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What is Assignment Of Contract in real estate?

What is an assignment of contract?

An assignment of contract is when the Buyer in a real estate transaction assigns their role to another Buyer in exchange for a fee.

The act of one buyer selling a contract to another buyer is commonly referred to as real estate "wholesaling".

Let's review an example of an assignment of contract

Joe is a real estate wholesaler and he notices 123 Main St is badly in need of landscaping and renovation. He does some research and finds that the property was inherited by Greg who lives out of state and has no interest in dealing with the property.

Joe knows several local fix and flip and rental property investors who would buy this property for the right price. He tours the property and conservatively estimates the rehab budget necessary to get 123 Main St to an after-repair value (ARV) of similar houses in good condition in the neighborhood. Joe runs some numbers to determine the range that his investors would be willing to pay and makes an offer to Greg for $25,000.

Greg accepts the offer and Joe markets the contract to his buyer's list at $30,000 which is the $25,000 purchase price plus a $5,000 assignment fee. Sure enough Stan, one of Joe's most reliable buyers, offers to pay Joe's asking price. Stan signs Joe's Assignment Agreement where he promises to take over the role as Buyer of 123 Main St and pay Joe $5,000 at closing.