Contract Assignment
Transferring the right to purchase a property from a buyer (assignor) to a third party (assignee) for a fee.
Definition
Contract assignment is the process by which a buyer (the 'assignor') legally transfers their rights under a purchase contract to another buyer (the 'assignee') — before the deal closes. The assignee steps in and closes the deal, while the assignor collects an assignment fee.
This is the foundation of most wholesale deals. A wholesaler finds a motivated seller, gets the property under contract at a below-market price, then assigns that contract to a cash buyer (typically a flipper or landlord) for a fee of $5,000–$30,000 or more depending on the deal's equity.
Assignment is only possible if the contract doesn't contain a non-assignment clause. Many sophisticated sellers and corporate sellers (banks, hedge funds) prohibit assignment. In those cases, a double close may be used instead. Some states have specific regulations around assignment fees — always consult a local real estate attorney.
Related Terms
Wholesaling
Finding distressed properties, getting them under contract, then selling that contract to another investor for a fee.
Double Close
Two simultaneous closings on the same property — an investor buys from the seller then immediately sells to the end buyer.
Earnest Money
A deposit paid by the buyer to demonstrate serious intent — held in escrow until closing.
Exit Strategy
The plan for how and when an investor will eventually sell or dispose of an investment property.
Purchase Agreement
The legal contract between buyer and seller that outlines the terms of a real estate transaction.
Also in "C"
Cap Rate
Capitalization rate — the ratio of a property's net operating income to its market value.
Cash Flow
The money left over each month after all property-related income and expenses are accounted for.
Cash-on-Cash Return
Annual pre-tax cash flow divided by total cash invested, expressed as a percentage.