Real Estate Assignment Contract: How to Draft and Use It
What assignment fees cover and how to justify or renegotiate them.
Austin Beverigde
Tennessee
, Goliath Teammate
If you're venturing into real estate investing, you might find yourself needing to navigate the complexities of assignment contracts. Understanding how to draft and use a real estate assignment contract can be overwhelming, especially if you're new to the process. But don't worry; this guide will break it down for you!
Quick Answer
A real estate assignment contract allows an investor to transfer their interest in a property to another party. To draft one, include essential elements like the property description, assignment fee, and signatures from all parties involved. Use clear language and ensure all terms are agreed upon to avoid disputes.
What is a Real Estate Assignment Contract?
A real estate assignment contract is a legal document that enables one party (the assignor) to transfer their rights and obligations in a real estate purchase agreement to another party (the assignee). This is common in wholesale real estate transactions, where investors secure properties under contract and then assign those contracts to other buyers for a fee.
How to Draft a Real Estate Assignment Contract
Step 1: Gather Necessary Information
Before drafting the contract, collect all pertinent information, including:
The property address and legal description
The names and contact information of the assignor and assignee
The original purchase agreement details
The assignment fee
Step 2: Write the Contract
When drafting the contract, include the following key components:
Title: Clearly state it is an Assignment Contract
Parties: Identify the assignor and assignee
Property Description: Include the address and legal description
Assignment Fee: Specify the fee for the assignment
Signatures: Ensure both parties sign and date the document
Step 3: Review and Finalize
After drafting, review the contract for clarity and completeness. It’s advisable to have a legal professional examine the document to ensure it complies with local laws and regulations.
Cost of Drafting a Real Estate Assignment Contract
The cost of drafting a real estate assignment contract can vary. If you choose to do it yourself, you may only incur minimal costs for templates or legal advice. However, hiring a real estate attorney can range from $200 to $500 or more, depending on their rates and the complexity of your situation.
Tools for Drafting Contracts
Several tools can help you draft a real estate assignment contract:
Online Legal Templates: Websites that provide customizable contract templates
Real Estate Software: Programs designed for real estate transactions
Legal Professionals: Hiring an attorney for tailored advice
Timelines for Using an Assignment Contract
The timeline for using a real estate assignment contract can vary based on the transaction. Generally, once you have a signed assignment contract, you can proceed to close the deal with the end buyer. This process can take anywhere from a few days to several weeks, depending on the buyer's readiness and financing.
Real-Life Example
Imagine you find a distressed property under contract for $150,000. You negotiate an assignment fee of $10,000 with another investor. By drafting a clear assignment contract, you can transfer your rights to the property for a total of $160,000, allowing you to profit without ever owning the property.
Checklist for Drafting a Real Estate Assignment Contract
Identify all parties involved
Clearly describe the property
Specify the assignment fee
Include terms of the original agreement
Obtain signatures from both parties
Common Mistakes to Avoid
When drafting a real estate assignment contract, avoid these common mistakes:
Failing to include all necessary details, which can lead to disputes
Not having both parties sign the contract, making it unenforceable
Using vague language, which can create confusion
FAQs
What is the purpose of a real estate assignment contract?
The purpose of a real estate assignment contract is to legally transfer the rights and obligations of a property purchase agreement from one party to another, typically in wholesale real estate transactions.
Do I need a lawyer to draft an assignment contract?
While it's not mandatory, having a lawyer review your assignment contract can help ensure it complies with local laws and protects your interests.
What happens if the buyer backs out after signing the assignment contract?
If the buyer backs out after signing, the assignor may have legal recourse depending on the contract terms, including potential claims for damages or enforcing the contract.
Can I assign a real estate contract without the seller's consent?
It depends on the original purchase agreement. Some contracts allow assignments without consent, while others require the seller's approval. Always check the original terms.
Is there a standard fee for assignment contracts?
There is no standard fee; it varies based on the property and market conditions. Typically, assignment fees range from a few thousand dollars to a percentage of the property’s purchase price.
