How to Assign a Contract, Step by Step
You found a deal. The seller agreed to $180,000 on a house that's worth $230,000 fixed up. You don't have the cash to close, and you don't want to. You want to sell your position in that contract to someone who does, and keep the difference. That's a contract assignment, and here's exactly how it works.
What a contract assignment actually is
You sign a purchase agreement to buy the house. You never intend to close on it yourself. Instead, you sell your right to buy it, the contract itself, to another buyer for a fee. The end buyer closes with the original seller. You get paid at closing for stepping out of the deal and handing it to someone else.
The steps, in order
- Get the property under contract using a purchase agreement that allows assignment. Look for language like "Buyer and/or assigns" next to your name.
- Put up earnest money if the contract requires it. Usually $500 to $2,000 for wholesale deals, held by a title company or attorney.
- Find your end buyer. Could be someone you already know, a cash buyer list you've built, or someone you find after signing the contract.
- Sign an Assignment of Contract agreement with that buyer. This document transfers your rights and obligations under the original purchase contract to them, in exchange for an assignment fee.
- Send the assignment to the title company or closing attorney handling the deal. They now know the new buyer is who's actually closing.
- The end buyer brings the rest of the purchase funds. The title company closes the deal between the original seller and the end buyer.
- Your assignment fee gets paid out of the closing, usually shown as a separate line on the settlement statement.
You never take title. You never touch the seller's money. You're paid for the contract, not the house.
Why this works
A real estate purchase contract is a piece of paper that says one party has the right to buy a property under specific terms. That right has value on its own, separate from the property. If you locked in $180,000 on a house worth $230,000 after repairs, that contract is worth something to an investor who wants that spread. You're not selling a house you don't own. You're selling the right to buy one, which you do own the moment the seller signs.
Title companies handle this constantly. It's not a loophole. It's a standard closing with an extra document in the file.
What people get wrong
Using a contract that doesn't allow assignment. Some standard state association contracts either prohibit assignment outright or require seller consent in writing. Read the contract before you sign it, not after you've already found a buyer.
Not telling the seller. You don't need the seller's permission to assign if the contract allows it, but sellers who find out mid-deal that a stranger is closing instead of the person who sat at their kitchen table tend to get nervous and sometimes walk. A short conversation up front, telling them you work with a network of investors and the closing may show a different buyer, saves you a blown deal two weeks before closing.
Treating the assignment fee like it's guaranteed. You don't get paid until the deal closes. If your end buyer's financing falls through, or they get cold feet, or the property doesn't appraise for their lender, you get nothing and you're back to finding another buyer before your contract deadline hits. Line up your buyer's proof of funds before you get comfortable.
Missing the closing deadline. Your purchase contract has a close date. If you haven't found a buyer and closed the assignment by then, the seller can cancel and keep moving, or you're asking for an extension you may not get. Give yourself real time in the contract, 21 to 30 days is common for wholesale deals, and start marketing to buyers the day you get it signed, not the week before it's due.
Not knowing when assignment isn't allowed. Bank-owned properties, HUD homes, and some new construction contracts often prohibit assignment entirely. In those cases, investors use a double close instead, buying the property and reselling it in a back to back closing, sometimes on the same day, using transactional funding to cover the first purchase. It costs more in closing costs but works when the seller won't allow an assignment.
A worked example
Say you get a house under contract for $180,000. The seller is motivated, needs to move in three weeks for a job, and doesn't want to deal with repairs. You have 21 days to close, with $1,000 in earnest money held by the title company.
You market the deal to your buyer list. An investor agrees to pay $195,000 for the contract, planning to put $35,000 into the rehab and resell around $255,000.
You sign an Assignment of Contract with that investor for a $15,000 assignment fee. You send the assignment to the title company, along with the buyer's proof of funds.
On closing day, the title company closes the sale between the original seller and your buyer. The seller receives their $180,000 minus normal seller closing costs. Your buyer pays $195,000 minus their $1,000 earnest money deposit (which typically transfers to them or gets credited), plus their own closing costs. You receive $15,000 out of that closing, paid by check or wire directly from the title company.
Nobody in that transaction is confused about what happened. It's on the settlement statement. You made $15,000 for finding the deal, locking it up, and connecting it to a buyer, without ever owning the house.
The honest limitation
Assignment fees have to come from somewhere, and that somewhere is the spread between what the seller accepted and what your buyer is willing to pay. If you overpay the seller, or the property doesn't actually have the equity you think it does, there's no fee to collect. Your buyer will run their own numbers, and if your math doesn't hold up, they'll walk or offer you less than you expected. This only works on deals with real margin in them. It doesn't create margin that isn't there.
Also worth knowing: some states have added disclosure rules or licensing questions around wholesaling and assignment fees in the last few years. What's standard in one state can require extra paperwork in another. Check your state's current rules before you build a business around this, not after your third deal.
Where the deals actually come from
Everything above assumes you already have a property under contract at a real discount. That's the hard part. Most people who struggle with assigning contracts aren't stuck on the paperwork, they're stuck because they don't have enough motivated sellers to talk to in the first place. Deal Machine is built for that end of the problem, helping you find and reach the owners of distressed and off-market properties before they list anywhere. If you've got the assignment process down and need more contracts to assign, that's where to look next: readmoneydecoded.com/deal-machine.