What is an assignment of contract?
An assignment of contract is when one party to an existing contract - the assignor - transfers their rights and obligations to another party, the assignee. In real estate, it most often lets a buyer pass their signed purchase contract to a new buyer, frequently for an assignment fee. It is the mechanism behind most wholesaling deals, and it shows up in ordinary purchase contracts through "and/or assigns" language. The paperwork, signatures, and key dates behind these contracts are what a brokerage's Paperless Pipeline's transaction management software keeps straight. This is general information, not legal advice.
How assignment of contract works in real estate
In a standard purchase contract, the buyer earns the right to close on the property at the agreed price. Assignment lets that buyer sell those rights to someone else before closing. Three things matter:
- The assignment clause. Many contracts include one, or use "and/or assigns" after the buyer's name, allowing assignment without further consent.
- The assignment agreement. A separate document between the assignor and the assignee that transfers the contract and sets the fee.
- The assignment fee. Usually paid at closing, either through the closing statement or in a separate exchange, depending on lender and title company rules.
How a real estate assignment flows
Three steps, from original contract to closing.
Illustrative figures. The contract's assignment clause and your state's rules control whether and how a contract can be assigned.
Who's who: assignor, assignee, and the seller
The roles table below shows what each party does, pays, receives, and signs.
| Party | Role | Pays | Receives | Signs |
|---|---|---|---|---|
| Original seller | Sells the property | Nothing extra | The contract price at closing | Original contract; deed to the assignee |
| Assignor (original buyer) | Assigns the contract | May have paid an earnest deposit | The assignment fee | Original contract; assignment agreement |
| Assignee (new buyer) | Buys the contract, then the property | Contract price + assignment fee | The property | Assignment agreement; closing documents |
A worked example with the numbers
Say the assignor signs a purchase contract for a property at $200,000, then finds a new buyer who is willing to pay a $5,000 assignment fee to take over the deal. At closing, the assignee pays the seller $200,000 and pays the assignor $5,000. The assignor never takes title; the assignee receives the deed and $205,000 total leaves their pocket (before closing costs).
- Property under contract at $200,000.
- Assignor assigns to assignee for a $5,000 assignment fee.
- At closing, the assignee pays the seller $200,000.
- At closing, the assignee pays the assignor $5,000.
- Assignor never takes title. Assignee receives the deed.
- Assignee's total out of pocket: $205,000.
Figures illustrative. Real deals include closing costs, taxes, and lender requirements.
When a contract cannot be assigned
- Anti-assignment clauses. Some purchase contracts prohibit assignment outright, or require the seller's written consent.
- Lender restrictions. Deals that involve financing may bar assignment or require the lender's approval.
- REO and HUD contracts. Foreclosure resales and HUD-owned properties typically ban assignment during a set holding period.
- State wholesaling rules. A growing number of states require wholesalers to hold a real estate license or disclose their role and fee.
- Materially different obligations. Assignment fails where it would meaningfully change what the other party expected.
Assignment vs delegation vs novation
- Assignment. Transfers rights (and often duties). The assignor may remain liable if the assignee does not perform, unless released.
- Delegation. Transfers duties only. The original party stays liable and can be sued if the substitute fails.
- Novation. Replaces the original party entirely, with everyone's written consent. The original party is fully released.
Risks and how to protect yourself
- Disclose your role, your fee, and that you may not close yourself. Some states require this in writing.
- Get any required seller consent in writing before advertising the deal.
- Use a clear, written assignment agreement that defines the fee, deadlines, and remedies.
- Ask an attorney to review both the purchase contract and the assignment agreement.
- Understand that unless you novate, you may remain on the hook if the assignee walks.
Keeping an assigned deal on track
An assigned deal adds a document and a party to the file - the assignment agreement and the assignee, on top of the original contract and buyer. The signatures, key dates, and paperwork are what a brokerage's transaction system keeps organized. For the bigger picture, see the closing process. Related reading: listing agreements, buyer agency agreement, and can a seller back out.
Frequently asked questions
What is an assignment of contract in real estate?
It is the transfer of a buyer's rights and obligations under a purchase contract to a new buyer. The original buyer (the assignor) assigns the contract to the new buyer (the assignee), often for an assignment fee, and the new buyer closes with the seller.
How does an assignment fee work?
The assignor charges the assignee a fee to take over the contract. In the example of a $200,000 contract assigned for a $5,000 fee, the assignee pays the seller $200,000 at closing and the assignor $5,000, and the assignor never takes title.
Is assigning a real estate contract legal?
Generally yes, if the contract allows it and your state's rules are followed. Many contracts include assignment or "and/or assigns" language. Some prohibit assignment, require the seller's consent, or are limited by lender, REO, or HUD rules. Disclosure laws vary by state.
What is the difference between assignment and novation?
In an assignment, the assignor transfers rights but may remain liable if the assignee fails to perform. In a novation, the original party is fully released and replaced by the new party, with all parties' consent. Novation ends the assignor's liability; assignment may not.
Can any contract be assigned?
No. A contract cannot be assigned if it contains an anti-assignment clause, if the assignment would materially change what the other party expected, or if it violates the law or public policy. Always check the contract language first.
Does the assignor stay liable after assigning?
Often, yes. Unless the contract is novated or the assignor is expressly released, the assignor can remain responsible if the assignee does not perform. Spell out liability in the assignment agreement and consider legal advice.