The Assignment Contract Explained: How Wholesalers Get Paid

What Is an Assignment of Contract?

An Assignment of Contract is a legal document that transfers your rights and obligations under a Purchase and Sale Agreement (PSA) to a third party — typically a cash buyer. When you wholesale a property, you don't actually buy it. You assign your contractual right to purchase it to someone else, and they pay you a fee for that right.

This is how wholesalers get paid without ever owning the property.

How the Assignment Process Works

Step 1: Contract with the Seller

You negotiate and execute a PSA with the motivated seller. This contract gives you the right (but not obligation) to purchase the property at a specified price. Your contract must include assignment language — typically a clause that says something like:

"Buyer shall have the right to assign this agreement to a third party without further consent of the Seller."

Step 2: Find Your Buyer

Market the deal to your cash buyer list. Your asking price = your contract price + your desired wholesale fee.

Example: You contracted a property at $80,000. You want a $12,000 wholesale fee. You market the deal at $92,000 to your buyers.

Step 3: Execute the Assignment

Once a buyer agrees to your asking price, you execute the Assignment of Contract. This document:

• Identifies the original PSA (date, parties, property address)
• Names you as the Assignor (the one transferring rights)
• Names the buyer as the Assignee (the one receiving rights)
• States the assignment fee amount
• Transfers all rights and obligations from the original PSA to the Assignee

Step 4: Close

The title company handles closing. The Assignee (your buyer) purchases the property from the original seller per the terms of the PSA. Your assignment fee is paid at closing from the transaction proceeds. You never own the property — the deed transfers directly from seller to buyer.

Key Assignment Contract Clauses

1. Assignment Fee

"Assignor shall receive an assignment fee of $[amount] at closing, payable from the closing proceeds."

This is your wholesale profit. Be specific about the amount and when/how it's paid.

2. Non-Refundable Earnest Money

"Assignee shall deposit $[amount] as non-refundable earnest money within [X] business days of executing this assignment."

This protects you. If the buyer walks away, you keep the earnest money. Typical non-refundable deposits: $1,000-5,000.

3. Closing Timeline

"Assignee agrees to close on or before [date], consistent with the terms of the original Purchase and Sale Agreement."

Your buyer must close within the timeline of your original contract with the seller. Don't give yourself a tight timeline and then struggle to find a buyer.

4. Inspection Period

"Assignee shall have [X] business days from execution of this assignment to inspect the property."

Buyers will want an inspection period. Keep it short (3-5 business days) to maintain deal momentum.

5. Assignee Responsibilities

"Assignee assumes all rights, obligations, and responsibilities of the Buyer under the original PSA."

This transfers the contractual obligations to your buyer — they're now responsible for closing per the PSA terms.

When Assignment Works Best

• Properties under $200K — buyers and sellers are more comfortable with the process
• Clear title — no liens, encumbrances, or title issues that complicate closing
• Motivated sellers — sellers who understand and accept the assignment process
• Strong buyer list — you have proven buyers who close quickly
• Wholesale fees under $20K — larger fees sometimes make sellers uncomfortable when they see the HUD statement

When to Consider Double Closing Instead

Sometimes assignment isn't the best strategy. Consider a double close (simultaneous close, also called a back-to-back close) when:

• Large spread: If your wholesale fee is $25K+ on a $100K property, the seller might object when they see the assignment fee on the settlement statement
• Seller restrictions: Some sellers or lenders prohibit assignment
• REO or bank-owned properties: Banks typically don't allow assignment of their contracts
• Privacy: You don't want the seller or buyer to know your fee amount

In a double close, you actually purchase the property and immediately resell it. Two closings happen on the same day (or within a few days). Your fee is hidden in the spread between your purchase and sale price.

Legal Considerations

• Assignment must be contractually allowed — your PSA needs assignment language. Without it, you may not have the right to assign.
• Some states have specific disclosure requirements — check your state's real estate laws regarding assignment and wholesaling
• Always use a title company familiar with assignments — not every title company handles wholesale closings. Find one that does and build a relationship.
• Earnest money deposits — your deposit to the seller under the original PSA should be reasonable ($500-2,000) and come from your business account
• Keep communication transparent — many experienced investors are upfront with sellers that they may assign the contract

The Bottom Line

The Assignment of Contract is the core mechanism of wholesale real estate. Get the property under contract with assignment rights, find a buyer at a higher price, execute the assignment, and collect your fee at closing. Include non-refundable earnest money from your buyer, keep closing timelines aligned, and work with assignment-friendly title companies. Master this process and you have a repeatable business model that generates income without capital.