GUIDE · UPDATED
Wholesale assignment contracts: how assigning a contract works
A wholesale deal runs on two documents. The first is a purchase agreement between you and the seller. The second is an assignment agreement that hands your place in that contract to a buyer, in return for a fee.
This guide explains what each document does, what makes a contract assignable, how the money moves at closing, and where wholesalers get it wrong. Contract law differs by state, so treat this as an overview and have a local attorney review the documents you actually use.
THE SHORT VERSION
- Two documents: a purchase agreement with the seller, and an assignment agreement with the buyer.
- What you sell is your right to buy the property under the first contract, not the property itself.
- The purchase agreement has to allow assignment, and the seller should know you may assign it.
- Your fee is paid at closing by the title company or closing attorney.
The two documents.
| Row | PURCHASE AGREEMENT | ASSIGNMENT AGREEMENT |
|---|---|---|
| Between | You and the seller. | You and the end buyer. |
| What it does | Gives you the right to buy the property at an agreed price by an agreed date. | Transfers that right, and its obligations, to the buyer. |
| Sets | Price, deposit, inspection period and closing date. | Your fee, the buyer’s deposit and when each is paid. |
| Signed | First. | After you find the buyer, before closing. |
In the example used across these guides, the purchase agreement is for $155,000 and the assignment fee is $15,000. The buyer pays $170,000 in total: $155,000 to the seller and $15,000 to you.
What makes a contract assignable.
A contract can be assigned when its terms allow it. Wholesalers usually make that explicit in one of two ways: the buyer is named as you "and/or assigns", or the contract includes a clause stating that the buyer may assign it. Some contracts do the opposite and forbid assignment, or require the seller’s written consent.
- Read the assignment clause before you sign anything, including on standard forms.
- Some sellers, such as banks selling foreclosed homes, use contracts that prohibit assignment.
- Where a contract cannot be assigned, a double close is the usual alternative.
- Tell the seller plainly that you may assign the contract to another buyer. Several states require that disclosure in writing.
Terms that matter in the purchase agreement.
- Price and how it is paid.
- Earnest money: the deposit, who holds it and when it becomes non-refundable.
- Inspection period: the days you have to inspect the property and cancel.
- Closing date: long enough to find a buyer, short enough to respect the seller.
- Access: your right to show the property to contractors and buyers before closing.
- Condition: sold as it is, with the seller’s known defects disclosed.
- Assignment: the clause discussed above.
- Closing agent: the title company or attorney who will close the sale.
What the assignment agreement covers.
- The parties: you as assignor, the buyer as assignee.
- The property, and the purchase agreement being assigned, attached as an exhibit.
- The assignment fee, and that it is paid at closing.
- The buyer’s deposit, usually non-refundable, and who holds it.
- The buyer’s promise to perform everything you promised the seller, on the same dates.
- What happens if the buyer does not close.
Give it to the title company early
Send both documents to the title company or closing attorney as soon as the assignment is signed. Not every closing agent handles assignments, so confirm that yours does before you put a property under contract.
How the fee is paid.
At closing, the buyer brings the full amount. The closing agent pays the seller the contract price, pays the costs of the closing, and pays you the assignment fee. The fee appears on the settlement statement, so the seller and the buyer can both see it. If you want the two prices kept separate, the tool for that is a double close, which costs more because there are two closings.
Disclosure and state rules.
States regulate wholesaling differently, and the rules have been changing. Some require a real estate license to market a property you do not own. Others require specific written disclosures to the seller and the buyer, or give the seller a right to cancel. A contract form that works in one state may be unenforceable in the next.
Not legal advice
This guide is general information. Before your first deal, read your state real estate commission’s guidance on wholesaling and have a local real estate attorney review your purchase and assignment agreements.
Common mistakes.
- Signing a purchase agreement that cannot be assigned.
- A closing date too short to find a buyer.
- No right of access, so buyers cannot see the house.
- Using a form written for another state.
- Choosing a closing agent who has never handled an assignment.
- Not telling the seller that the contract may be assigned.
- Taking a refundable deposit from a buyer, who can then walk away for free.
FROM THE PUBLISHER
Where ARIA fits.
On the Pro and Max plans, ARIA generates a purchase agreement or an assignment from the lead, sends it for e-signature and stores the signed PDF beside the deal, so the contract never leaves the pipeline. ARIA’s documents are templates, not legal advice: have an attorney in your state review any contract before you use it.
FAQ
Questions, answered.
What is an assignment of contract in real estate?
It is the transfer of a buyer’s rights and obligations under a purchase agreement to another buyer. In wholesaling, the wholesaler is the first buyer and assigns the contract to an investor, who closes with the seller and pays the wholesaler a fee.
Is assigning a real estate contract legal?
Generally yes, when the contract allows it. How wholesaling is regulated depends on the state: some require a license or written disclosures. This is general information, not legal advice. Check your state’s rules and have an attorney review your contracts.
Does the seller have to agree to an assignment?
That depends on the contract. If it permits assignment, separate consent is usually not needed, though some contracts require the seller’s written approval and some states require disclosure. Whatever the contract says, tell the seller up front that you may assign it.
What does "and/or assigns" mean in a contract?
It is wording added after the buyer’s name to show that the buyer may transfer the contract to someone else. It is one common way to make a purchase agreement assignable; a separate assignment clause is the other.
How much is a wholesale assignment fee?
It is whatever gap exists between your contract price with the seller and what a buyer will pay, so it differs on every deal. In the example on this page the fee is $15,000 on a $155,000 contract. Price the deal from the buyer’s numbers, not from the fee you would like.
What happens if I cannot find a buyer before closing?
You either close on the property yourself, cancel within the inspection period if the contract allows it, or ask the seller for more time. Past the inspection period you can lose your deposit. Do not put a property under contract unless the numbers work for the buyers you know.
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