Assignment of Contract Explained: How Wholesalers Transfer Deals
An assignment of contract is a legal mechanism that allows a buyer to transfer their rights and obligations under a purchase contract to a third party. In wholesale real estate, this is how the deal gets done: you sign a contract to buy a property from a seller, then assign that contract to an end buyer who actually closes on the purchase. You receive an assignment fee for transferring the deal. The buyer gets a property at an agreed price. The seller gets their sale.
Assignment is the most common closing structure in wholesaling because it is simple, fast, and requires no capital beyond your earnest money deposit.
How assignment works step by step
1. You sign the purchase contract (A-B contract)
You (the wholesaler, party B) sign a purchase agreement with the seller (party A). This is a standard real estate purchase contract with one important addition: an assignment clause that gives you the right to assign the contract to another buyer. Without this clause, many contracts default to non-assignable.
Standard assignment clause language: "Buyer shall have the right to assign this contract to a third party without the prior consent of Seller." Some variations require the seller's consent. Others limit assignment to the buyer's LLC or business entity. The broadest clause gives unrestricted assignment rights.
2. You find a buyer and negotiate the assignment price
Once you have the property under contract, you market it to your buyer list. When a buyer is interested, you negotiate the assignment price, which is your contract price plus your assignment fee. If your contract with the seller is $130,000 and you want a $10,000 fee, your assignment price is $140,000.
3. You sign the assignment agreement (B-C assignment)
The assignment agreement is a separate document (usually 1 to 2 pages) that transfers your contractual rights from you to the end buyer (party C). Key terms include the original contract price, the assignment fee, the payment terms (typically due at closing), and the assignee's agreement to perform all obligations under the original contract.
4. The buyer closes with the seller
The title company handles closing. The end buyer (C) brings the full purchase amount ($140,000 in this example). The title company pays the seller the original contract price ($130,000), pays you the assignment fee ($10,000), and transfers the deed directly from the seller (A) to the end buyer (C). You never take title to the property.
The assignment fee
The assignment fee is your profit on the deal. It is the difference between your contract price and the price the end buyer pays. There is no legal limit on assignment fees, but practical considerations include:
- Typical range: $5,000 to $15,000 for mid-market residential deals. $15,000 to $50,000+ for higher-value or higher-spread deals.
- Transparency: In an assignment, both the seller and buyer can see your fee on the closing documents. The buyer sees your contract price with the seller. The seller sees what the buyer is paying. If your fee is perceived as too large, either party may balk.
- Market norms: Most experienced buyers accept assignment fees without issue. They understand the value you provided in finding and contracting the deal. Sellers are less familiar with the practice, which is why some wholesalers prefer not to disclose the assignment fee amount to sellers (though it appears on the HUD-1 or closing disclosure).
When assignment does not work
There are situations where assignment is not possible or not advisable:
- Non-assignment clauses: Bank-owned (REO) properties, HUD homes, and some institutional sellers include clauses prohibiting assignment. If the contract says "this contract may not be assigned," you cannot assign it.
- Title company refusal: Some title companies will not process assignments, either due to company policy or unfamiliarity with the process. Always confirm with the title company before contracting.
- Large fees: When the assignment fee exceeds $20,000 to $25,000, some wholesalers switch to a double close to keep the fee private. A $30,000 fee visible on the closing statement can cause friction with sellers or buyers who feel the margin is too large.
- State regulations: Some states require specific disclosures when assigning contracts. Illinois and Oklahoma require written disclosure to the seller of the intent to assign and the potential profit. See our wholesaling legal guide for state-specific rules.
In these cases, a double close is the alternative. Two separate closings keep the A-B and B-C prices completely separate. See the assignment vs. double close section in our wholesaling guide for a detailed comparison.
Protecting yourself in assignment deals
- Always include the assignment clause. Do not rely on state law defaults. Include explicit language in the purchase contract.
- Collect a non-refundable deposit from the buyer. When the end buyer signs the assignment agreement, collect $2,000 to $5,000 as a non-refundable assignment deposit. This ensures the buyer is serious and protects you if they walk away.
- Use a title company experienced with assignments. Call ahead and ask if they have processed assignment deals before. A title company unfamiliar with the process can cause delays or refuse to close.
- Keep your option period active. Do not let your option or inspection period expire until you have a signed assignment agreement with a buyer and their deposit in hand. If you cannot find a buyer, you need the ability to cancel and recover your earnest money.
Related guides
- Assignment Fee Guide
- Wholesale Real Estate Contracts Explained
- How to Wholesale Real Estate
- Wholesaling Legal Guide
- Earnest Money Guide
- What is an Assignment? (Glossary)
- What is a Wholesale Deal?
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