Assignment of Contract in Real Estate, Explained

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.

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.

Three steps, from original contract to closing.

The roles table below shows what each party does, pays, receives, and signs.

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).

Once a purchase contract allows assignment, the assignor usually markets the contract itself, not the property, to a short list of cash buyers or investors - through a buyers list, a wholesaling network, or a real estate investment club. The pitch describes the property, the contract price, and the assignment fee. Because the assignee is stepping into an existing contract with its own deadlines, speed matters: assignors typically give buyers a few days to review the property and commit before the original contract's closing date gets close. Some states require the marketing itself to disclose that the seller is not the one selling.

• 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. 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.

Wholesalers use two main structures. An assignment is faster and cheaper: the assignor never buys the property, so there is no second closing, no second set of closing costs, and no need for the assignor's own financing. A double close (also called a simultaneous or back-to-back closing) has the wholesaler actually buy the property, then resell it, often the same day, in two separate closings. Double closes cost more and take more coordination, but they keep the assignment fee private from the original seller and work around anti-assignment clauses. Which one fits depends on the contract's language and your state's wholesaling rules.

An assignment fee is generally treated as ordinary income to the assignor, not a capital gain, since the assignor never owned the property. Depending on how often someone does this, the income may also be subject to self-employment tax. Title companies and closing agents often report the fee separately on the closing statement. None of this is tax advice - talk to a tax professional about how assignment income should be reported in your situation.

• Does the original purchase contract actually allow assignment? Check for an anti-assignment clause or a requirement that the seller consent in writing before you market the deal to anyone.
• Does my state require a license or a specific disclosure to wholesale? Rules vary widely and some states have tightened them in recent years; confirm current requirements before advertising a contract.
• Am I released from liability, or just transferring the benefit? An assignment alone usually does not release the assignor. Ask whether the seller will agree to a release, or whether novation is available instead.
• What happens to my assignment fee if the assignee cannot close? Spell this out in the assignment agreement - whether the fee is refundable, held in escrow, or forfeited if the deal falls through.
• How is the fee reported at closing? Ask the title company or closing agent how they will show the assignment fee on the settlement statement, since practices differ by state and lender.
• Do I need title insurance or an attorney's review before advertising the contract? A quick title check can catch issues (liens, ownership disputes) that would derail an assignment after you have already found a buyer.

• 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.
• Keep a firm timeline: because you are working inside the original buyer's closing deadline, give your assignee a short, clear window to commit and perform.

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.