Key Takeaways

  • An assignment of purchase and sale agreement allows a buyer to transfer their contractual rights to another party before closing.
  • Assignments offer flexibility for investors, especially in fast-moving real estate markets.
  • Restrictions, such as seller consent or anti-assignment clauses, can limit these transactions.
  • Legal and financial implications—including earnest money disputes and default liability—must be carefully managed.
  • Clear contract terms, builder consent, and agreement on cost responsibilities are essential for a valid and enforceable assignment.

An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. In this situation, the buyer is the assignor, and the third party is the assignee. Under the agreement, the assignee pays a higher price. This agreement must take place in the time between when the assignor agrees to buy the home, but before the contract closes with the builder.

With this period, the assignor never takes the title of the property. Instead, the title is put in the name of the assignee. This is informally known as "flipping a home." The flipping of a home occurs when:

  • The original buyer enters into a purchase contract and assigns the contract to the third party before closing ends.
  • The original buyer makes a profit from the sale.

If the sale does not close, the seller will lose time, money, and resources.

Advantages and Disadvantages of an Assignment of Contract

There are several advantages of an assignment of contract. With an assignment of contract, you are not actually flipping a home. Instead, you are flipping the contract, which means you don't have to have the financial backing to purchase the property. Not only do you not close on the property, but you will also not have to pay any closing costs or take on any additional expenses.

For wholesale flippers, using the assignment of contract is a way to save thousands of dollars each month. For example, if the closing costs per property are $1,000, and you "flip" 10 properties, that is a $10,000 savings.

Wholesalers only need to put down the purchase contract deposit amount that will be held in escrow with the title company or with an attorney. The lower the deposit, the lower the risk that will be assessed. Deposits may be as low as $10 or $100 and will be easier to lose if there are any delays or issues.

An assignment of purchase agreement allows the assignee to buy into new and desirable neighborhoods that are no longer available through the builder.

The main disadvantage of an assignment of contract is the risk of not finding a buyer. If a third-party buyer is not found, and you are under contract, you are responsible for completing the contract. Additional responsibilities include the responsibility of:

  • Existing liens.
  • Property taxes.
  • Insurance.

In addition, if the financing of the assignee cannot be obtained before the closing, this may cause the assignor to be responsible for the closing costs and the purchase of the property. The assignor may also not be able to get his or her deposits returned.

Legal Considerations and Restrictions

While an assignment of purchase and sale agreement can be a strategic tool, it is subject to several legal and contractual restrictions. Not all agreements are assignable—some contain explicit "no assignment" clauses. These clauses may:

  • Prohibit assignment without the seller's prior written consent.
  • Allow assignment only under specific conditions, such as financial vetting of the assignee.
  • Void the contract entirely if the assignment occurs without approval.

Even in the absence of such clauses, certain state laws may require disclosures or impose other obligations. It's also critical to consider local market practices and whether the jurisdiction places limits on real estate wholesaling. Failing to comply with these legal nuances can result in the seller rescinding the deal or retaining the earnest deposit.

Obtaining the Builder's Consent

For an assignment of a purchase agreement to be valid, the builder and assignor must first have a valid legal contract in place that shows the assignor is obligated to purchase a home or condominium unit from the builder.

The buyer may limit how the property can be sold, including that the property cannot be listed on the MLS (multiple listings service). If it is, it is seen as a competing with the builder. If the assignor puts the property on the MLS, it will be a breach of contract, and the builder will be entitled to damages or rescission of the contract. The buyer will also be able to retain any deposits that have been paid and any other money paid for upgrades and extras.

The assignor must also clearly state the property is an assignment of an agreement of purchase with the builder and not a direct sale from the assignor.

Common Use Cases for Assignments

Assignments of purchase and sale agreements are frequently used in:

  • Real estate wholesaling: Investors secure contracts below market value and assign them for a profit.
  • New developments: Buyers of pre-construction properties may assign contracts if they no longer wish to complete the purchase.
  • Time-sensitive deals: Buyers who need to exit quickly due to financial or personal reasons often rely on assignments.

These arrangements are particularly popular in hot markets where properties appreciate during the escrow period, allowing assignors to profit by transferring the contract.

Preparing an Assignment of Purchase Agreement

When preparing the agreement documentation, there are questions that should be asked to determine responsibility. Some of the questions to be asked are:

  • Who will be preparing the documents?
  • Who will pay the cost to prepare the documents?
  • Will the assignment agreement and written consent of the builder be prepared by the builder's attorney? And will they cover the costs?
  • Can terms agreed to by the assignor and builder be negotiated by the assignee? If so, who will cover the costs, and how will they be resolved?

A detail that should also be negotiated is the responsibility of paying the commission of the assignment agreement.

Risks and Liability for the Assignor

Assignors remain liable under the original contract unless the seller formally releases them. This means:

  • If the assignee fails to perform (e.g., misses a payment or backs out), the assignor could be held responsible for breach.
  • The seller may retain earnest money or pursue legal remedies against the assignor.
  • Disputes may arise over fees, timing, or miscommunication regarding responsibilities.

To mitigate these risks, assignors often include indemnification clauses in the assignment contract, ensuring the assignee will cover any costs or losses stemming from non-performance.

Key Components of an Assignment Agreement

A well-drafted assignment of purchase and sale agreement should include:

  • Parties involved: Full legal names and contact details of the assignor, assignee, and original seller.
  • Assignment fee: The amount the assignee pays the assignor for the contractual rights.
  • Earnest money details: Clarification on who holds the earnest money and under what terms it may be refunded.
  • Closing timeline: Specific dates by which the transaction must be completed.
  • Builder or seller consent: Whether approval has been granted or is pending.
  • Assumption of obligations: Confirmation that the assignee agrees to all terms of the original purchase agreement.
  • Contingencies: Provisions for inspection, financing, or other conditions precedent to closing.

Frequently Asked Questions

  1. Is an assignment of purchase and sale agreement legal in all states?
    It is generally legal, but some states impose restrictions or licensing requirements—especially in cases involving real estate wholesaling.
  2. Does the seller have to approve the assignment?
    Not always. It depends on the original contract terms. Some agreements require seller consent, while others allow free assignment.
  3. What is an assignment fee in real estate?
    This is the amount paid by the assignee to the assignor for the rights to the contract. It can range from a flat fee to a percentage of the purchase price.
  4. Can the assignor back out after assigning the contract?
    Once assigned and accepted, the assignor typically cannot revoke the assignment unless the contract permits it or the assignee fails to meet conditions.
  5. Is an attorney needed to draft or review an assignment?
    While not legally required, having an attorney ensures the assignment complies with local laws and protects all parties involved. You can find experienced attorneys on UpCounsel to assist with this process.

If you need help with an assignment of a purchase agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.