How to Assign Real Estate Contracts the Right Way
A complete guide to assigning contracts legally and getting paid safely.
Austin Beverigde
Tennessee
, Goliath Teammate
Are you feeling overwhelmed by the process of assigning real estate contracts? You're not alone. Many investors and home buyers find themselves confused about how to properly assign contracts to ensure a smooth transaction. This guide will break down the steps you need to take to assign real estate contracts correctly, so you can move forward with confidence.
Quick Answer: To assign a real estate contract, first, ensure that the original contract allows for assignment. Next, draft an assignment agreement that details the terms, including the buyer’s information and the purchase price. Finally, obtain signatures from all parties involved and provide a copy of the assignment to the original seller and the new buyer.
Understanding Real Estate Contract Assignments
Before diving into the process, it's essential to understand what an assignment of a real estate contract entails. Essentially, it allows one party (the assignor) to transfer their rights and obligations under a contract to another party (the assignee). This is common in real estate investing, especially for wholesalers.
Steps to Assign Real Estate Contracts
1. Review the Original Contract
Start by checking if the original contract permits assignment. Look for specific language that indicates whether the seller allows the buyer to assign their rights. If it’s unclear, consult with a real estate attorney.
2. Draft the Assignment Agreement
Once you confirm that assignment is allowed, create an assignment agreement. This document should include:
The names of the assignor and assignee
The original contract details
The purchase price and any deposits
Signatures of all parties involved
3. Notify the Original Seller
After the assignment agreement is signed, you must notify the original seller of the assignment. Provide them with a copy of the signed agreement to ensure everyone is on the same page.
4. Complete the Transaction
Finally, the assignee can proceed with the transaction as outlined in the original contract. Ensure that all terms are met to avoid any legal issues.
Costs Involved in Assigning Contracts
The costs associated with assigning real estate contracts can vary. Common expenses include:
Legal fees for drafting the assignment agreement
Potential transfer taxes, depending on your location
Any fees associated with notifying the seller
Tools You Might Need
While you can draft an assignment agreement yourself, consider using templates or legal software to simplify the process. Additionally, having a real estate attorney review your documents can help prevent mistakes.
Timelines for Assignment
The timeline for assigning a real estate contract can vary based on several factors, including the complexity of the contract and the responsiveness of the parties involved. Generally, expect the process to take anywhere from a few days to a couple of weeks.
Real-Life Example
Imagine you have a contract to purchase a property for $200,000. You find an investor willing to pay $220,000 for the same property. By drafting an assignment agreement and following the steps outlined above, you can successfully assign the contract to the investor, pocketing a $20,000 profit without ever owning the property.
Checklist for Assigning Real Estate Contracts
Confirm assignment is allowed in the original contract
Draft a clear assignment agreement
Obtain signatures from all parties
Notify the original seller of the assignment
Keep copies of all documents for your records
Common Mistakes to Avoid
Here are some pitfalls to watch out for:
Not verifying if the contract allows for assignment can lead to legal issues.
Failing to notify the seller could result in disputes later on.
Using a poorly drafted assignment agreement can leave you vulnerable to misunderstandings.
FAQs
What is a real estate contract assignment?
A real estate contract assignment is the process of transferring the rights and obligations of a real estate contract from one party to another. This is often used in real estate investing to allow investors to sell their contract rights to another buyer.
Can I assign any real estate contract?
No, not all contracts are assignable. You must check the original contract for specific language that allows assignment. If it’s not explicitly stated, you may need to get the seller's consent.
Do I need a lawyer to assign a real estate contract?
While it’s not legally required, consulting a real estate attorney can help ensure that your assignment agreement is properly drafted and that you comply with all legal requirements.
What happens if I assign a contract without permission?
If you assign a contract without the seller's permission, you could face legal repercussions, including being held liable for damages or losing your deposit.
How much can I make from assigning contracts?
The profit from assigning contracts varies widely based on the property and market conditions. Some investors make a few thousand dollars, while others can earn tens of thousands, depending on the deal.
