Assigning Deals Safely With a Wholesale Assignment Contract

Gavin Finch
Written by Gavin Finch 
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Once you sign a real estate contract with a motivated seller, it’s time to enjoy your big payday. But there’s one more thing you need to take care of before you can cash that assignment fee check you’ve been looking forward to: you need a wholesale assignment contract. 

How does it differ from a wholesale real estate contract and what should it include? Here are all the details you need to know about legally transferring your deals to cash buyers.

What is a wholesale assignment contract?

There are two different kinds of contracts you need to understand in wholesale real estate: purchase and sale agreements and wholesale assignment contracts.

A purchase and sale contract gives a wholesaler equitable interest in a property, meaning that the house is in the process of being sold and the wholesaler has a financial tie to the transaction. A wholesale assignment contract transfers that equitable interest to a cash buyer, giving them a right to close on the property in place of the wholesaler.

The difference between the two documents is that the assignment contract details the wholesaler’s terms and removes the wholesaler from the deal completely. After signing, it’s the cash buyer’s job to finish the transaction.

What should a wholesale assignment contract include?

An agreement between a wholesaler and a cash buyer is a relatively simple document, but you should include a few key elements to protect yourself and keep everyone involved in the transaction informed.


One key thing to include is a copy of the original wholesale real estate contract. This document will include all the sale agreements including the closing date, sale price, state of the property, and its legal description or address. 

You should also detail your terms and conditions. These include the deposit you expect on the assignment fee, the fee amount, how it should be paid, and if it will be held in escrow. The document should also include a clause that states that you are absolving yourself of any responsibility or equitable interest in the property. This can protect you if something happens to the deal between the seller and the cash buyer.

One final piece your wholesale assignment contracts should include is a clause that prohibits the buyer from assigning the contract to someone else. Contract law states that nearly all contracts are assignable by nature unless they specifically state otherwise. By including a clause that prohibits your buyer from reassigning the contract, you can prevent them from wholesaling your deal and assigning it to someone else for more profit, ensuring that you collect your assignment fee.

Building a list of buyers you can trust

Because real estate investing involves large monetary transactions, it’s important to have buyers you can trust before you assign a contract to them. While contracts are designed to protect you, the truth is they can’t stop buyers from breaching the agreement. They can only give you recourse after the fact. 

However, that will still require you to hire a lawyer and possibly even go to court to reclaim damages. Even if you can reclaim the money, you’ll be spending a large amount of it on legal fees. You’ll also be losing a lot of time you could use to find other deals.

To protect yourself from this hassle, we recommend building relationships with cash buyers as opposed to sending deals to investors you don’t know. This way you know who you’re working with before you sign a contract with them.

Finding cash buyers

There are several ways to meet and network with cash buyers. One great option is to get involved in local real estate groups and meet-ups. Not only will this give you the chance to meet buyers in person, but you’ll also open up opportunities for joint ventures and partnerships with other wholesalers.

You can also attend local property auctions. When homes are condemned or enter foreclosure, the county may auction them off on the courthouse steps, giving buyers a great opportunity to snag deals at low prices. 

These auctions will give you a great opportunity to see which investors are actively buying. With the real estate market cooling down, not every investor can still afford to buy. You should limit your working relationships to those who can so you don’t get stuck with deals you can’t assign.

Finally, you can also use real estate lead generation software to generate a lot of potential buyer leads at once. All you have to do is search for people who have made cash real estate purchases in the last two years. Then you can call through the lists to find real estate investors who are interested in buying a property like the one you have available.

All of these are great ways to find cash buyers, but we recommend being careful and doing your due diligence before sending a contract to anyone, especially if it’s your first time working with them. Ask other investors in your market if they know them and learn as much as you can about their reputation. A contract can protect you, but it may involve a lot of headaches that can be avoided by learning about who you’re working with before sending them a contract.

Conclusion

Understanding how to assign a contract to a cash buyer is an essential part of wholesaling real estate. The process is fairly simple, but it does involve a few key parts that you don’t want to overlook. 

The good news is that the internet is full of reliable wholesale assignment contract templates that you can use for free. We just recommend consulting a real estate attorney before you sign or assign one. Real estate laws vary by state, and you don’t want to find out that you’re working with a bad contract after you’ve already signed it. 

With all that in mind, the most important thing to understand about real estate contracts is that they can’t stop someone from breaking an agreement. Your first responsibility is to find trustworthy people to do business with so that your contracts can act as a formality instead of helping you reclaim damages in court.

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