What is an Assignment Contract?
April 23rd, 2021
In this article, you’ll learn what an “assignment contract” is and why you need one to wholesale a house...
An “assignment” occurs when one party (known as the assignor) has an existing contract and transfers the contract’s obligations and benefits to another party (known as the assignee).
Why Use an Assignment Contract?
An assignment contract is a strategy wholesalers use to make money without using their own money. Sometimes this is called “flipping real estate contracts” because you’re flipping the contract (not the house) and making a wholesale fee!
Tips for Assignment Contracts
First, you want to be transparent with the seller. The seller should know that you are an investor who will be wholesaling their house. All of this is laid out in the contract, but sometimes you will come across sellers who are unfamiliar with assignments. You need to help them understand how the process works. Just remember: you are not selling the house, you are selling the rights to buy the house to the new investor. This is where they can get confused, so assure them it’s completely legal and will help sell their house!
Second, make sure to raise the purchase price (to the buyer) and build your fee into that price. This markup is your wholesale fee, also known as an “assignment fee.” Assignment fees range from $5,000 to $20,000 depending on the deal.
Let’s say you get a contract on a distressed house for $125,000 but rehabbers in that area are buying houses for around $140,000. That means you can build in a $15,000 assignment fee for yourself. When the deal closes, the buyer (the rehabber) will pay $140,000. Out of that, $125,000 will go to the seller and $15,000 will go to you!
Watch this video with Jerry Norton where he interviews someone who uses an assignment contract on their first deal!
How Do I Get an Assignment Contract?
The hardest (and most expensive) way to get an assignment contract is to pay an attorney to write one up for you. Luckily, we’ve done that work for you. Click HERE to get Jerry Norton’s Wholesaler Contract Pack which includes his attorney-approved Assignment Contract. This contract clearly states what the investor and seller will get out of the deal. It also includes the verbiage that gives you the authority to assign the property to another buyer.
Watch this YouTube video with Jerry Norton where he shows you step-by-step how to fill out an assignment contract.
Why Do Rehabbers Pay Wholesale Fees?
A question that new wholesalers often ask is: “Why would a fix and flipper want to buy my deals, when they could find their own?” The answer is simple: they don’t have the time to track down houses, run comps, and negotiate contracts! By finding deals, you are saving them countless hours and a ton of headaches. And since they will make a hefty profit when they resell the house, they will gladly pay your wholesale fee because it saves them time and effort.
5 Steps to an Assignment Contract Deal
- Find a distressed property
- Talk to the seller
- Get assignment contract signed
- Assign the contract to a final buyer
- Collect your fee at closing
Also, make sure to check out Jerry Norton’s wholesaling and house flipping software called Flipster. If you haven’t heard of Flipster, it’s a cloud-based all-inclusive software that helps you organize, streamline, and automate all the steps to wholesaling and flipping houses. It also comes with “fill in the blank” digital contracts (including an Assignment Contract). Click here to see it in action.