you can build a list of buyers who will pay more for a good deal than most of the other “bottom of the barrel” buyers who demand very steep prices.Where do find buyers willing to pay more? It’s usually among high w-2 earners (doctors, lawyers, etc) who like to flip houses on the side. Or high-income business owners looking to park their cash somewhere to earn 15%+ annual ROI by doing so occasional flips.If you can find them, network with them, and add them to your list you can essentially raise your property raise to increase your assignment fee

12. How to find discounted properties to wholesale?

Finally our last section in this article which is probably at the top of some people’s minds:

“ Assignments sound great, but how do you FIND discounted properties!?!?”

Wholesaling is probably one of the toughest occupations in real estate.

You have to be well-rounded in almost every aspect of the industry. And you have to be top-notch in your selling and marketing capabilities.

But with that, there are foundational techniques to help you find these properties on your own. I’m going to give you 2 resources to start below.

First, is our article “ 8 ways to find 100 sellers for under $500”

Second is our eBook on Direct mail

You can get the Ebook for free by subscribing below to our newsletter, where we give lessons, stories, and value every week to real estate investors like you…

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Real Estate Contracts

What is an assignment contract.

Assignment contracts are a vehicle used by real estate investors to transfer one party’s rights and obligations under an existing real estate contract to another party. Assignment contracts don’t involve transferring or selling the property directly like a purchase agreement. Instead, the buyer under the original purchase agreement (the assignor) assigns their rights and obligations under the purchase agreement to the assignee, sometimes for a profit. The assignee then becomes the buyer under the original real estate contract.

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When Is an Assignment Contract Used?

In one scenario, a type of real estate investor called a wholesaler contracts with the current owner(s) of a distressed property that may be unsellable to average homebuyers. The wholesaler creates a purchase agreement with that owner to buy their property. The wholesaler then finds an end buyer who wants to take possession of the property. The assignment contract is then created to transfer the wholesaler’s rights and obligations under the original purchase agreement to the end buyer.  

Elements of an Assignment Contract

• Assignor : the real estate wholesaler. This is the person who is the buyer under the original purchase agreement and who is selling or transferring their rights and obligations under that contract. 
• Assignee : the end buyer. This is the person who is purchasing or receiving the assignor’s rights and obligations under the original purchase agreement and who would ultimately pay the purchase price (plus any assignment fee agreed to in the assignment contract) and take possession of the property. 
• Description or identification of contract being assigned:  a description of the original purchase agreement being assigned. Oftentimes, the assignment contract will also attach the original purchase agreement or state that it has been provided to the assignee.   
• Subject property information: the property address, legal description, or property identification number/parcel number for the property that is the subject of the original purchase agreement.  
• Assignment earnest money amount:  like with other types of real estate contracts, earnest money shows the assignee is a serious buyer. The money helps ensure that the assignee won’t back out of the deal for frivolous reasons. 
• Assignee’s purchase amount: the amount the end buyer agrees to pay that fulfills or exceeds the original purchase agreement amount. 
• Assignment fee: the amount of money the assignor will make for finding an end buyer. The assignment fee should be clearly set forth in the assignment contract.
• Name of the company holding escrow : the assignment contract will designate what company is holding escrow.  This escrow company should match the escrow company listed in the original purchase agreement or you will need an amendment to the original purchase agreement or, in states where it is permissible, a split escrow.  
• Closing date: the date by which the transaction should be finalized. This should correspond to the original purchase agreement’s closing date. If a different date is used, an amendment to the original purchase agreement may be required.  
• How assignment earnest money is handled : should one party cancel the contract or fail to meet the contractual obligations, the earnest money may either be forfeited by the assignee or returned. In instances of a dispute between the parties, the third party holding escrow may release the assignment earnest money pursuant to the terms and conditions of the assignment contract.

Writing a comprehensive assignment contract is a vital part of several real estate investing strategies. If you’re new to creating these kinds of contracts, be sure to get some legal advice before moving forward. Once you have a solid assignment contract template in place,  transactions using this contracting tool will run more smoothly. 

* The information provided on this site does not, and is not intended to, constitute legal, financial, tax, or real estate advice. Please consult your expert for advice in those areas. All content is for general informational purposes only and is not intended to provide a complete description of the subject matter. Although Blueprint provides information it believes to be accurate, Blueprint makes no representations or warranties about the accuracy or completeness of the information contained on this site. Specific processes will vary based on applicable law. The title and closing process will be handled by a third-party attorney to the extent required by law. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed.

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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.

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 #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 #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.

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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• About The Firm

17 February 2021

• Ashley Molson
• Real estate

Assignment Contracts 101

Assignment contracts are very popular with investors. This topic is definitely for newer investors or even for realtors who are starting to work with investors. If that sounds like you, continue reading!

In the world of real estate investing, you’re going to encounter contracts that are called “assignment contracts”. Assignment contracts are used, when an investor goes under contract with a seller to buy the Sellers’ property and then, the Buyer takes their RIGHTS to buy and assigns those rights via an  assignment contract to a new buyer . They will say, “I am going to assign this” or “ I am going to wholesale” this. That’s when you know to be ready to work on an assignment transaction. The Original Buyer or the Assignor usually takes a fee at closing for “finding” and assigning the property to the new buyer.

Assigning a contract is not the same as selling a property or brokering a property. You’re not selling a property. You cannot do that because you cannot sell something that you don’t own. You’re just transferring your rights and you, t he original Buyer, becomes the “middleman/woman”.

If you assign your contract, your new buyer will step into your shoes as the buyer under the same terms that you’ve negotiated with the seller . So the parties are:

• Middle Man (you) and
• The End Buyer.

The End buyer will perform the inspection and due diligence and they will bring the money to closing.

It’s important that  both you and the end buyer are represented by an attorney and you each have to have your own attorney .This way, you can police the behavior of your end bu yer. Also, your attorney is likely to be the one communicating with the Sellers’ Attorney.

End buyers back out all the time. When you’re assigning a contract, the Seller doesn’t often know it, so if your end buyer backs out, you could still be on the hook to buy the property , so you definitely need an attorney protecting your interest. 

Are assignment contracts legal?

Yes, they are. There are statutes that say that assignment contracts are legal. Even though they are legal, there are contracts that prohibit assignments OR only allow assignments with the Sellers’ consent. So, the contract you sign with the Seller is very important. You’ll have to look at the terms and see if there is a clause precluding assignments. If so, you’ll need to negotiate this term before you sign the contract with the Seller. 

TIP: If you’re in New Jersey, the New Jersey standard realtor form contract has a provision in it that states that this contract is only assignable upon the consent of the seller. So, if you were planning to assign your rights from a NJ standard realtor contract, you will need to negotiate this during Attorney Review with your Attorney. If you’re not using the realtor contract, you can have your attorney draft your own contract with the seller and they can add the assignment provision in so that it is already there and clear that you have the right to assign it. 

Now there are certain circumstances where assignment should not be used and that is in the case of buying a property that is a short sale. I highly recommend staying away from assigning those transactions due to certain prohibitive federal regulations. 

I hope this article helps you get a better understanding of Assignment contracts. Thank you for reading.

This post is for educational purposes only and is not intended to be legal advice. No Attorney Client Relationship is formed by your reading of this article.

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How A Real Estate Assignment Contract Works

• Blog , Wholesaling Real Estate
• Published on September 27, 2023

Home » How A Real Estate Assignment Contract Works

Real estate assignment contracts are an important tool for real estate investors, particularly real estate wholesalers. While most real estate purchases don’t involve assignment contracts, they’re a necessity for investors who aren’t personally planning to purchase a property.

Real estate wholesalers enter into an agreement with the seller called a purchase and sale agreement. This agreement establishes that the wholesaler has equitable interest in a property, meaning that the house is in the process of being sold and the wholesaler has a financial tie to the transaction. A real estate assignment contract transfers the equitable interest to a cash buyer, giving them a right to close on the property in place of the wholesaler.

Understanding Real Estate Wholesaling

Real estate assignment contracts are at the core of wholesale real estate . Wholesaling is a real estate investment strategy in which a wholesaler finds a property that is either physically or financially distressed and enters into a contract with the seller that establishes the wholesaler’s right to buy the house, typically for less than market value. 

The wholesaler then approaches a buyer, typically a real estate investor, and assigns them the right to buy the property. Real estate wholesalers will always negotiate a higher price with the buyer than the amount they’ve agreed upon with the seller. The difference between the two prices, which is often referred to as the spread, is how a real estate wholesaler makes money from the transaction. 

While real estate wholesaling may sound simple and straightforward, it can take a lot of time and effort  to find motivated sellers and investors who are able to buy the property. Wholesalers need to network consistently to create a pool of potential buyers for their distressed properties. In order to find a motivated seller, real estate wholesalers typically have to approach many distressed property owners to get just one property under contract. A distressed property can be a property that is in severe disrepair or has a financial distress factor. 

A few of the most common financial distress factors include pre-foreclosure , tax default, low or negative equity, and high interest rate. Wholesalers who invest in real estate data platforms can easily search for properties with financial distress factors. 

Assignment Contract Legalities

Real estate wholesaling is legal in all fifty states and anyone can be a wholesaler. While you do not need a real estate license to wholesale, some states have restrictions on how wholesalers can legally market their properties if they do not have a real estate license. This is why many wholesalers have real estate licenses, allowing them to sidestep these restrictions. 

There’s another key advantage to having a real estate license. If a wholesaler assesses a property and realizes that it could sell for more in a traditional sale, the wholesaler could offer to represent the seller in a conventional sale of the property.    

Creating an Assignment Contract

When creating an assignment contract, it’s best to work with an attorney who’s well versed in the laws and regulations around real estate wholesaling in your state and municipality. Wholesalers who try to cut this corner by using a contract they found online can experience problems later if it’s a poorly written contract or one that’s written for a market with different regulations. 

In order to create an assignment contract, there must first be a purchase deal between the homeowner and the wholesaler. The purchase deal, also referred to as a wholesaling contract, states that the wholesaler has the right to buy the property. 

When the wholesaler secures an investor who is interested in buying the property, the two parties enter into a real estate assignment contract. This contract transfers all obligations from the wholesaler to the buyer. The same terms outlined in the purchase deal carry over to the buyer except for the price of the property. 

The key elements of an assignment contract are: 

• A copy of the original wholesale contract or purchase deal
• The legal names of the buyer and seller
• The property’s street address, type of property, and assessor’s parcel number (APN)
• The physical condition of the property, including any defects and repairs
• The purchase price as well as specifications regarding financing and deposits (if applicable)
• The closing date
• Any contingencies

Completing the Sale

To complete the sale, the buyer transfers the money for the agreed-upon purchase amount to the title company. The difference between the sale price in the assignment contract and the purchase deal is the spread, and it is paid to the wholesaler by the title company.

If for some reason the buyer backs out of the sale, the seller does not get paid nor does the wholesaler. This is why it’s important that the wholesaler has a database of potential buyers to come through if the intended buyer doesn’t follow through with the purchase. Wholesalers can also protect themselves with a contingency clause in the purchase deal stipulating that the wholesaler isn’t obligated to buy the property if the buyer backs out.

Real estate wholesaling has exploded in popularity in the past few years. While that has resulted in limited inventory in a lot of markets, savvy wholesalers can use technology to wholesale remotely . 

But whether you’re a wholesaler who’s buying properties within your community or on the other side of the country, assignment contracts are an essential part of the transaction. As we stated earlier, make sure that you work with an attorney who understands wholesaling to create a real estate assignment contract that will protect you and your money.

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Real Estate Assignment of Contract: What Investors and Wholesalers Need to Know

Now and again you have heard experienced investors say you can break into the real estate industry with minimum or no capital. That sounds a relief. Getting capital to start a business is one of the greatest challenges for new investors. The jackpot they are referring to is wholesaling in real estate investing.

But how can I commence without money? This lucrative venture gives you an opportunity to acquire ownership rights of property by getting it under contract. After which you sell these rights to another buyer with a profit.

Contract assignment in wholesaling real estate is one process that all investors and wholesalers should understand deeply. It has its own intricacies that even those who have been in the industry don’t comprehend.

But again, it is not that complicated. If you are curious to learn how the real estate assignment of contract works and how to use it to achieve your financial goals, you are reading the right article. Let us begin.

A real estate assignment of contract

This is a wholesale approach employed by real estate investors to expedite the sale of a property between the owner and an interested buyer. In this strategy, a wholesaler signs a contract with the property owner that gives them rights to buy the house below the market value, in return for the house to be sold easily and quickly.

The wholesaler then goes ahead and sells these rights to an interested buyer at a slightly higher price than the contract amount. The buyer is mostly another real estate investor who is looking for desirably priced properties to fix and flip. The buyer in turn pays the wholesaler assignment fees and goes ahead to buy the property. In other terms, the wholesaler is flipping a real estate contract.

The strength of the contract relies on what is written in it. It should clearly outline what each of the parties involved will get out of it. As an investor make use of a specialized lawyer in a real estate contract assignment.

The contract should clearly state that the wholesale deal is a transparent process. Additionally, the contract should spell out the assignment fees and how the wholesaler will be paid after assigning a contract. The standard fee is usually $5000 though, sometimes it varies depending on the deal.

The process of assigning a real estate contract

As much as real estate contract assignment is profitable, the process to make it flawlessly can’t be underestimated. The following are steps you should follow to have a timely and valuable contract assignment.

#1:   Find the right property

In wholesale real estate investing you don’t just look for any property. Your specific search is aimed at finding motivated sellers, who are looking to get rid of their properties quickly and easily. Because of their urgency, they mostly sell their homes below the market value.

In your hunt, it is wise to target homes that are in bad shape but can be renovated or those that have been in the market for a long time. Choose the right property and obtain all relevant information about it. You can go ahead and even estimate the renovation costs to build credibility with your buyers.

But how do you get such properties? It is not an easy process but you can apply the following methods:

#1: Driving for dollars

This entails driving around your locality looking for homes that look distressed and get in touch with the owners hoping to sign a contract.

#2: Bandit signs

Another option is strategically placing “we buy homes” signs with your contact, hoping a motivated seller will give you a call.

#3: Direct mail

This process involves purchasing a mailing list and sending several mails to potential sellers.

  #2:   Draft and submit the contract

Real estate assignment contract templates can easily be accessed online. Get one and make use of an attorney to go through and edit it to fit your needs. An attorney will ensure you do the right thing and provide legal advice in case of any issues.

Disclose this draft to the seller and explain all clauses if necessary. You need to assure the owner of the property they will get the proceeds of the property as agreed.

Depending on your local authorities, submit the real estate assignment contract for a title search to ensure the property has no outstanding claims. Then sign the contract to make it valid.

#3:   Find a buyer

Just like finding a seller, finding a buyer involves exploring all avenues. Starting might not be easy, but with time you will make a buyers list that you can use to quickly assign contracts.

Your search will mainly focus on other investors flipping houses. Those who want to buy houses relatively below the market value rehabilitate and sell at profit.

Listing websites are one of the platforms you can get the right buyers. You can also check on your network of real estate investors to get a willing buyer. To market your business further, create a website and advertise there.

#4:   Assign the contract

After successfully getting the buyer, to sail on a safe boat, request for an earnest money deposit to seal the deal.  The deposit can be any amount depending on your negotiation as a wholesaler. This money will cushion you in case there is a breach of contract. The deposit is nonrefundable whether the deal closes or not.

#5:   Collect your assignment fee

The profit from selling the property comes from the stipulated assignment fee and the difference between the contract selling amount and the actual amount the buyer pays for the property.

It is a win-win situation. The property owner has quickly sold their house as per their desires. Another real estate investor has found the right property hustle free to flip and get a profit. In your case, as a wholesaler, you have happily pocketed your profits.

Bottom line

Real estate assignment of contract is a good exit strategy to get into real estate investing with minimum capital commitment. However, you must grasp the process and execute it aggressively to get constant profits.

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Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

Table of Contents

• What Is an Assignment?
• What is an Assignment in Real Estate?
• What Does it Mean to Assign a Contract in Real Estate?
• How Does a Contract Assignment Work?
• Pros and Cons of Assigning Contracts

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

• Find the right property.
• Get a purchase agreement signed.
• Find an end buyer.
• Assign the contract.
• Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won’t take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it’s compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

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Wholesaling Real Estate Assignment Contracts: A Comprehensive Guide for Beginners

Introduction:.

Wholesaling real estate assignment contracts is a popular strategy in real estate investment. As an investor, it allows you to act as a middleman between sellers and buyers, earning profits without ever owning the property. This article will discuss the essentials of wholesaling property contracts, including how to get a wholesale assignment contract done, wholesaling land contracts, the role of the real estate middleman, and much more.

Wholesaling Real Estate Assignment Contracts:

Wholesaling real estate assignment contracts involve finding a property seller, negotiating a purchase price, and assigning the contract to a buyer for a higher price. The difference between the purchase price and the assigned price is your profit. This approach is an excellent way for new investors to enter the real estate market, as it requires minimal capital and can be done with little experience as a real estate investor.

Wholesale Property Contract:

A wholesale property contract is a legally binding document that outlines the terms and conditions of a full real estate business transaction between the wholesaler and the seller. The wholesaler negotiates a purchase price with the seller, and in return, they have the right to assign the contract to a buyer. Critical components of a wholesale property contract include property information, purchase price, earnest money deposit, inspection contingencies, and assignment clause.

How to Get a Wholesale Contract:

To get a wholesale contract, follow these steps:.

• Find a distressed property or motivated seller.
• Negotiate a purchase price that is below market value.
• Draft a wholesale property contract with the seller, including an assignment clause.

Wholesaling Land Contract:

Wholesaling land contracts follow a similar process to real estate wholesaling contracts and real estate assignment contracts but involve vacant land instead of residential or commercial properties. Investors find undervalued land, negotiate a purchase price with the seller, and then assign the land contract to a buyer for a higher price. Wholesaling land contracts can be lucrative, as land often has lower holding costs and fewer complications than developed properties.

How to Get Wholesale Contracts:

Getting wholesale contracts involves networking, marketing, and diligent research. investors can find potential deals by:.

• I attend local real estate events and connect with other investors, wholesalers, and professionals.
• You use online and social media platforms to market your services and find motivated sellers.
• I am researching public records, foreclosure lists, and other sources for distressed properties or owners.
• We are developing a reputation for reliability, professionalism, and integrity within the real estate community.

What is a Wholesale Real Estate Contract?

A wholesale real estate contract is a legally binding sale agreement between wholesalers and property sellers. It allows the wholesaler to assign the contract to a buyer for a higher price, earning a profit without purchasing the property. Wholesale real estate contracts typically include an assignment clause, which gives the wholesaler the right to assign the contract to a third party.

Real Estate Middleman Contract:

A real estate middleman or real estate wholesale contract is an agreement between a wholesaler and a property seller. The wholesaler acts as a middleman, connecting motivated sellers with buyers and assigning the contract for a profit. This type of contract is attractive to investors with limited capital, as it allows them to earn money without owning the property or financing the purchase.

Wholesale Contract for Real Estate:

A wholesale contract for real estate is an agreement between a wholesaler or real estate agent and a seller, allowing the wholesaler to assign the purchase contract to a buyer for a higher price. This contract outlines the terms and conditions of the transaction, including property information, purchase price, contingencies, and assignment clause.

Wholesaling Contracts:

Wholesaling contracts are legal agreements that allow real estate investors to act as intermediaries in real estate transactions, connecting motivated sellers with buyers and earning a profit from the difference in the negotiated purchase price and the assigned price. Wholesaling contracts typically include clauses that protect the wholesaler’s interests, such as inspection contingencies and the right to assign the contract to a third party.

Assigning a Real Estate Contract for Wholesale:

Assigning a used real estate purchase contract for wholesale involves transferring the rights and obligations of the purchase agreement from the wholesaler to the end buyer. This process is generally straightforward and involves the following steps:

• Finding a suitable end buyer: Market the property to potential buyers and find someone interested in purchasing the property at a price higher than the negotiated purchase price.
• Drafting an assignment agreement: Create a legally binding assignment agreement that outlines the terms and conditions of the contract assignment, including the assignment fee (the profit earned by the wholesaler).
• Signing the assignment agreement: The wholesaler and the end buyer must sign the assignment agreement to legally bind it.
• Closing the transaction: The end buyer and the original seller will proceed with the closing process, and the wholesaler will receive their assignment fee upon the successful completion of the transaction.

In conclusion, wholesaling real estate assignment contracts is an attractive investment strategy for individuals looking to enter the market with minimal capital and experience. By acting as a middleman and connecting motivated sellers with buyers, wholesalers can earn profits without ever owning or financing the property. Understanding the intricacies of wholesale real estate deals, property contracts, land contracts, and the assignment process is crucial for success in this fast-paced and competitive market. By networking, marketing, and conducting thorough research, aspiring wholesalers can find lucrative deals and build a successful real estate investment business.

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Assignment Clause in a Real Estate Contract: What to Know

An assignment clause in a real estate contract allows an investor to sell a property without buying it. There is a lot to unpack in that simple sentence, so let us examine why a seller, an investor (or wholesaler), and a buyer may want to enter into such an agreement. 

• An assignment clause in real estate allows an intermediary to grant the privileges and responsibilities of a contract to another person. 
• People make money assigning contracts by brokering deals between motivated sellers and dependable investors.  

There is a lot of legwork that goes into finding appropriate properties. However, the transactions themselves usually happen very quickly.  

Click to Open Outline

How Does an Assignment of Contract Work? 

What does assignment mean in a contract? An assignment grants the benefits and responsibilities of a contract from one party to another. Investors use these contracts to ensure they get paid when they broker real estate deals. 1   

What is an Assignment Clause in a Real Estate Contract? 

The assignment clause in a real estate contract is the vehicle that allows wholesalers, or intermediaries, to broker deals in real estate. There are three important parties in the clause: 

• The assignor – The seller  
• The obligor – The investor or wholesaler 
• The assignee – The buyer 

This allows the obligor to be a legal party to the contract. It allows compensation for the investor (the obligor), who acts as the middleman. 

What if There is No Assignment Clause in a Real Estate Contract? 

Can you assign a contract without an assignment clause? Most of the time yes. In most states, if the contract does not specifically forbid it then a buyer may assign the contract to another buyer. However, be careful. If you do not include the clause in the sales contract, then you should draft a contract stipulating your assignment fees with the new buyer.  

Difference Between Assignment and Novation 

The difference between an assignment and a novation is subtle but important. With an assignment, the obligor transfers the benefits and obligations of the existing contract to a third party. No change is made to the contract. In the case of a novation, the investor substitutes one buyer for another.  

To novate a contract, the assignor (the seller) must agree to a change in the contract. That is not necessarily true in the case of assignment. The 0bligor may assign an assignee (the new buyer) and not make any changes to the contract.  

How do You Make Money Assigning Real Estate Contracts? 

This real estate investment strategy works when you broker a deal between a motivated seller and an investor. It is a niche market that requires you, as the broker, to find the right seller and match them with an appropriate buyer. But what kind of seller? And what kind of buyer? 2   

What Sellers You Should Approach with an Assignment Contract 

Not every seller is interested in this type of transaction. Finding the right seller of an appropriate property is crucial. You must find a motivated seller who thinks it is more important to sell quickly than get the most money.  

This is a proactive process. You must find them before they find another interested buyer or broker. Here are some ways brokers find these buyers: 

• Email marketing 
• Direct mail marketing 
• Putting out signs in a target neighborhood 

With this campaign, you look for the seller who tells you “I have to sell because . . .” as opposed to “I’m curious about what my house may be worth.” 

What Buyers You Should Approach with an Assignment Contract 

When you find a motivated buyer, who wants to sell an appropriate property it is important to already have an interested seller or sellers, you can call. If you do not have a dependable buyer ready to go you will lose the deal, because someone else will buy. What does a good buyer look like in this case? 

• Someone with experience buying investment properties. 
• Someone who can close quickly. 
• A professional who is consistent and decisive. 

The buyer must act quickly. This means they pay cash or have financing lined up ahead of time and can close quickly. Indecisive people will either not act quick enough or get cold feet and back out of the deal. In the latter case that could leave you in a precarious position. You either must buy the property yourself or forfeit your earnest money.  

The best thing to do is find an investor you trust before you find a motivated seller. Going to investing chat rooms is a good place to start if you do not know anyone personally.  

Final Thoughts on An Assignment Clause in a Real Estate Contract 

Assignment contracts may seem like an easy investment strategy on the surface, but it requires a lot of research. You must know real estate values in your area very well and be willing to do a lot of legwork finding undervalued properties with motivated sellers. That is not easy, and there is a lot of competition.  

On the other side of the transaction, you must cultivate a stable of reliable investors. This takes even longer because you must develop trust with them. You must trust them to complete the transaction, and they must trust you to find them good investments. One bad deal can sour a relationship. Also, not every investor is ready when you find a property, so you must gather a stable of investors so that one will be ready when you call with a hot deal.  

References 

• Assets America  
• Fortune Builders  

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An Investor’s Guide to Novation in Real Estate

What is real estate novation?

What are the types of real estate novation?

Assignment vs. novation

Commercial and residential real estate novation

Most real estate transactions are complex affairs, and several factors on a contract can change before the deal is closed. For example, either party can ask for different terms or change their demands between the first negotiation session and closing. Since buying a home is one of the most significant and expensive purchases you can make, you should ensure all your paperwork’s information is recorded correctly and ready to go. More importantly, any contract you sign has to be up to date and accurate. If a transaction’s contract has a problem, it could delay or derail the transaction process.

To ensure buyers and sellers are properly protected, you need to understand novation in real estate. In this article, we will explore what novation real estate is, what a novation typically involves, as well as a few examples of what a real estate novation might look like. By knowing all real estate options, you’re able to guarantee transparency and clarity throughout the real estate experience.

What is Novation In Real Estate?

To understand how novation in real estate works, the definition of novation will come into play. In a nutshell, novation means an existing legal contract or obligation is replaced with a new contract of either equal or close to equal (proximate) value. Through novation, an original contract is nullified and eventually replaced with a new contract. All of the benefits, terms, and burdens initially discussed are transferred to the new contract.

Novation is necessary because a new contract must always be redrawn and signed by all involved parties whenever a deal term or element is renegotiated, especially with something as complex and valuable as a real estate transaction. Verbal agreements just won’t cut it, nor will modifying an existing legal contract by scratching out certain words or phrases. Novation sets a new real estate contract as valid and legally binding. It ensures that everyone gets access to the new contract whenever a term renegotiation occurs (which can be frequent for real estate). For example, parties may disagree on the selling price, the mortgage term, the burdens or debt obligations, and so on.

Aside from real estate, novation can also be used in finance contracts, business contracts, and anything where legal terminology is crucially important. Novation’s primary benefit is arguably the nullification of earlier contract versions. Without novation, earlier versions of real estate or other contracts may be used in court to argue ownership, price disagreements, and more. Novation protects real estate investors by nullifying earlier contracts and rendering them legally invalid and unable to be exploited by any party involved.

Types of Real Estate Novation

Now that we’ve explored what novation in real estate means, let’s dive into the three common types of novations witnessed. Novation is always suggested when changes occur, as “verbal agreements” between a buyer or seller are ill-advised, and simply modifying an existing legal contract by scratching out certain words or phrases is a quick way to increase confusion down the line. Novation in real estate exists to protect all parties involved and is performed in three major ways, which include:

Standard Novation: A Standard novation occurs when both parties in a given transaction agree to a new contract and add new terms to the document. Both parties then sign the new contract.

Expromissio Novation: An expromissio novation is necessary if three parties are involved in the transfer of certain rights. The parties are the transferor, the transferee, and the counterparty. Each party in the transaction has to agree to new novation contract terms if they want to move forward with the transaction.

Delegation Novation: A Delegation novation is needed if a new creditor takes on the benefits and contractual responsibilities for an old creditor. In doing so, the original debtor is discharged from their financial obligations to the first creditor. The delegation novation contract then legally binds the new creditor to the obligations of the debtor. In simpler terms, the debtor stops owing money to the first creditor and then owes the same amount to the new creditor.

Assignment vs. Novation in Real Estate

A common confusion when becoming introduced to novation is its relation to an assignment. Novation in real estate is very similar to assignment in real estate , as both processes can be used to bring at least one new party into an existing contract or real estate transaction. For example, novation makes a new agreement and transfers contractual obligations or rights from an existing party to a new party.

On the other hand, assignment only transfers the benefits and rights of the original contract to the new party or “assignee.” But any burdens, such as debt obligations, stay with the original party per the contract’s terms. In this way, with an assignment in real estate, the assignor or the person transferring property is still legally responsible for any contract terms or burdens.

Because of this major difference, novation and assignment are used for different purposes or objectives. Typically, assignments are used in real estate if someone needs to sublease a rental property to a new party while remaining on the same lease. This contract adjustment can be useful since real estate assignments don’t require a third party’s approval. Novation in real estate does.

Novation in Residential Real Estate vs Commercial Real Estate

Novation can play a key role in residential and commercial real estate transactions, although it also significantly draws out these transactions or negotiations. While the negotiation process might be simple, ensuring all parties have the chance to review updated documents can be a time-intensive process. In residential real estate transactions, the process is a little simpler. Most residential real estate transactions are, after all, conducted between only two parties: the real estate buyer and seller. For this type of deliberation, it’s not difficult to gather all individuals to review the new terms.

Things become much more complicated if novation is used in commercial real estate transactions , which may involve three parties or multiple legal entities more often. If anything is changed in the contract, which happens very frequently in all real estate transactions, but especially commercial real estate transactions, novation is used to produce a new contract ready for signatures from all involved parties.

For commercial real estate transactions, it’s fairly common to see delegation novations taking place to ensure no one is inappropriately taking on or keeping past debts. Expediting the process of closing might take longer for commercial real estate investments, especially for buyers looking to maximize their investment and stay fully aware of future obligations. That being said, no one should rush any real estate transaction, and novations ensure everyone is happy at the closing date and years down the line.

Real Estate Novation Example: Selling Price Adjustment

To make sure you fully grasp novation in real estate, let’s break down an in-depth example of a typical residential real estate transaction that would like to implement a novation. Say that a real estate buyer makes an offer on a house. After placing the offer, they arrange for an in-depth inspection and learn the property’s yard line or borders don’t meet regulations. Even worse, they infringe on the property lines of another adjacent home. In this case, the owner and/or buyer have several options. This would be an example of a standard novation.

For example, the owner could pay for the adjustments to the yard line out-of-pocket. Alternatively, the owner and seller could renegotiate the contract between themselves for a lower price. The buyer would pay a lower price since they would need to redo the yard line instead, covering the cost of that modification after closing. In this instance, the burden or responsibility to adjust the yard line must be placed on at least one party. It all depends on what the buyer and seller decide. A new contract would be drafted that reflects the negotiated plan.

Say that the buyer and seller for the real estate property agree that the buyer will be responsible for modifying the home in exchange for a lower purchase price. Therefore, they draw up a new purchase agreement that includes the revised price using novation. The old agreement is henceforth voided and is no longer valid. The real estate transaction then moves forward to a close using the new contract.

Successfully Closing A Deal

No matter which side of the transaction you are on, make yourself available as the contract approaches closing. Buyers and sellers should be able to promptly answer questions, resolve issues, and finalize any pending requests. This will help both parties successfully close the deal and finish the novation process. If not, the contract could stall and closing could take longer than usual. Remember the key to completion is to focus on staying in touch and finalizing any details.

Ultimately, real estate investors need to know how and when to use novation in real estate transactions. If you buy or sell any property, odds are you’ll use notation at least a couple of times as contract terms shift and as party expectations are adjusted based on things like price negotiations, inspection reports, and so on. Thanks to novation, real estate transactions can be modified relatively quickly, new contracts can be drawn up, and all parties can rest assured that earlier versions of real estate contracts won’t come back to cause them legal trouble later down the road.

When making any big-ticket investment, it’s imperative to guarantee all parties are legally protected. Real estate investors need to know how and when to use novation in real estate transactions to keep information up-to-date, properly navigate financial obligations, and accurately legally protect themselves. By analyzing a few examples and learning how real estate novation operates, real estate investors and sellers can improve their entire real estate experience.

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Assignments, double closings, subject to deals are not a problem for closed ®, our team of investment experts with decades of experience, powerful tools giving you access and control over your trasactions, your business will grow with smooth deals every time, reduce acquisition costs. volume investors receive discounted fees, title reinvented ™, closed® delivers for real estate investors and wholesalers. from our combined decades of experience handling complex investor deals- to working flawlessly online to simplify and speed up the closing experience. closed® is trusted by investors of all sizes, from local investors, to national institutional investors.  we are experienced in assignments, double closings, and quick closings in as little as 24 hours. the right title company can get more deals closed® for you every year, adding revenue to your business and streamlining your operations..

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Never, ever wait for your commissions and proceeds. Instant, digital commission delivery. Every time. Zero wire fees- ever!

We also offer an industry leading option: closing fully online. Close via your phone, tablet or computer. For cash buyers- simply wire us your funds and sign electronically and your'e all set. 

Stay organized and know exactly what is needed of you and your clients for your closings.

DANIEL GITLIN

Founder/coo, closed® title, from my experience as an investor buying and selling thousands of investment properties and working with hundreds of title companies, i know what investors are looking for in a title company. this is why closed ®   was built to deliver the three things investors need: communication, speed, and the title expertise to get deals  closed.  we understand your business inside and out, we have built a platform and hired a team ready to help you grow your investment business.    that's why closed ® is the investor friendly title company™., contract writing instructions, experience title reinvented: enter our information below on your next contract.

Yes, CLOSED® Title is Investor Friendly

Answering common questions about our closing platform and investors.

Frequently we have both current and potential new clients ask whether we are investor friendly. Our legal and processing team has years of experience working with investors of all sizes. We work with investor groups of all sizes, from solo home buyers to national, institutional investors. 

Whether it's navigating a distressed property, or handling an assignment, we are here to help.

Have questions about what services we offer? We got you.

CLOSED® is a full service title company offering settlement services for investor real estate transactions.  Below is a list of services we provide that investors and wholesalers frequently inquire about:

Conduct a full title search and municipal lien search

Handle assignments, double closings and complex investor transactions.

Maintain escrow accounts for purchase, sale, refinance and tax deferred property exchange transactions, real estate escrow services, financial (loan) transaction settlement services

Coordinate with all parties, including lenders for mortgage loan transactions

Organize loan closing documents, provide services for closing of mortgage loans, real estate closing/settlement services.

• How does this work? As an attorney in Florida, you may charge your clients a legal fee for reviewing documents for closing and conducting a real estate closing. However attorney review and notarization/closing is just one small part of what is needed to professionally and accurately complete real estate closings. Backed by CLOSED, we will handle all of the rest, allowing you to collect 100% of your desired legal fee, while CLOSED as the title insurance agency collects the premium for title insurance. CLOSED will handle: -Opening and processing files with our experienced proessing team -Managing processors -Managing all title software systems -Keeping clients informed during the closing process -Handling escrow, both EMD and disbursement -Performing all accounting required for the file -Preparing all documents required for closing -Providing documents to you for review and closing -Recording all required documents and issuing title insurance policies
• What if I don't know how to close? Through CLOSED Academy, our team can train you on the basics of conducting a real estate closing. Schedule a meeting with our team to learn more.
• Where will closings take place? Typically clients will want to meet with you at your office, which can be anywhere in Florida. CLOSED will provide you the required documents prior to closing, you conduct the closing and post closing deliver the original documents that are required to be recorded (via pre-paid Fed-Ex) to our HQ in Fort Lauderdale for our team to record.
• What is CLOSED Direct? With CLOSED Direct, Florida Attorneys use CLOSED LLC, a Florida Limited Liability and Title Insurance Agency (License ID W497476). CLOSED, as a title insurance agency will open the contract, order title, lien searches, process title, prepare closing documents, issue a title insurance policy and perform recordings. Attorneys, through CLOSED Direct will review documents for closing, conduct closings, and will correspond with their clients during the closing process. Licensed Florida Bar Attorneys will charge their clients their legal fees at closing on the settlement statement.

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Understanding the Concept of an Assignment Fee in Real Estate

Navigating the realm of real estate transactions can often feel like deciphering a complex puzzle, especially for those who are early on their property journey. A concept that can confuse professionals and individuals involved in transactions alike is the idea of an assignment fee in real estate—something that comes into play in various scenarios. In the context of real estate, an assignment fee is an essential concept to grasp, bridging the gap between  creative financing  and the traditional purchase and sale of properties.

What is Assignment in Real Estate?

To understand an assignment fee in real estate, you first have to understand what an assignment is. An assignment contract is essentially the document that gives someone the right to purchase a property. The assignment fee refers to the payment made to an individual, generally known as an assignor, for transferring their rights and obligations under a pre-existing real estate assignment contract to another party, known as the assignee. 

This transaction is particularly prevalent in the practice of  real estate wholesaling . In these transactions, an individual will secure a contract to purchase a property and then assign that same contract to an end buyer, charging a fee for the convenience and the opportunity they present.

A contract assignment fee is a strategic tool for those looking to leverage lucrative opportunities within the market without needing a significant capital investment. It allows for flexibility in the investment realm, enabling professionals to generate income from real estate deals without the traditional barriers of entry. This means people can make headway in their careers without having to obtain mortgage loans or conduct extensive renovations.

In essence, the assignment fee is the financial reflection of the value that the assignor brings to the table in a transaction. The assignor is a useful party for both buyers and sellers, helping the process along by identifying a potentially profitable deal, negotiating terms, and then passing on the right to execute the deal to a suitable party. Understanding this concept is crucial for real estate investors at all stages of their careers, especially those interested in using wholesale strategies and creative financing options.

What is an Assignment Fee in Real Estate?

The assignment fee in real estate is a concept rooted in the overarching principle of a contractual rights transfer. It represents the price that an assignee, someone interested in purchasing property, pays to the assignor for the rights to acquire said property under the terms the assignor has already negotiated with the seller. To make sure you get the right fee for the assignment of a contact, you need to understand the mechanics of how they work. 

This section expands on how assignment fees function in real estate transactions and delves into the factors that influence their amounts.

Explanation of How Assignment Fees Work in Real Estate

When an investor or a wholesaler, known in this case as the assignor, enters into a purchase agreement with a property seller, they acquire the legal right to buy the property at some negotiated, agreed-upon terms. However, instead of completing the purchase themselves, the assignor then finds another buyer, known as the assignee, who is interested in taking over the contract to eventually own the property.  This is when assignment fees come into play. 

The assignee must pay an assignment fee to the assignor for the right to purchase the property. Only once this fee is paid can the assignee step into the shoes of the original buyer, then proceed to close the deal with the seller. The original contract to buy is thus “assigned” from the assignor to the assignee, who from then on becomes responsible for fulfilling its terms.

Factors That Determine the Amount of Assignment Fees

The amount, or monetary value, of the assignment fee can vary greatly from deal to deal, being influenced by a range of factors, which we’ve broken down below:

Property Value and Equity:  Appropriately, the value and equity of the property will inform the assignment fee. A property with high value or substantial equity typically commands a higher assignment fee and vice versa.

Market Demand:  Consider  overarching market trends  when ascertaining an appropriate assignment fee. For example, in a seller’s market with higher demand for properties, assignment fees can increase because of plentiful competition among buyers.

Deal Profitability:  Even in the cases of lower-value properties, the nature of the deal itself will impact the assignment fee. This means that the more profitable a deal appears to be, the higher the fee that an assignor can command.

Negotiation Skills:  In a similar vein to the impact that profitability can have, negotiation skills can also change the shape of an assignment fee. The ability of the assignor to negotiate deals on both ends can directly impact their fee amount, with skilled negotiators often being able to secure higher fees.

Timeframe:  Time is money, and in the case of a wholesale assignment contract, this can be especially true. If the assignor negotiates the situation and closes the deal quickly, they might be able to command a higher fee for the increased convenience of a speedy transaction.

Comparison of Assignment Fees with Other Real Estate Transaction Costs

Assignment fees differ from the costs associated with various other real estate transactions in a variety of ways: 

Earnest Money vs. Assignment Fee:  Earnest money is a kind of deposit made to demonstrate the buyer’s seriousness about acquiring a property. This fee can typically be refunded under certain conditions or applied to the purchase at closing. On the other hand, an assignment fee is a non-refundable payment made to the assignor, specifically for the right to take over the contract.

Closing Costs vs. Assignment Fee:  Closing costs can encompass a variety of fees that buyers and sellers pay at the end of a real estate transaction. These fees can include things such as those associated with title searches, real estate attorney’s fees, and credit report charges. Assignment fees are separate from these, only ever being paid to the assignor for the contract rights.

Commission vs. Assignment Fee:  Real estate agents earn their living through commissions based on the property’s sale price, paid by the seller, generally from their earnings through making the sale. In contrast, an assignment fee is paid by the assignee to the assignor and is not related to the sale price or commission.

Understanding the nature of assignment fees, such as when they’re applicable, how they are calculated in relation to a transaction, and how they compare to other common transaction costs, is essential for anyone involved in real estate investing. This level of understanding is particularly vital in strategies such as wholesaling, where such fees are part and parcel of the process.

Pros and Cons of Assignment Fees

Assignment fees in real estate can be positive elements of transactions for sellers and investors while posing some notable challenges depending on the perspective of all parties involved, including the buyer. Below, we explore the advantages and disadvantages for the enactors of these transactions, as well as the risks and challenges that come with assignment fees.

Advantages for Sellers and Investors

For sellers:.

Quick Sales:  Sellers benefit from the existence of assignment fees as they can do wonders for speeding up the transaction. Wholesaling and the assignment fees that come with it are especially viable solutions when a seller wants to shift their asset quickly. Investors or fellow wholesalers who offer to pay these fees often aim to close deals rapidly.

Fewer Hurdles:  Sellers might avoid some traditional selling hurdles when embracing the nature of wholesaling and assignment fees. In the standard selling cycle, sellers might have to go through various stages, such as multiple showings or a buyer’s own financial approval process. These processes can be skipped altogether when dealing with investors ready to pay an assignment fee.

For Investors:

Profitability:  Investors or wholesalers can use assignment fees as their primary source of income. As it sidesteps the traditional processes of investing and reselling properties, wholesalers stand to make a profit through the assignment fee without having to close on the property themselves. By embracing this system, they also avoid closing costs and the need for financing.

Less Capital:  Wholesaling is a great method for generating income, without needing the same level of seed investment. Since the investor doesn’t need to purchase the property outright, they generally just have to pay a small (often refundable) deposit for the contract; there is less capital required upfront compared to traditional real estate investments.

Flexibility:  Because of the nature of deals that use assignment fees, investors can back out of a particular deal at any time. This can be achieved by offering and assigning the contract to another, more suitable buyer if the deal doesn’t fit their investment strategy or if they cannot secure financing.

Disadvantages for Buyers and Sellers

For buyers:.

Increased Cost:  Assignment fees do often increase the overall cost for the end buyer, as it becomes their responsibility to cover both the property’s agreed-upon price and the assignment fee. In some cases, the assignment fee can be taken from the overall sale price, but this isn’t common, meaning the speedier sale usually comes with an inflated price tag. 

Transparency Issues:  Buyers in these situations can often find it challenging to get full transparency regarding the property’s conditions or the original contract terms if not properly disclosed by the assignor. This shouldn’t be an issue, as long as the wholesaler or assignor does their job properly, but buyers should make sure to vet any collaborators carefully. 

Potential for Overextension:  Sellers may encounter issues if they work with the wrong wholesaler or investor. In some cases, an inexperienced investor can overextend and find it difficult to find a buyer to whom they can assign the contract, slowing down the transaction process and possibly reversing it. 

Market Misrepresentation:  Sellers could face the challenges of market misrepresentation if the assignor markets the property incorrectly or unethically, leading to potential legal challenges. For example, if the assignor lies about the property’s amenities, uses  unrealistic photography , or overvalues it, buyers might respond with legal action. 

Potential Risks and Challenges with Assignment Fees

Legal and Ethical Considerations:  The legality of assignment fees, much like many other aspects of the real estate market,  varies from region to region . Along with the legal side of things, there may also be ethical considerations to consider if parties are not fully informed of the contract terms and fees involved.

Market Fluctuations:  Market conditions can change rapidly—need we remind you of what happened to the housing market in 2008? This means that if the property value decreases or interest rates increase, it will likely become more challenging for the assignor to find a buyer willing to pay the fee on top of the existing property price.

Contractual Risks:  If the assignee fails to close the deal, the assignor might end up legally obligated to purchase the property under the original contract terms. Considering the reasons that most investors choose to embrace wholesaling and assignment fees, this could pose a significant financial risk that they’re not ready to incur.

Reputational Risks:  Assignors who consistently charge unnecessarily high assignment fees might gain a negative reputation in the real estate community among potential clients and fellow professionals alike. It’s important to consider what a fair, mutually beneficial fee should be to avoid potentially negatively affecting future business.

Complexity in Transactions:  Assignment fees add a level of complexity to real estate transactions, which are already fairly complicated at the best of times. There may be misunderstandings or disputes between the involved parties over the terms of the contract, the condition of the property, or the responsibilities each party has.

Both sellers and investors involved in wholesaling and assignment in real estate need to weigh the potential for quick and profitable transactions against the complexities and risks assignment fees introduce. It is crucial for every party involved to conduct suitable due diligence, operate transparently, and possibly seek professional legal counsel to ensure the process is conducted legally and ethically.

Legal and Ethical Considerations

The use of assignment fees in real estate transactions is full of potential, being a viable part of a strategic investment plan. However, while assignment fees and the deals they’re attached to can be highly lucrative, they also come with the potential for legal and ethical quandaries. Here, we delve into the legal regulations and ethical considerations that assignors should consider, highlighting potential issues that could arise from the misuse of assignment fees.

Legal Regulations and Requirements

Regulatory landscape:.

Disclosure Requirements:  Many jurisdictions require the full disclosure of an assignment fee to all parties involved in a transaction, ensuring no one feels like they’ve missed out on any vital information. Failure to clearly express the assignment fee to the buyer can often lead to legal penalties or complications.

Contractual Rights:  There are some contractual points to consider when handling an assignment fee in real estate. The original purchase agreement must expressly allow for the assignment of the contract without the need for repeat consent of the seller, or the investor must obtain written permission from the seller to assign the contract.

Licensing Laws:  Some regions may require an individual enacting a wholesale deal or receiving an assignment fee to have a professional real estate license, as the transaction could be considered as engaging in real estate brokerage without a license. This is worth considering if you want to pursue a career as a wholesaler or investor in general. 

State and Local Laws:  Both assignment fee legality and the ability to assign a contract can vary greatly between the different states and localities of the US. It’s crucial to understand the specific regulations of the area where you’re working and or where the property is located. It’s always important to tailor your approach to real estate for the area that you operate within. 

Ethical Considerations:

Fairness to All Parties:  Ethically, the fee should always reflect the value that’s actually been added by the assignor in finding the deal and should not be exploitative. If you’re working as a real estate wholesaler or receiving an assignment fee in any other way, make sure that you’re offering real value without overstating your contribution to the transaction. 

Transparency:  Assignors must be totally transparent about the property’s condition, the original contract terms, and the assignment fee’s size at every stage of the transaction. Remember, you’re not just trying to avoid legal implications with your honesty; you’re looking to build positive professional relationships built on trust. 

Conflict of Interest:  Ethically, an assignor should avoid any conflicts of interest in all transactions and should not misrepresent the potential value or investment benefits to the assignee. For example, if the assignor knows that an area is losing steam in the market, they should make that clear to their assignee.

Examples of Potential Legal and Ethical Issues

Non-Disclosure:  Failing to disclose one’s assignment fee openly and clearly to the end buyer or seller can lead to lawsuits, as it may be considered a fraudulent practice. It’s absolutely essential that a wholesaler makes it clear what they stand to gain from a deal so everyone understands the transaction from top to bottom. 

Predatory Practices:  Charging exorbitant assignment fees, especially in distressed markets or from vulnerable sellers, which are often hubs for real estate wholesaling, can be seen as unethical and might lead to legal challenges. This is why offering real value and making your fees reasonable is crucial.

Misrepresentation:  An assignor could face serious legal action if they misrepresent the terms of the original contract or the property’s condition for the purpose of securing a higher fee. It goes hand in hand with all of the other aspects of transparency—assignors must be clear and honest at every stage to avoid legal and ethical complications. 

Violation of Licensing Laws:  If an assignor acts as a de facto real estate broker by frequently assigning contracts for fees without a professional license, they might face legal penalties, including fines and injunctions. These laws vary from state to state, meaning it’s best to have a license in place, ensuring you can work in as many areas as possible. 

Breach of Contract:  If the original contract does not allow for the assignment of the property and the assignor proceeds without consent, they are highly likely to be sued for breach of contract. It should go without saying, but every real estate transaction needs to be enacted with the utmost professionalism, ensuring every party is fully aware of its nature. 

It’s essential for every party involved in the assignment of real estate contracts to be aware of the legal and ethical implications. The complex nature of these transactions often warrants the involvement of a dedicated legal professional to navigate the potential minefield of legal regulations and ethical considerations. Moreover, maintaining transparency and integrity throughout the process not only helps assignors avoid legal troubles but also builds a reputation that can lead to more successful deals in the future.

In this exploration of assignment fees in real estate, we’ve navigated their many complexities and nuances. From definition to application, assignment fees are a pivotal mechanism for investors, particularly in the realm of wholesaling.

There are many advantages and disadvantages associated with assignment fees. For sellers and investors, they can represent an expedient route to liquidity and profit. Conversely, for buyers, they can often introduce additional layers of cost and complexity.

The discussion of legal and ethical considerations illuminated the tightrope walked by those who engage in these transactions. The importance of adhering to disclosure norms, maintaining transparency, and aligning practices with the legal stipulations of the local and state jurisdictions cannot be overstated in this particular vein of real estate.

While the concept of assignment fees may appear straightforward, its application is often fraught with potential legal and ethical pitfalls. Those involved in real estate transactions must have a clear understanding of these fees and the corresponding regulations that govern their use.

By engaging in thorough research and due diligence and enlisting expert guidance, navigating the complex world of real estate can be achieved with confidence. The strategic use of assignment fees can indeed unlock opportunities and foster successful transactions, but only when managed with suitable care and consideration of all the variables at play.

For more insightful pieces about the real estate industry,  visit our blog today .

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• Advice for Agents

Buying and selling assignments: State of the Canadian market in 2023

Rose Morrison | Nov 16, 2023 | 3 comments

This year, investors and agents are having trouble closing their units. The assignment climate has shifted in favour of buyers, making entrepreneurs wait for another seller’s market.

Year-over-year condominium sales transactions have fallen in Vancouver, the Fraser Valley, Toronto, Ottawa and Halifax.

Because of rising interest rates and falling prices, the assignment market is now more rigid for real estate investors to make sound deals.

“Through bankruptcy, more users lose their life savings (to assignments), so we’re calling for government intervention and to scrap the 13 per cent tax”

The Canadian real estate market has seen its fair share of highs and lows in the past few years. Investors and real estate agents have taken advantage of rising demand and housing prices to find lucrative business opportunities.

One growing section in Canadian real estate is the assignment market. How have investors fared in this field? What can you expect in the future? Here’s a guide on the Canadian assignment market and its outlook.

Assignment market favouring buyers

The assignment market was red hot in 2021, with investors buying many properties due to low interest rates. However, 2023 has slowed down due to several factors.

Now, some investors and real estate agents are in a bind because they’re having trouble closing their units. The assignment climate has shifted in favour of buyers, making entrepreneurs wait for another seller’s market.

The assignment market’s conditions depend on where your targeted areas are. Most major Canadian assignment markets have seen a downturn, but a few are on the upswing for investors.

Re/Max’s 2023 National Condominium Report shows that year-over-year sales transactions have fallen in Vancouver, the Fraser Valley, Toronto, Ottawa and Halifax. Edmonton saw a slight increase at 3.1 per cent, and Calgary enjoyed the most significant increase at 22 per cent since 2022.

Why is the assignment market facing tough times?

The assignment market’s downshift has come relatively quickly in the last year, but it’s unsurprising for investors. These reasons show why the market is facing challenging times.

High interest rates

The driving force behind the changing assignment market is rising interest rates. As TradingEconomics.com shows, Canadian interest rates dipped below 1 per cent in 2020 and remained low until 2022. Frequent incremental increases have led to interest rates hitting 5 per cent in 2023, making the market sway out of sellers’ favour.

As a result, the assignment market is now more rigid for real estate investors to make sound deals because of falling prices.

Eric Skicki is an industry professional who has seen this change firsthand. As CEO of BrokerPocket — Canada’s largest marketplace for off-market listings, with over 11,000 agents on the platform currently – Skicki says demand will remain high in metropolitan areas like Toronto, but interest rates have harmed investors and end users.

“Let’s say an investor would have bought this (assignment). They’ll be able to rent it out last year for $3,000, and their carrying costs would have been maybe $2,700,” Skicki illustrates. “That same condo is closer to $5,500 now. That was more than a year and a half ago before the interest rate hikes.”

Although Canada’s 5 per cent interest rates are lower than reported rates in the United States of above 7 per cent, Canadian rates are the highest they’ve been since the mid-to-late 1990s.

Assignment tax

The housing market for buyers has been challenging in the past few years, so the Canadian government has helped residents buy their first homes with a tax-free savings account. The Department of Finance says over 150,000 Canadians are eligible for the New tax-free First Home Savings Account program, allowing them to contribute up to $8,000 a year. While the program is terrific for home buyers, it comes at a cost for investors and real estate professionals.

The Department of Finance levies taxes and funding to support the program, taking some revenue from those in the assignment market. Canada extended GST to assignment sales of newly constructed housing, setting the rate at 13.5 per cent. The government aims to curb speculative trading in the housing market, but Skicki says Canada should reverse the policy.

“It was put in with good intention,” Skicki says. “However, since then, there (have been) over-stimulants from the government in the sense that too many measures were put in place to cool the market.”

Navigating a changing and challenging market: What does the future hold for assignments?

Professionals in the assignment market may struggle due to existing interest rates, and the immediate outlook seems to be more of the same. The Bank of Canada could raise interest rates again to combat inflation if economic conditions persist. Fortunately, the Bank also predicts inflation rates will decrease over the next few quarters. If the trends are correct, you may see the market revert to sellers with increasing assignment prices.

If interest rates stay this high, Skicki fears there could be a significant economic impact.

“There are a lot of end users who are going to be hurting right now — it’s builders and then end users,” Skicki says. “If something is not done soon, you’re going to see more builders go under.

Calling for an end to assignment tax

“Through bankruptcy, more users lose their life savings for this thing, so we’re calling for government intervention and to scrap the 13 per cent of tax on assignments,” explains Skicki.

The current situation brings to mind the 2008 economic crisis for Skicki. He says this time around, reverse effects will happen to the economy. Skicki thinks blue-collar jobs will generally be safe, but those working in tech could see ripple effects in a chain reaction if the government doesn’t take action for the assignment market and its investors.

How can investors and real estate professionals navigate the current market?

Market conditions make it challenging for the average real estate agent and investor to buy and sell assignments. However, you can help yourself and your colleagues by following these tips.

Use off-market listing services

Finding assignments is more complex because they’re not on the typical MLS websites. Instead, it’s imperative to use off-market listing services for your needs. For example, BrokerPocket has 11,000 agents on its platform, letting agents communicate with one another and access exclusive listings.

One of BrokerPocket’s primary features is its ease of access for users. Simeon Papailias, co-founder of REC Canada, says BrokerPocket is the most secure and sophisticated platform he uses for off-market listings. You can filter by criteria like geographical location and amenities, making the app accessible to industry professionals.

Security is a significant feature for BrokerPocket users and has become a platform feature. Real estate agents can keep their client’s identity a secret and ensure confidentiality throughout the transaction. Papailias says BrokerPocket has become a regular tool and essential for day-to-day work in the industry.

Additionally, users have access to a referral network. BrokerPocket says agents can gain back with every converted user, increasing their ease of access. The platform’s objective is to promote off-market properties and effectively refer clients to other agents.

Educate clients

Selling assignments has become tougher amid the high interest rate environment. Buyers look to condominiums for their affordability but lose that advantage once the market prices them out with high demand and high interest rates. Right now, Skicki says real estate professionals looking to enter the market should educate their clients because lacking knowledge could lead to adverse outcomes.

“Make sure you educate your client of where the market is because where the market was last year, people were looking to make anywhere between $50,000 to $100,000 or $150,000 on their assignment,” Skicki says. “But (as of now,) advice to agents would be ‘your clients did well if they’re breaking even.’”

Stay informed

While educating clients is vital, so is educating yourself on the market. For example, if you want to enter the assignment sector, find locations where the market favours sellers, such as Calgary and Edmonton. While the competition may be higher, you’ll have better luck with selling and completing transactions. Skicki says the lack of knowledge and numbers can harm professionals if they don’t do their research.

“There are many people who are failing to close their units and do not understand how much transactions and prices have fallen since last year,” Skicki says. “Even those who are not aware do not have any data to back those claims up.”

Ultimately, Skicki recommends partnering with experts and finding a lawyer specializing in assignments. These professionals will help you navigate the assignment world, considering how different it is from resales.

It’s also crucial to time things right by watching market conditions. Papailias says now isn’t a good time to get into the assignment market if you’re a seller. However, the real estate market is ripe for buyers because sellers are motivated to let go of their properties. Buyer agents who want to get into new construction see the market in their favour, but the tides could turn if interest rates fall.

Real estate is challenging for agents and investors due to the market’s ups and downs. Currently, the Canadian assignment market demonstrates an inopportune time for sellers due to interest rates and the GST on assignment sales.

If your clients are interested in the assignment market, speak with industry experts about getting started. Lowered interest rates could turn the market back in the seller’s favour.

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• Tags: buying and selling assignments

I really feel bad for some of these clients who bought multiple condos in 2017/2018 as “investments” and can not close now! What options do they have?

Interest and Intent:

“Very interested — can we schedule a viewing?” “Considering making an offer.” “Is it still available?” “Looking for a quick closing.”

For the end users this sucks. For the most part it’s the speculators who are whining, they got caught in the downturn and can’t offload according to plan. All part of the risk! FOMO is a b*tch!

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