Assignment Contracts

Assignment contracts are the legal mechanism that makes wholesale real estate work. Instead of buying a property and reselling it (which requires significant capital), you acquire the right to buy a property under contract, and then assign that right to an end buyer for a fee. Understanding how assignment contracts work -- on both the buy side and the sell side -- is essential for every wholesaler.

This article provides general information about assignment contracts in the context of real estate wholesale. It is not legal advice. Consult a real estate attorney in your state for guidance specific to your transactions.

What an assignment contract is

An assignment contract is a legal document that transfers one party's rights and obligations under an existing purchase contract to a new party. In wholesale, this works as follows:

1. A seller agrees to sell their property to you (the wholesaler) under a purchase contract. You are now the "buyer" in that contract.
2. Before the contract closes, you assign your position as buyer to an end buyer using an assignment contract. The end buyer steps into your shoes and completes the purchase.
3. In exchange for transferring your contract rights, the end buyer pays you an assignment fee.

The key distinction is that you never actually purchase or take title to the property. You are selling your contractual position, not the property itself. This is what allows wholesalers to operate with minimal capital -- you do not need hundreds of thousands of dollars to buy the property, only enough for earnest money and option fees.

The buy side: acquiring the contract

The buy assignment is the contract between you and the deal source (the seller, another wholesaler, or another entity selling the property). This is where you establish your right to purchase the property, which you will later assign to your end buyer.

How it works

You (or the deal source) presents a purchase contract with you named as the buyer. The contract specifies the purchase price, closing date, and all standard terms. Critically, the contract must allow assignment -- most standard real estate contracts do not prohibit it by default, but you should verify that no anti-assignment clause exists.

In many wholesale transactions, the buyer line on the contract reads something like "Your Name and/or assigns." The "and/or assigns" language explicitly preserves your right to assign the contract. Some deal sources prefer to use a separate assignment addendum instead.

Key terms on the buy side

• Purchase price -- the amount you have agreed to pay the seller for the property. This becomes your cost basis when calculating your assignment fee. If you contract at $150,000 and assign to a buyer at $175,000, your gross fee is $25,000.
• Earnest money -- a good-faith deposit showing you are serious. This is typically $500 to $5,000, deposited with the title company or escrow agent within a few days of contract execution. The earnest money is credited toward the purchase price at closing -- it is not an additional cost.
• Option period -- in some states (notably Texas), the buyer can pay a small option fee (often $100 to $500, delivered directly to the seller) to secure an unrestricted right to terminate the contract within a set number of days (typically 7 to 14 days). This gives you time to find a buyer, inspect the property, and run your numbers. If you terminate during the option period, you get your earnest money back but lose the option fee. The option fee is also credited toward the purchase price if you close.
• Inspection period -- in states that do not use the Texas option period model, there is typically an inspection contingency (also called a due diligence period or feasibility period) that serves a similar purpose. During this window, you can terminate based on inspection findings. The length and terms vary by state.
• Closing date -- the date by which the transaction must close. As a wholesaler, you need enough time between contract signing and closing to find a buyer and complete the assignment. A typical closing window is 21 to 45 days, though experienced wholesalers with strong buyer lists sometimes work with shorter timelines.
• Title company -- the neutral third party that handles the closing, holds earnest money, performs the title search, and distributes funds. In some states, a closing attorney fills this role instead.

Protecting yourself on the buy side

The option period (or inspection contingency) is your primary protection on the buy side. If you cannot find a buyer within the option period, you can terminate without losing your earnest money. After the option period expires, your earnest money is typically at risk -- if you back out, the seller may be entitled to keep it as liquidated damages.

For this reason, most experienced wholesalers use the option period aggressively: they begin marketing the deal immediately upon contract execution and aim to have a buyer under assignment before the option period expires. This way, if the deal does not attract a buyer at the right price, they can exit cleanly.

The sell side: assigning to the end buyer

The sell assignment is the contract between you and the end buyer. It transfers your contractual right to purchase the property to the buyer in exchange for an assignment fee.

How it works

When you find a buyer willing to purchase the property at a price above your contract price, you draft an assignment contract that names the buyer as the new purchaser. The buyer agrees to fulfill all obligations of the original purchase contract (closing date, purchase price, etc.) and additionally agrees to pay you an assignment fee at closing.

Key terms on the sell side

• Assignment fee -- the amount the buyer pays you for the right to step into your contract. This is your profit on the deal. The assignment fee is typically paid at closing through the title company as part of the settlement statement.
• Non-refundable earnest money -- on the sell side, the buyer's earnest money deposit is typically non-refundable. This is standard practice and serves a critical purpose: it prevents buyers from tying up your deal, running their own numbers for two weeks, and then walking away at no cost. Non-refundable earnest money ensures the buyer is committed. Typical amounts range from $2,000 to $10,000 depending on deal size.
• No option or inspection period -- most sell-side assignments do not grant the buyer an option or inspection period. The expectation is that the buyer has already evaluated the property (through a walkthrough, photo review, and their own analysis) before signing. This protects you from delays and last-minute renegotiations.
• Closing timeline -- the buyer must close on or before the closing date in the original purchase contract. This is non-negotiable because your obligation to the seller is to close by that date regardless.

Protecting yourself on the sell side

Non-refundable earnest money is your primary protection. If the buyer backs out, you keep their deposit as compensation for the lost time and opportunity cost. You then need to quickly find a replacement buyer or exercise your option to terminate the buy-side contract (if still within the option period).

Always require proof of funds or a lender pre-approval letter before signing the sell-side assignment. A buyer who cannot prove they have the capital to close is a significant risk to your deal timeline.

Common assignment fee structures

Assignment fees vary widely based on the deal, the market, and the wholesaler's negotiation skills. Here are the most common structures:

Flat fee

A fixed dollar amount regardless of the sale price. This is the simplest structure and the most common in wholesale. Example: "Assignment fee is $10,000, payable at closing." The fee is stated explicitly in the assignment contract and appears on the closing statement.

Spread-based

The assignment fee equals the difference between your buy-side contract price and the sell-side price. If you contracted at $150,000 and the buyer pays $170,000, your fee is $20,000. This structure naturally scales with deal size -- larger deals generate larger fees.

Typical ranges

Most wholesale assignment fees fall in the $5,000 to $25,000 range. On the low end, smaller deals or competitive markets may produce $2,000 to $5,000 fees. On the high end, larger properties or deeply discounted deals can produce $30,000 to $50,000+ fees. The market sets the ceiling -- your fee must leave enough room for the buyer to profit on their exit strategy (fix and flip, buy and hold, etc.).

Texas-specific contract notes

Texas has unique contract conventions that every Texas wholesaler should understand:

TREC 1-4 Contract

The Texas Real Estate Commission (TREC) provides standard forms for residential real estate transactions. The TREC 1-4 Family Residential Contract (Resale) is the base contract used in most Texas wholesale deals. This is a standardized form that both parties are familiar with, which simplifies the transaction. The assignment addendum is a separate document attached to the TREC 1-4.

Option period vs. inspection contingency

Texas uses a paid option period rather than a free inspection contingency. The buyer pays a small option fee (typically $100 to $500) directly to the seller -- not to escrow -- for the unrestricted right to terminate within the option period. This fee is non-refundable if the buyer terminates but is credited toward the purchase price if the deal closes. The option period typically runs 7 to 14 days.

Title company, not closing attorney

Texas uses title companies (not closing attorneys) to handle real estate closings. Title companies perform the title search, issue title insurance, hold escrow, prepare closing documents, and distribute funds. Not all title companies handle assignment transactions -- build a relationship with at least two investor-friendly title companies in your market.

Disclosure requirements

Texas is a non-disclosure state for real estate transactions, meaning sale prices are not publicly reported by the state. However, this does not affect assignment contracts -- the assignment fee is visible to all parties involved in the closing (buyer, seller, and title company) on the settlement statement. If you want to keep your fee private, consider a double close structure instead of an assignment. See Closing a Deal for details on double close vs. assignment.

Information About Brokerage Services (IABS)

If you are a licensed real estate agent in Texas, TREC requires you to provide the Information About Brokerage Services form to all parties in a transaction. Even if you are acting as a principal (buying/selling for your own account), disclosure of your license status is required. If you are not licensed, this does not apply to you, but be aware that wholesale transactions do not require a real estate license in Texas as long as you are acting as a principal party to the contract.

Recording assignment contracts in Deal Run

Deal Run tracks the key terms of your assignment contracts within each deal's record. On the deal detail page, you can record:

• Buy-side contract price and closing date
• Sell-side assignment fee and buyer information
• Earnest money amounts (both sides)
• Option period dates (for Texas deals)
• Title company name and contact

This information is used to calculate your potential and realized assignment fees, populate your dashboard metrics, and maintain a complete record of every deal's financial structure. When a deal moves to the Closed stage, the assignment fee recorded here becomes part of your permanent track record.