What is an assignment contract?

An assignment contract — also called an assignment of contract or assignment agreement — is a document that transfers one party's rights and obligations under an existing contract to somebody else. In real estate investing, it almost always means this: a wholesaler who has a property under contract transfers the right to buy that property to an end buyer, who then closes with the original seller.

The parties have names worth learning, because every assignment document uses them. The assignor is the original buyer — the wholesaler transferring the contract. The assignee is the new buyer receiving it. The seller under the original purchase agreement stays exactly where they were; what changes is who shows up at the closing table to buy.

The assignment does not create a new sale of the property. It sells the contractual position — the right to buy at the agreed price, by the agreed date, on the agreed terms. That is why the assignor can be paid without ever owning the property.

The starting point is the original purchase and sale agreement between the seller and the assignor. For an assignment to be possible at all, that agreement must permit it. Many investor-drafted contracts say so expressly — the buyer is named as, for example, “Jane Doe and/or assigns” — while other contracts prohibit assignment or require the seller's written consent. Reading the assignment clause of the underlying contract is always the first step.

The assignment agreement itself is short compared to a purchase contract. It identifies the underlying contract, names the assignor and assignee, states the assignment fee and when it is paid, and says what happens to the earnest money already on deposit. Commonly the assignee reimburses or replaces the assignor's deposit as part of the deal.

A key business point is whether the assignment releases the assignor. Some assignments transfer the obligations completely; others leave the assignor on the hook if the assignee fails to close. Which one the document does is a term the parties negotiate, not a default anyone should assume.

At closing, the settlement agent works from the original contract plus the assignment. The seller conveys the property to the assignee, the assignee pays the full price they agreed to, and the assignment fee is paid to the assignor — often shown as its own line on the settlement statement.

The numbers below are invented round figures for illustration — they describe no real property and no listing on this site.

A wholesaler contracts to buy a duplex for $200,000, closing in 45 days, with $3,000 earnest money. Two weeks in, an investor agrees to take the deal at $212,000. The two sign an assignment agreement: the investor becomes the buyer under the original contract, reimburses the $3,000 deposit, and agrees to pay a $12,000 assignment fee at closing.

On closing day the seller receives the $200,000 the contract always promised. The investor pays $212,000 in total — $200,000 to the seller and $12,000 to the wholesaler — plus their own closing costs. The wholesaler's name never appears on the deed.

Note what the seller's experience was: the price, the date and the terms they signed never changed. The only difference an assignment makes to the seller is the name on the buyer's side of the closing documents — which is exactly why some sellers negotiate for the right to approve or refuse it.

An assignment is one closing with a substituted buyer; a double closing is two complete closings back to back, in which the wholesaler actually buys and then resells. The assignment is usually cheaper — one set of closing costs, no purchase funding — but it makes the fee visible to both sides, because the assignment fee typically appears on the settlement statement.

Wholesalers who prefer to keep the two prices separate, or whose underlying contract cannot be assigned, use a double closing instead. The choice is made deal by deal, and the cost difference between the two routes is a real number worth computing before choosing.

As with everything in this glossary, the mechanics described here are the industry's general practice. What an assignment must contain, what must be disclosed and to whom, and how the fee may be handled vary by state, and nothing here is legal advice.