How to read an assignment contract

You are buying a position, not a house

An assignment transfers somebody else's right to buy a property. You step into their contract on their terms. That is the single most important thing to understand, because every term that was negotiated before you arrived is now yours: the price, the closing date, the earnest money, the inspection period, whatever was or was not disclosed.

Read the underlying contract first

The assignment agreement is usually one page and says almost nothing. The document that matters is the purchase agreement it points at. If you are only sent the assignment, ask for the original. Anyone who will not send it is asking you to buy a position sight unseen.

The dates are the risk

Check the closing date and count the days from today. Check whether the inspection period has already run - it usually has, which means the contingency you would normally rely on is gone. Check whether any extension has been signed and whether the seller agreed to it in writing. A contract that expired on Tuesday is not a deal, it is a conversation with a seller who no longer has to talk to you.

Find the assignment clause

The original contract has to permit assignment, or the seller has to consent to it. “And/or assigns” after the buyer's name is the usual wording. If it is absent and the seller has not signed a consent, the assignment can fail at the closing table, which is the worst possible place to find out.

Know where your money sits

Your assignment fee and your earnest money should go to the title company or the closing attorney, not to the wholesaler's account. If somebody wants the fee wired to them directly before closing, that is the moment to slow down and ask why.

What to get advice on

Assignability, disclosure obligations and whether what is being done needs a licence are all state-specific, and some states have tightened the rules on wholesaling considerably. This is a guide to reading the paperwork, not legal advice. Before your first assignment in a new state, pay an attorney there for an hour.

What the fee buys, and what it does not

The assignment fee compensates whoever found the property and tied it up. It does not buy you a warranty, an inspection, clean title, or a guarantee that the seller will perform. If the seller walks, your recourse runs against the seller under the original contract, not against the wholesaler for the fee you paid. Read the assignment document for whether that fee is refundable in that scenario, because most of the time it is not.

Disclosure to the seller

In most states the seller is entitled to know the property is being assigned, and in some the contract has to say so plainly. That matters to you, not just to them: an assignment the seller did not know about is one a seller can fight, and a fight two days before closing is your problem as much as anyone's. Ask whether the seller has been told. The answer tells you a good deal about who you are dealing with.