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OffMarket Deck · Updated 2026-07-10
An assignment of contract in real estate is a legal transaction where the original purchaser (the assignor) transfers their rights and obligations under a purchase agreement to a new buyer (the assignee) in exchange for an assignment fee. The assignee steps into the shoes of the original buyer and closes directly with the seller. The assignor never appears on title — they are compensated purely for having secured the deal.
This is the primary transaction structure in wholesale real estate. It requires no real estate license in most states (you are selling your contractual interest, not brokering real estate), no proof of funds, no credit check, and no closing costs beyond a nominal document preparation fee.
However, assignment is not universal. Nine states have significant restrictions, and several major cities require specific disclosures or licenses. Understanding where assignment is straightforward — and where it is hazardous — separates successful wholesalers from those who lose deals or face regulatory action.
Key takeaway Assignment of contract is legal in all 50 states if you have a bona fide purchase agreement with equitable interest in the property. The restrictions apply to how you market the deal and what you disclose — not to the assignment mechanism itself.
| Factor | Assignment | Double-close | Traditional sale (agent) |
|---|---|---|---|
| You on title? | No | Yes (briefly) | Yes (as owner) |
| Seller sees your profit? | Yes (unless negotiated otherwise) | No | N/A |
| Closing costs | $0–$500 | $1,500–$3,500 | 5–6% commission |
| Time to close | 7–14 days | 10–21 days | 30–60 days |
| Capital needed | $100–$500 (earnest money) | $5,000–$15,000 | Full purchase price |
| Best for | Fees under $15K | Fees over $15K, privacy | Retail sale |
| Complexity | Low | Medium | High |
When you sign a purchase agreement with a seller, you acquire an equitable interest in the property. This is not ownership — the seller still holds title. But it is a legally recognized financial interest that can be sold, transferred, or encumbered.
The legal principle dates to English common law and has been upheld in U.S. courts for centuries. In Stuart v. City of Tulsa (2014), the Oklahoma Supreme Court affirmed that a real estate purchase contract creates equitable title in the buyer, which the buyer may assign to a third party unless the contract explicitly prohibits it.
Three conditions must be met for a legal assignment:
Bona fide purchase contract — You must have a signed, binding agreement with the seller. A verbal agreement or a "letter of intent" does not create equitable interest.
Consideration paid — You must have given the seller something of value — typically earnest money ($100–$500). Zero consideration weakens your legal position if challenged.
Contract does not prohibit assignment — Most purchase agreements include an assignment clause. Ensure yours explicitly permits it via "Buyer: [Name] and/or assigns."
What assignment is NOT:
Step 1: Secure the original contract Sign a purchase agreement with the seller using "and/or assigns" as the buyer name. Include an inspection contingency (7–10 days) and pay earnest money ($100–$500).
Step 2: Calculate your assignment fee Your fee is the difference between what the seller agreed to accept and what your cash buyer will pay. This is not arbitrary — it reflects the value you created by finding the deal, negotiating the price, and connecting the seller with a ready buyer.
| Deal size | Typical assignment fee | Fee as % of ARV |
|---|---|---|
| Under $100K purchase price | $3,000–$7,000 | 2–5% |
| $100K–$250K | $5,000–$15,000 | 2–5% |
| $250K–$500K | $10,000–$25,000 | 2–5% |
| Over $500K | $15,000–$50,000 | 2–4% |
Step 3: Market to your cash buyers Send your deal blast (see our cash buyers list guide for the template). Include: property details, photos, ARV, repair estimate, your asking price (seller's price + your fee), and comps.
Step 4: Execute the assignment agreement Once a buyer commits, both parties sign an Assignment of Contract. This document:
Step 5: Assignee performs due diligence The assignee has the remainder of your inspection period to evaluate the property. They may bring contractors, inspectors, or appraisers. If they back out during this period, they forfeit their earnest money (per your assignment agreement).
Step 6: Close The assignee closes directly with the seller per the terms of the original purchase agreement. You receive your assignment fee at closing, typically wired to your account within 24–48 hours. The title company handles the paperwork.
While you should have a real estate attorney review your assignment agreement, here are the clauses every document needs:
1. Assignment of rights
"Assignor hereby assigns, transfers, and conveys to Assignee all of Assignor's right, title, and interest in and under the Purchase Agreement dated [Date] for the property located at [Address]."
2. Assignment fee
"In consideration for this assignment, Assignee shall pay Assignor an assignment fee of $[Amount], payable at closing."
3. Assumption of obligations
"Assignee assumes all obligations of the Buyer under the Purchase Agreement and agrees to perform all duties, covenants, and conditions required of the Buyer."
4. Non-refundable earnest money
"Assignee shall deposit $[Amount] as non-refundable earnest money within 48 hours of executing this agreement. This deposit shall be credited toward the assignment fee at closing. If Assignee fails to close for any reason other than seller default or title defect, the earnest money shall be forfeited to Assignor."
5. Inspection period
"Assignee shall have [X] days from execution of this agreement to conduct due diligence. During this period, Assignee may terminate this agreement and receive a full refund of earnest money only if a material defect not disclosed by Assignor is discovered."
6. Disclaimer of representations
"Assignor makes no representations or warranties regarding the condition, value, or fitness of the property. Assignee acknowledges they have been given the opportunity to inspect the property and are purchasing based on their own investigation."
7. Indemnification
"Assignee agrees to indemnify and hold harmless Assignor from any claims arising from Assignee's purchase and ownership of the property."
8. Seller acknowledgment (optional but recommended)
"The Seller acknowledges and consents to this assignment and agrees to recognize Assignee as the Buyer under the Purchase Agreement."
| State/Jurisdiction | Restriction Level | Key Requirement | Penalty for Violation |
|---|---|---|---|
| Illinois | High | Real estate license required for marketing property you do not own | Class A misdemeanor, up to $25,000 fine per violation |
| Oklahoma | High | Limited to one assignment per year without license; must disclose intent to assign and maximum fee to seller | License suspension, fines up to $10,000 |
| Philadelphia, PA | High | Real estate license required for transfers within 90 days | Fines, license revocation |
| Nevada | Medium | Must be a principal in the transaction; advertising the property = brokering | Cease-and-desist, fines |
| Ohio | Medium | Must disclose intent to assign and maximum assignment fee to seller | Civil penalties, transaction rescission |
| Wisconsin | Medium | Advertising property without ownership interest may trigger licensing | Fines, license requirements |
| California | Low | Must demonstrate "good faith intent to purchase" | Case-by-case enforcement |
| Texas | Low | Generally allowed; assignor liable for misrepresentation | Civil liability for fraud |
| Florida | Low | Assignment generally permitted without license; no disclosure to seller required | N/A (if done correctly) |
| All other states | Minimal | Standard contract law applies; bona fide interest required | N/A (if done correctly) |
Best practice regardless of state: Disclose your intent to assign and your fee to the seller at the time of contracting. Transparency eliminates legal risk and builds trust. If the seller asks, "How do you make money?" say: "I negotiate a purchase price with you, then I connect the property with one of my cash buyers who pays a premium for the work I have done sourcing and underwriting the deal. My fee comes from their side — you get your full asking price at closing."
Assignment is not always the right tool. Use a double-close when:
Your fee exceeds $15,000 — Some buyers balk at large assignment fees. A double-close hides your profit from both parties.
The seller is emotionally sensitive — If the seller would be distressed knowing you are reselling for a profit, a double-close preserves the relationship.
The contract prohibits assignment — Some bank-owned (REO) and short sale contracts explicitly ban assignment. In these cases, transactional funding for a double-close is your only option.
You need to renegotiate with the seller — If you discover issues during inspection and need the seller to reduce their price, it is easier to renegotiate as the buyer than as an assignor with a third party involved.
Transactional funding (for double-closes): A short-term loan that covers your purchase for 1–5 days until your buyer's funds arrive. Cost: 1–3% of loan amount ($1,500–$4,500 on a $150K property). Providers: Transactional Funding LLC, Best Transactional Funding, Coastal Funding Corp.
No "and/or assigns" in the original contract — If the contract says "Buyer: John Smith" without assignment language, you may need the seller's written consent to assign. Always include it.
Marketing the property before you have equitable interest — Advertising a property on Facebook before you have a signed contract is considered brokering without a license in most jurisdictions. Wait for the contract.
Overpromising to the seller — Telling the seller "I am the buyer" when you intend to assign creates a fraud claim if the seller feels misled. Be transparent from day one.
Insufficient earnest money — A $10 earnest deposit looks like you have no skin in the game. Use $100–$500 to demonstrate good faith.
No inspection contingency — Without an inspection period, you cannot back out if the property has hidden defects. Always include 7–10 days.
Skipping the attorney review — A $500 legal review of your assignment agreement prevents $50,000 problems. Find a real estate attorney who works with investors — not one who handles residential closings and thinks wholesaling is "weird."
Q: Can the seller refuse to let me assign the contract? If your contract includes "and/or assigns," the seller cannot unreasonably withhold consent. However, if the contract requires "Seller's consent for assignment" without specifying it cannot be unreasonably withheld, the seller could block it. Solution: Use "and/or assigns" and do not include a seller consent clause.
Q: Do I pay taxes on assignment fees? Yes. Assignment fees are ordinary income, not capital gains. You will pay federal income tax (22–37% depending on bracket), self-employment tax (15.3%), and state income tax. Set aside 35–40% of every fee for taxes. Work with a CPA to structure your business (LLC, S-Corp) for tax optimization.
Q: What if my buyer backs out after I assign? Your assignment agreement should require non-refundable earnest money ($2,500–$5,000). If the buyer backs out without cause, you keep the deposit. However, if the buyer discovers a material defect you did not disclose, they may have grounds to recover their deposit. Full disclosure protects both of you.
Q: Can I assign a contract to myself or my LLC? Yes. Many wholesalers start in their personal name for speed, then assign to their LLC before closing for liability protection. Ensure your purchase agreement permits assignment to "a related entity" if you plan to do this.
Q: How do I justify my assignment fee to the buyer? Your fee is compensation for: (a) finding the deal, (b) negotiating the price, (c) underwriting the numbers, (d) connecting them with a ready seller, and (e) handling coordination through closing. If a buyer pushes back, show them your comp work and repair estimates. The fee is for the work you did before they ever heard of the property.
Q: Is there a limit to how much I can charge as an assignment fee? No legal limit, but practical limits exist. Fees above 10% of the purchase price or $25,000 often trigger buyer resistance. If your fee is large, consider a double-close instead, or reduce your fee to ensure the deal closes. A $10,000 fee you collect is better than a $25,000 fee you do not.
Your assignment fee is built into your Maximum Allowable Offer calculation from day one. Our MAO guide shows exactly how to calculate the highest price you can pay while reserving your desired fee. Master this formula and you will never wonder "what should I charge?" again — the numbers tell you before you make the offer.
Written by the OffMarket Deck team. Last updated: July 2026.
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