What is an Assignment of Contract?
An assignment of contract (also called a wholesale assignment) is a legal mechanism that transfers your rights and obligations under a real estate purchase contract to another party. In wholesaling, this is the primary method for closing deals: you get a property under contract with the seller, then assign that contract to an end buyer (the cash buyer) who closes directly with the seller. Your profit -- the assignment fee -- is the difference between your contract price and what the buyer pays.
Assignment is not selling the property. You never take title. You're selling your contractual right to purchase the property. The end buyer steps into your shoes on the original contract and closes the transaction. The title company handles the mechanics, and your assignment fee is paid at closing from the buyer's funds.
How assignment works step by step
- Contract with seller: You sign a purchase agreement with the property owner (the A-to-B contract). In Texas, this is typically the TREC 1-4 Residential Contract. The contract gives you equitable interest in the property.
- Find an end buyer: Using your disposition process, you find an investor willing to buy at a higher price. This is where your buyer list, marketing package, and outreach tools come in.
- Execute the assignment: You sign an Assignment of Contract with the end buyer. This document states that you're transferring your rights under the original purchase contract to the buyer in exchange for an assignment fee. The original contract price stays the same -- the buyer pays the contract price plus your fee.
- Title company closes: The title company processes one closing between the seller and the end buyer. The buyer brings the total amount (contract price + assignment fee). The seller receives the contract price. You receive the assignment fee. Everyone signs at closing.
Assignment vs. double close
Assignment and double close accomplish the same goal (wholesale a deal to an end buyer) but work differently:
| Assignment | Double Close |
|---|---|
| One closing transaction | Two separate closings (A-B, then B-C) |
| You never take title | You briefly take title between closings |
| Lower closing costs (one set) | Higher costs (two sets of closing costs) |
| Both parties see each other's numbers | Prices are completely separate |
| No transactional funding needed | Requires short-term funding for A-B close |
| Simplest and cheapest method | More complex but more private |
Most wholesalers default to assignment because it's simpler and cheaper. Double close is used when the assignment fee is large enough that disclosure could create friction, when the original contract prohibits assignment, or when the end buyer's lender doesn't allow assignments.
Legal requirements by state
Assignment of contract is legal in all 50 states, but the specific requirements and norms vary. Here are key considerations:
Contract language
The original purchase contract should not contain language prohibiting assignment. Most standard real estate contracts (including the TREC 1-4 in Texas) allow assignment by default. If the contract says "this contract may not be assigned" or similar restrictive language, you cannot assign it -- you'd need to use a double close instead.
Some wholesalers add explicit assignment language to their contracts: "Buyer reserves the right to assign this contract to a third party prior to closing." This removes ambiguity, but it can also signal to sellers that you're a wholesaler rather than an end buyer. Whether to include this language is a strategic decision.
Disclosure requirements
Some states require disclosure that you intend to assign the contract or that you're acting as a principal rather than a licensed agent. In states with stricter wholesaling regulations, you may need to disclose your role, your profit, or both. Always consult with a local real estate attorney about your state's requirements.
States with extra scrutiny
Illinois, Ohio, Oklahoma, and a handful of other states have enacted or proposed laws specifically regulating wholesale real estate transactions. These may require disclosure of the assignment fee, limits on the number of transactions per year without a license, or specific contract language. Check our state compliance guides for details on your state.
Typical assignment fees
Assignment fees vary widely based on the deal size, market, and competitive landscape:
- $5,000 - $10,000: Common for lower-price-point deals ($80K-$150K ARV) or deals with thin margins. This is where most new wholesalers operate.
- $10,000 - $25,000: Standard for mid-range deals ($150K-$300K ARV) with good margins. This is the sweet spot for experienced wholesalers.
- $25,000 - $50,000+: Higher-end deals ($300K+ ARV), luxury flips, or multi-unit properties. These are less frequent but more profitable per deal.
The key principle is that your assignment fee should leave enough room for the end buyer to hit their profit targets. If the buyer needs to buy at $160K to make the deal work (based on the MAO formula) and your contract price is $140K, your maximum assignment fee is $20K. Trying to charge $30K would mean no buyer would take the deal.
When assignment won't work
There are situations where assignment is not the right tool:
- Non-assignable contracts: Some sellers or contracts explicitly prohibit assignment. REO (bank-owned) properties and HUD homes typically have non-assignable contracts.
- Large assignment fees: If your fee is $40K on a $120K contract, disclosing that on the HUD-1/closing statement can create problems. The seller may feel they left too much money on the table. A double close keeps the numbers separate.
- End buyer using financing: Some lenders will not close on an assigned contract, particularly FHA and VA loans. If the end buyer needs conventional financing, a double close or novation may be required.
- Seller sensitivity: Some sellers become upset when they learn a wholesaler is making a fee on the transaction. While this is legally and ethically fine (the seller agreed to the price), it can cause complications at closing. If you anticipate this, a double close avoids the issue entirely.
Deal tracking through assignment
From contract to close, tracking the assignment process is essential. You need to monitor: the original contract's closing deadline, the option/inspection period expiration, the buyer's due diligence timeline, the title company's progress, and any contingencies. Deal Run's deal tracking board moves deals through stages (Active Marketing, Walkthroughs, Offers, Under Contract, Closed) so nothing falls through the cracks.