assignment of listing agreement

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Types of Listing Agreements: Understanding Real Estate Agent Contracts With Sellers

What's a listing agreement, and why do you need one? This guide breaks it down.

In this article:

What is a listing agreement?

What's included in a seller-broker agreement.

• Exclusive right to sell listing agreement
• Exclusive agency listing agreement
• Open listing agreement
• Net listing agreement
• Alternatives to a seller-agent contract

Selling a home for the first time? As you're choosing a listing agent, you'll want to do some due diligence and make sure you understand exactly what's included in your real estate agent agreement.

Because it’s a legal document, listing agreements can be complicated to decipher, especially since you may see it only a few times over a lifetime. It helps to know the most common elements in a listing agreement so you recognize if what you’re signing is standard or if it's missing seller protections or has excessive agent benefits.

A listing agent agreement, also known as a listing agent contract, is a legally binding document between a seller and the real estate agent representing them in the sale of their home. There are several different categories of standard listing agreements, but any agreement can be modified to fit a specific situation.

Most agents who are part of a real estate agent organization or brokerage will use the standard listing agreement provided for them for each type of real estate contract, including:

• Exclusive right to sell
• Exclusive agency

While contracts can be amended or modified, and while addenda may be added, there are some common real estate listing agreement terms:

Commission amount

The commission amount is usually 5-6 percent of the sale price, which is split roughly 50-50 between your listing agent and the buyer's agent. Whether you owe your agent a commission depends on the type of listing agreement that is in place — more on that later.

Listing duration

This identifies how long your contract is valid before it expires and your agent is no longer representing you. In most major real estate markets, it's usually three months, but it can be longer or shorter in duration, depending on the state of your local real estate market.

Cancellation clause

The cancellation clause outlines any penalties you will or won't face if you attempt to cancel the contract before your agent successfully sells your home.

Responsibilities

This section details what tasks and services your agent will complete. Common examples include  professional photography , getting the home listed on the MLS and detailed marketing services.

These are guidelines around how issues or conflicts will be handled. This can include disagreements over listing price or marketing strategies.

In this section, you confirm that you are the home's owner, you have the right to sell the house and you're legally allowed to transfer the title.

This notes that if the contract expires before the house is purchased, the listing agent can provide a list of all buyers who saw the home while they were the agent. It says that if one of those past buyers comes back after the contract expires and wants to buy the home, the listing agent is still due their commission, within a specified time frame. It's also called a holdover clause or a carryover clause.

Dual agency

This is when a listing agent keeps the full commission because they're representing both the seller and the buyer. It's illegal in many states, and in the states where it is legal, there are restrictions set by both the state and local professional organizations that prevent conflicts of interest.

Type 1: Exclusive right to sell listing agreement

This is the most common type of listing agreement. It says that the listing agent has the exclusive right to earn the commission if they bring the buyer (either directly or via another agent). It's an exclusive contract with your real estate agent that prevents you from working with another agent during the term.

In this arrangement, all offers go through the listing agent, which protects the agent from losing time and money on a deal that they won't receive any commission for.

The contract can sometimes include an exception if one specific person (who is predetermined) ends up buying the home — a specific family member, for example. The name has to be included in the contract before signing, and it must be something that was in the works before listing.

Here are a few examples of exclusive right to sell contracts across Arizona, Oklahoma and Kentucky — notice their similarities.

Benefits of an exclusive right to sell listing

Agents work incredibly hard to secure a buyer, because they won't get their commission until they do. If you engage a full-service agent with an exclusive right to sell listing, you'll get the full real estate agent experience and the expertise that goes along with it.

Type 2: Exclusive agency listing agreement

This type of listing agreement is far less common. In this agreement, you still hire a listing agent, but if you are the one who ends up finding the buyer, you get to keep the commission.

Check out this South Dakota example of the uncommon exclusive agency agreement.

Benefits of an exclusive agency listing agreement

The main benefit here is that you have an opportunity to avoid paying commission. This type of agreement is best for people who want to be hands-on in the process and those who are comfortable investing in their own marketing.

You'll also have the peace of mind that comes with knowing there is still an agent working on your behalf (even though they may not provide all the marketing services a full-service agent typically would).

Set up a good way to track whose marketing efforts got each potential buyer through the door so you'll know who gets the commission.

Type 3: Open listing agreement

An open listing agreement is not a formal contract. Instead of engaging a listing agent, a seller instead allows local buyer's agents to market the listing in hopes of getting the 3 percent buyer's agent commission.

The whole process happens without a listing agent, sort of like a for sale by owner (FSBO) transaction. To start this process, you would reach out to a handful of local buyer's agents, letting them know that you're willing to pay a buyer's agent commission. If a buyer's agent is interested in this arrangement, they may want to put it in writing before they bring their buyers through the door.

Benefits of an open listing agreement

An open listing provides some flexibility, as you're not committed to one single listing agent agreement. And it gives you the ability to change direction or take the house off the market whenever you want, without a penalty .  But the biggest benefit is that since you're not using a listing agent, you'll only have to pay half as much commission — typically just 3 percent to the buyer's agent (a savings of 3 percent).

You'll want to do whatever you can to help the buyer's agents you're engaging sell the home. Give them a good description of the home, share your real estate photos , and give them permission to share your home with their clients as they see fit.

Type 4: Net listing agreement

A less common type of real estate agency agreement, a net listing agreement is when a listing agent guarantees to sell your house for a certain set price, and if they sell the house for a higher amount, they pocket the difference as their commission.

The reason this is a less common agreement is that net listings are illegal in many states. And in the states where they're legal, which include Texas and California, there are rules in place to protect sellers and prevent lawsuits over perceived losses.

Net listing agreement considerations

A net listing can be good for someone who wants a quick sale and a guaranteed price, but it's important to use an agent you trust. Because the listing agent is so invested in your purchase price, they could take advantage of the situation and not show you the lower offers received. That's why these arrangements are illegal in many places — they're considered financially risky.

Kristijonas Umbrasas

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Assignment of Contract – Assignable Contract Basics for Real Estate Investors

What is assignment of contract? Learn about this wholesaling strategy and why assignment agreements are the preferred solution for flipping real estate contracts.

Beginners to investing in real estate and wholesaling must navigate a complex landscape littered with confusing terms and strategies. One of the first concepts to understand before wholesaling is assignment of contract, also known as assignment of agreement or “flipping real estate contracts.”  

An assignment contract is the most popular exit strategy for wholesalers, and it isn’t as complicated as it may seem. What does assignment of contract mean? How can it be used to get into wholesaling? Here’s what you need to know.

What Is Assignment of Contract?

How assignment of contract works in real estate wholesaling, what is an assignment fee in real estate, assignment of agreement pros & cons, assignable contract faqs.

• Transactly Saves Time. Learn How Now!

Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer.

This strategy is also known as flipping real estate contracts because that’s essentially how it works:

• The wholesaler finds a property that’s already discounted or represents a great deal and enters into a contract with the seller,
• The contract contains an assignment clause that allows the wholesaler to assign the contract to someone else (if they choose to!), then
• The wholesaler can assign the contract to another party and receive an assignment fee when the transaction closes.

Assignment of contract in real estate is a popular strategy for beginners in real estate investment because it requires very little or even no capital. As long as you can find an interested buyer, you do not need to come up with a large sum of money to buy and then resell the property – you are only selling your right to buy it .

An assignment contract passes along your purchase rights as well as your contract obligations. After the contract assignment, you are no longer involved in the transaction with no right to make claims or responsibilities to get the transaction to closing.

Until you assign contract to someone else, however, you are completely on the hook for all contract responsibilities and rights.

This means that you are in control of the deal until you decide to assign the contract, but if you aren’t able to get someone to take over the contract, you are legally obligated to follow through with the sale .

Assignment of Contract vs Double Closing

Double closing and assignment of agreement are the two main real estate wholesaling exit strategies. Unlike the double closing strategy, an assignment contract does not require the wholesaler to purchase the property.

Assignment of contract is usually the preferred option because it can be completed in hours and does not require you to fund the purchase . Double closings take twice as much work and require a great deal of coordination. They are also illegal in some states.

Ready to see how an assignment contract actually works? Even though it has a low barrier to entry for beginner investors, the challenges of completing an assignment of contract shouldn’t be underestimated. Here are the general steps involved in wholesaling.

Step #1. Find a seller/property

The process begins by finding a property that you think is a good deal or a good investment and entering into a purchase agreement with the seller. Of course, not just any property is suitable for this strategy. You need to find a motivated seller willing to accept an assignment agreement and a price that works with your strategy. Direct mail marketing, online marketing, and checking the county delinquent tax list are just a few possible lead generation strategies you can employ.

Step #2: Enter into an assignable contract

The contract with the seller will be almost the same as a standard purchase agreement except it will contain an assignment clause.

An important element in an assignable purchase contract is “ and/or assigns ” next to your name as the buyer . The term “assigns” is used here as a noun to refer to a potential assignee. This is a basic assignment clause authorizing you to transfer your position and rights in the contract to an assignee if you choose.

The contract must also follow local laws regulating contract language. In some jurisdictions, assignment of contract is not allowed. It’s becoming increasingly common for wholesalers to assign agreements to an LLC instead of an individual. In this case, the LLC would be under contract with the seller. This can potentially bypass lender objections and even anti-assignment clauses for distressed properties. Rather than assigning the contract to someone else, the investor can reassign their interest in the LLC through an “assignment of membership interest.”

Note: even the presence of an assignment clause can make some sellers nervous or unwilling to make a deal . The seller may be picky about whom they want to buy the property, or they may be suspicious or concerned about the concept of assigning a contract to an unknown third party who may or may not be able to complete the sale.

The assignment clause should always be disclosed and explained to the seller. If they are nervous, they can be assured that they will still get the agreed-upon amount.

Step #3. Submit the assignment contract for a title search

Once you are under contract, you must typically submit the contract to a title company to perform the title search. This ensures there are no liens attached to the property.

Step #4. Find an end buyer to assign the contract

Next is the most challenging step: finding a buyer who can fulfill the contract’s original terms including the closing date and purchase price.

Successful wholesalers build buyers lists and employ marketing campaigns, social media, and networking to find a good match for an assignable contract.

Once you locate an end buyer, your contract should include earnest money the buyer must pay upfront. This gives you some protection if the buyer breaches the contract and, potentially, causes you to breach your contract with the seller. With a non-refundable deposit, you can be sure your earnest money to the seller will be covered in a worst-case scenario.

You can see an assignment of contract example here between an assignor and assignee.

Step #5. Receive your assignment fee

The final step is receiving your assignment fee. This fee is your profit from the transaction, and it’s usually paid when the transaction closes.

The assignment fee is how the wholesaler makes money through an assignment contract. This fee is paid by the end buyer when they purchase the right to buy the property as compensation for being connected to the original seller. Assignment contracts should clearly spell out the assignment fee and how it will be paid.

An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer.

The standard real estate assignment fee is $5,000 . However, it varies by transaction and calculating the assignment fee may be higher or lower depending on whether the buyer is buying and holding the property or rehabbing and flipping.

The assignment fee is not always a flat amount. The difference between the agreed-upon price with the seller and the end buyer is the profit you stand to earn as the assignor. If you agreed to purchase the property for $150,000 from the seller and assign the contract to a buyer for $200,000, your assignment fee or profit would be $50,000.

In most cases, an investor receives a deposit when the Assignment of Purchase and Sale Agreement is signed with the rest paid at closing.

Be aware that assignment agreements can have a bad reputation . This is usually the case when the end buyer and seller are unsatisfied, realizing they could have sold higher or bought lower and essentially paid thousands to an investor who never even wanted to buy the property.

Opting for the standard, flat assignment fee is much more readily accepted by sellers and buyers as it’s comparable to a real estate agent’s commission or even much lower and the parties can avoid working with an agent.

Real estate investors enjoy many benefits of an assignment of contract:

• This strategy requires little or no capital which makes it a popular entry to wholesaling as investors learn the ropes.
• Investors are not added to the title chain and never own the property which reduces costs and the amount of time the deal takes.
• An assignment of agreement is easier and faster than double closing which requires two separate closings and two sets of fees and disclosures.
• Wholesaling can be a great tool to expand an investor’s network for future opportunities.

As with most things, there are important drawbacks to consider. Before jumping into wholesaling and flipping real estate contracts, consider the downsides .

• It can be difficult to work with sellers and buyers who are not familiar with wholesaling or assignment agreements.
• Some sellers avoid or decline assignment of contract offers because they are suspicious of the arrangement, think it is too risky, or want to know who they are selling to.
• There is a limited time to find an end buyer. Without a reliable buyer’s list, it can be very challenging to find a viable end buyer before the closing date.
• The end buyer may back out at the last minute. This may happen if they do not have owner’s rights until the contract is assigned or they do not want to pay an assignment fee.
• Not all properties are eligible for wholesaling like HUD and REO properties. There may be anti-assignment clauses or other hurdles. It is possible to get around this by purchasing the property with an LLC which can then be sold, but this is a level of complication that many wholesalers want to avoid.
• Assignors do not have owner’s rights. When the property is under contract, investors cannot make repairs or improvements. This makes it harder to assign a contract for a distressed property in poor condition.
• It can be hard to confirm an end buyer is qualified. The end buyer is responsible for paying the agreed upon price set by the seller and assignor. Many lenders do not handle assignment agreements which usually means turning to all-cash end buyers. Depending on the market, they can be hard to find.

In the worst-case scenario, if a wholesaling deal falls through because the end buyer backs out, the investor or assignor is still responsible for buying the property and must follow through with the purchase agreement. If you do not, you are in breach of contract and lose the earnest money you put down.

To avoid this worst-case scenario, be prepared with a good buyer’s list. You should only put properties under contract that you consider a good deal and you can market to other investors or homeowners. You may be able to get more time by asking for an extension to the assignment of contract while you find another buyer or even turn to other wholesalers to see if they have someone who would be a good fit.

What is the difference between assignor vs assignee?

In an assignment clause, the assignor is the buyer who then assigns the contract to an assignee. The assignee is the end buyer or final buyer who becomes the owner when the transaction closes. After the assignment, contract rights and obligations are transferred from the assignor to the assignee.

What Is an assignable contract?

An assignable contract in real estate is a purchase agreement that allows the buyer to assign their rights and obligations to another party before the contract expires. The assignee then becomes obligated to meet the terms of the contract and, at closing, get title to the property.

Is Assignment of Agreement Legal?

Assignment of contract is legal as long as state regulations are followed and it’s an assignable contract. The terms of your agreement with the seller must allow for the contract to be assumed. To be legal and enforceable, the following general requirements must be met.

• The assignment does not violate state law or public policy. In some states and jurisdictions, contract assignments are prohibited.
• There is no assignment clause prohibiting assignment.
• There is written consent between all parties.
• The property does not have restrictions prohibiting assignment. Some properties have deed restrictions or anti-assignment clauses prohibiting assignment of contract within a specific period of time. This includes HUD properties, short sales, and REO properties which usually prohibit a property from being resold for 90 days. There is potentially a way around these non-assignable contracts using an LLC.

Can a non-assignable contract still be assigned?

Even an non-assignable contract can become an assignable contract in some cases. A common approach is creating an agreement with an LLC or trust as the purchaser. The investor can then assign the entity to someone else because the contractual rights and obligations are the entity’s.

Assignment agreements are not as complicated as they may sound, and they offer an excellent entry into real estate investing without significant capital. A transaction coordinator at Transactly can be an invaluable solution, no matter your volume, to keep your wholesaling business on track and facilitate every step of the transaction to closing – and your assignment fee!

Adam Valley

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Florida's Laws & Regulations Regarding Real Estate Contracts

Calculating time periods.

Florida Realtors has three residential contracts. Two are Florida Realtors/Florida Bar contracts(FR/Bar), the standard Residential Contract for Sale and Purchase and the “AS IS” version, and one is the Florida Realtors Contract for Residential Sale and Purchase (CRSP).

Time periods for these Florida Realtors/Florida Bar (FR/Bar) contracts are calculated using calendar days  – which means that weekends do count. However,  any specified time period or date that ends or occurs on a Saturday, Sunday or national legal holiday will extend to the next calendar day that isn't a weekend or observed holiday.  See Standa rd F in either version of the Florida Realtors/Florida Bar contracts. 

The Florida Realtors Contract for Residential Sale and Purchase (CRSP) is calculated using business days. As such, if any deadline falls on a Saturday, Sunday or national legal  holiday, performance is due on the next business day. Additionally, all time periods end at 5 p.m. local time (i.e. where the property is located) of the appropriate day. See paragraph 11(b) of the Contract for Residential Sale and Purchase.

Florida Real tors also has a Commercial Contract and a Vacant Land Contract. For both of these contracts, calendar days are used, except when computing time periods of 5 days or less, which are calculated without including Saturday, Sunday or national legal holidays. S imilar to the Florida Realtors/Florida Bar Contracts, if a time period ends on a weekend or national legal holiday, the time for performance is extended until 5 p.m. of the next business day. See paragraph 3 of the Commercial Contract and paragraph 10 of t he Vacant Land Contract.

Canceling a listing agreement

If a seller decides to cancel a listing agreement such as an Exclusive Right of Sale Listing Agreement before its termination date, it is up to the broker to let the seller out of the agreement. There is no unilateral right to terminate the Exclusive Right of Sale Listing Agreement. If the broker agrees, the agent can use the Modification to Listing Agreement form. The document offers two options, listed midway through the form: conditional termination and unconditional termination. The listing broker and seller should carefully review the difference and select one of these options so they both understand what rights and obligations, if any, extend past the negotiated early termination.

Canceling a c ontract

• A  buyer  who has  an  AS IS Residential Contract for Sale and Purchase  has a very strong right of cancellation  during the inspection period . Paragraph 12 of that contract  states that  t he option to terminate resides in the buyer’s “sole  discretion” and the buyer’s deposit is to be returned to him/her.
• Members of the military have special ability to terminate a contract if they get permanent change of station orders requiring them to move 35 miles or more from the property location. The service member must provide a notice to the seller or the mortgagor along with either a copy of the official military orders or a written verification signed by his/her commanding off icer . (Section 689.27(2)(a), Florida Statutes)
• After a seller has accepted a buyer's offer on a property, the buyer does not automatically have a three-day right to cancel, unless  the contract includes  that as  a  specific  provision . None of the Florida Realtors contract forms provides for this right.
• A contract may have different contingencies that allow for either party to cancel.  As with any contractual interpretation question, the language of the contract is paramount in determining the rights of the parties, so our advice is to always suggest to th e parties that they seek legal advice from a licensed professional if they wish to gather further information about contract rights. 

Authorization to sign closing documents

• A  seller  may issue  a power of attorney authorizing  someone else to sign closing documents . 

Florida law allows a power of attorney to be  used in Florida real estate transactions. This document should state the specific powers the seller is granting to the attorney-in-fact. If a power of attorney will be prepared and signed in another state or country, it is important to contact the closing  agent to confirm that the power of attorney will be effective and address any concerns in advance of closing. The power of attorney must comply with Florida law. The seller must sign the power of attorney in the presence of two subscribing witnesses, and i t must be properly notarized. There may be additional requirements if the document is prepared and signed outside the United States, such as having the principal visit a U.S. embassy or consulate for notarial services, or having a foreign no tary’s document authenticated .

• In the case of a deceased person, t he personal representative assigned during probate has the authority to sign documents and make decisions concerning the disposition of the estate. Remember, a person’s position as an heir to the deceased  does not necessarily make him or her an owner until probate is closed. In addition, it is important to know that a power of attorney (even a durable one) cannot survive the death of the principal. 

More about time periods

• All listing agreements in Florid a are required to have a definitive termination date. A licensee may be disciplined by the Florida Real Estate Commission (FREC) for failing to include a definite expiration date in a listing agreement. An agent and seller should  choose a mutually agreeabl e termination date, which  they can always modify or extend  by  mutual assent.  (Section 475.25(1)(r), Florida Statutes)
• The  Extension Addendum to Contract  gives members a quick, easy way to modify common contractually defined time periods (loan approval/commitment periods, inspection period, title review period, etc.). Simply check the box (or boxes) for the time period(s) you wish to modify and have the add endum executed by the parties. As always, if you are concerned about the proper way to modify a contract, refer your customer to a legal professional for assistance. 
• If a buyer needs additional time to secure financing , you should request that the seller  grant an extension for the closing date,  and also request an extension to the financing contingency term. Extending the closing date doesn’t automatically extend the buyer’s time in which to obtain financing. Generally, a contract that’s contingent on fina ncing includes a timeframe during which the buyer can apply for and secure financing. Depending on the contract’s terms and financing contingency, buyers may risk losing their escrow money if they  can’t  secure financing before their financing contingency t erm expires. 

Leasing after closing

If a property  is subject to a lease after closing , t he buyer and seller should carefully review occupancy and leasing language in the  contracts to get a full picture of their rights and obligations in this matter, and they should consult a lawyer if they need help understanding or complying with these terms. Here is a brief summary of these sections as covered in the Florida Realtors/Florida Bar (FR/Bar) contracts,  arranged chronologically: 

• Seller shall deliver copies of the lease(s) and a written disclosure of the facts and terms to the buyer within five days after the Effective Date. 
• Buyer may terminate the contract by delivering written notice to seller within f ive days after receipt of the lease(s) and written disclosure if buyer is not satisfied with them. 
• Seller shall furnish Estoppel Letter(s) (or seller’s affidavit if seller is unable to obtain an Estoppel Letter) to buyer at least 10 days prior to closing.
• Buyer may terminate the contract by delivering written notice to seller within five days after receipt (but no later than five days prior to the  C losing  D ate) if an Estoppel Letter or seller’s affidavit differs materially from the lease(s) or representat ions in seller’s written disclosure just described in point 1. 

Closing date

I f parties don’t close on the closing date, the contract still exists. The issue then becomes why the contract failed to close and whether either (or both) parties breached the  agreement. 

Offers and counteroffers

• A s eller  is not required to accept   any offer.  No one can force a seller to execute a contract, even if the offer contains all the requirements stipulated in a listing agreement. Remember, a seller’s decision is not  always based on dollar amount alone, and therefore, it should not be evaluated in a vacuum. For example, perhaps the higher offer included an earlier closing date. 
• There is no law that requires a buyer or seller to communicate in writing his or her  decision to reject the other’s offer. 
• T here is no Florida law that requires the seller to negotiate with each buyer in the order in which the offers were received. 
• A counteroffer serves as a rejection of an initial offer. Therefore, the initial offer is  no longer on the table.
• If a seller receives multiple offers on a property, the seller is technically permitted to counter more than one offer at a time, in writing. However, doing so can be complicated . If the seller counters in writing more than one offer and each counter is accepted before the seller is able to communicate an intent to withdraw her counter to one of the buyers, the seller could be bound to multiple written contracts and thus have pote ntial liability to those buyers. 

Appraisal contingency

There is no appraisal-to-the-purchase-price contingency built into the  core  Florida Realtors/Florida Bar Contract.  If  a buyer wants to have the option to get out of the contract if the property fail s to appraise to the purchase price,  he or she  should use Comprehensive Rider  F, Appraisal Contingency.  

Use of addenda

If  an executed contract has inconsistencies between pre-printed provisions and  an addendum , h andwritten and typed terms will generally p revail over pre-printed ter ms that are in direct conflict.

Assigning rights in a contract

In order for a buyer to  assign his or her rights in a sales contract to another part y,  the parties must have an assignable contract. Then  Buyer 1 (assignor) and Buyer 2 (assignee) should enter into a written Assignment of Contract Agreement, which should be drafted by one of their attorneys. 

Location of a closing

Florida does not have a law mandati ng that a  real estate closing take place in the county where the real property is located .  H owever, many sale/purchase form contracts include pre-printed provisions indicating where the closing must take place. 

Presenting offers

A single agent and a transaction agent must present “all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing.” Therefore, if the seller has previously directed his or her single or transaction agent in writing that he or she shouldn’t be presented with any offers written on a certain contract form then it would not be a violation for the seller’s single or transaction agent to refuse to present it to the seller. If the seller hasn’t so previously directed his or her single or transaction agent in writing, then the agent must present the offer in a timely manner. (Sections 475.278(2) and (3)(a), Florida Statutes)

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A Guide to Assignment of Contract in Real Estate

Written by MasterClass

Last updated: Jul 13, 2021 • 4 min read

Assignment of contract involves one party transferring the rights of a real estate purchase agreement to another party. This real estate investing strategy can involve time and financial pressure, but the assignor can potentially make a quick buck.

Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

Get your assignment of agreement

by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

Read more...

Updated on: November 24, 2023 · 3 min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

• The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
• The assignor must agree to assign their rights and duties under the contract to the assignee.
• The assignee must agree to accept, or "assume," those contractual rights and duties.
• The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

• First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
• All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
• Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

• Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
• The effective date of the assignment and assumption agreement
• Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
• Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
• Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
• A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Assignment Of Purchase And Sale Agreement: Definition & Sample

Jump to section, what is an assignment of purchase and sale agreement.

An assignment of purchase and sale agreement is a real estate transaction contract that defines the parties and terms of a real estate purchase. This agreement allows the original purchaser of a property to transfer or assign their rights in the deal to a third party. This agreement is often used in flipping houses.

Assignment of purchase and sale agreements allows the purchaser to take their rights and obligations under a purchase agreement and reassign them to a third party who will take on those responsibilities. Some contracts may have clauses that prohibit assignment or allow it under specific circumstances usually laid out in the agreement.

Common Sections in Assignment Of Purchase And Sale Agreements

Below is a list of common sections included in Assignment Of Purchase And Sale Agreements. These sections are linked to the below sample agreement for you to explore.

Assignment Of Purchase And Sale Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.1.1 2 d245573dex1011.htm ASSIGNMENT OF PURCHASE AND SALE AGREEMENT , Viewed October 18, 2021, View Source on SEC .

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Lawyers with backgrounds working on assignment of purchase and sale agreements work with clients to help. Do you need help with an assignment of purchase and sale agreement?

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Meet some of our Assignment Of Purchase And Sale Agreement Lawyers

Joshua is an experienced attorney with deep expertise in finance, corporate, and business law. He offers practical legal solutions and personal service. As Managing Partner of Soloway Group PC, he advises startups, growing companies and investment funds on key issues, from formation to fundraising, stock issuances, trademarks and general business. He started out structuring funds and transactions at PwC before launching his own firm in 2009. He has been a partner in several New York law firms and has founded several companies including a banking firm, a real estate business, and a Cleantech company. Joshua has also served as Chief Legal Officer and Chief Strategy Officer of several companies in the tech, real estate, consulting, and sustainability industries. Prior to law school he was an early employee at a SoftBank-backed startup until it’s acquisition. Over the years, Joshua has helped many clients to launch, finance and grow successfully.

Sarah brings together her accounting and legal background to help solve client problems. Sarah couples her broad, general commercial legal background with our client’s international and business problems to arrive at elegant solutions that work for their business.

Hi, I'm Sarina. Thank you for taking the time to read my bio! In 2019, I graduated summa cum laude from Capital University Law School. While in law school, I was a staff member and editor on the Capital University Law Review. I was also involved in the Volunteer Income Tax Assistance Program and Operation Legal Help Ohio, a program which provides legal assistance to veterans. One of the highlights of my law school experience was my externship with Judge Jeffrey Sutton in the United States Court of Appeals for the Sixth Circuit. After law school and passing the Ohio bar exam, I worked for two years as an associate at an AmLaw 100 law firm, where my practice focused on corporate, healthcare, and regulatory law. I then took an in-house position at one of the largest insurance brokerage firms in the USA, where I oversaw corporate governance, mergers and acquisitions, contracts negotiations, intellectual property, and other general corporate matters. Specifically, I am proficient in business law, navigating due diligence during acquisitions, contract drafting and review, and providing effective advice in the nuanced field of regulatory law. I prioritize responsiveness and thoroughness. Please do not hesitate to reach out to me with any questions!

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I’m an Attorney working out of Marion, Ohio. Born and raised in Toledo, Ohio. I completed undergrad at the University of Toledo. I completed law school at Barry University in Orlando, Florida.

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Listing Agreements: Read This Before You Sign

Negotiating tips | Red flags | Listing agreement types | Terminating a contract

What is a listing agreement?

A listing agreement is the contract a home seller signs with their real estate agent . It’s a legally binding document that guides the process of listing, marketing, and ultimately closing a real estate transaction.

A listing agreement authorizes your agent to legally represent you in the sale of your home, allowing them to market your home on a multiple listing service (MLS) , install a lockbox , and show your home to prospective buyers.

It also specifies important details including:

• A general list of services you’ll receive
• The commission rate and payment structure
• How long the agreement will last

Listing agreements vary by type and location, but all share the same goal: providing a legal foundation that aligns the seller’s and agent’s expectations and responsibilities.

Do you have to sign a listing agreement?

If you’re a seller who wants to work with an agent, then yes — you’ll have to sign a listing agreement.

However, a listing agreement is not necessarily required to sell a home. You can opt to sell your home without an agent , commonly known as listing for sale by owner (FSBO).

Buyers don’t sign listing agreements — as the name suggests, listing agreements exclusively concern those listing a property for sale.

Some agents will ask buyers to sign exclusive agreements to ensure they’re compensated for their efforts, but many don’t require a contract.

» LEARN: What is a buyer agent agreement?

When do you sign a listing agreement?

You’ll sign a listing agreement as soon as you choose a realtor to sell your home .

Without a signed listing agreement in place, your agent isn’t legally entitled to represent you in your sale. In other words, they can’t do anything until that contract is signed.

Because listing agreements are legally binding, you should only sign if you’re 100% confident you’ve found a great agent.

Before signing a listing agreement, we recommend speaking to at least 2-3 real estate agents to weigh your options.

Conducting multiple interviews will give you the chance to ask questions and get a feel for which potential agent is the best fit for your situation, goals, and preferences.

» MORE: Questions You Should Ask a Listing Agent

While you’re in the process of choosing, be clear with each agent you speak with that you’re not planning to commit to anything on the spot.

Setting this expectation can help you avoid situations where you might feel pressured to sign a contract without adequate time to comb through the fine print.

What to know before signing a listing agreement

A listing agreement is a legally binding document, so it’s crucial to understand all the ins and outs before you sign on the dotted line.

A typical listing agreement stipulates the key terms that will guide the sale of your home. This includes, but is not limited to:

• Services the agent will provide — e.g., MLS listing, professional photography , showings, etc.
• Commission rate and structure, including how the fee will be split with the buyer’s agent
• Timeline for the sale (typically 3-6 months, or sometimes up to 12)
• Required disclosures about material defects, such as lead paint or material defects
• Guidelines for terminating the listing agreement
• Other state and federally-mandated legal requirements, such as anti-discrimination regulations

To reiterate, always read contracts closely before signing — and ask your agent to explain anything that seems unclear.

If something in a contract is unclear or seems problematic, seek legal advice from a real estate attorney or simply find another agent .

Can you negotiate a listing agreement?

Technically, everything in real estate is negotiable — but that doesn’t mean your agent will always agree to your proposed terms.

Agents typically use standard, boilerplate contracts provided by their local associations. These contracts are heavily vetted by real estate attorneys to help both parties avoid tricky legal complications.

Though the bulk of the contract will stay the same, there are opportunities to negotiate key details such as the:

• Listing price
• Listing term
• Commission rate

Boilerplate listing agreements also generally include a section where agents can write in any special considerations.

For example, they may agree to special terms if you have a buyer picked out since they won’t have to invest time and effort into marketing.

» LEARN: Tips for Negotiating Realtor Commission

Possible red flags

Though most listing agreements are standard and predictable, you should still be on the lookout. In many cases, common red flags can be easily avoided if you know what’s typical in your area.

Examples of red flags include:

• A pushy agent. Start off on the right note by avoiding an agent who attempts to pressure you into anything. You should never feel rushed into signing a listing agreement before you’re ready.
• Unusually high commission. Average commission rates vary locally, but one that’s significantly over the national average of 5.49% could be cause for concern.
• A leisurely timeline. Listing agreements typically last 3-6 months. On the high end of the scale, some agents will ask for up to 12 months — but anything longer is a definite red flag. If you’re looking for a shorter time commitment, interview agents until you find one who’s on the same page.

In addition to screening for red flags, talk to prospective agents about how and when their realtor fee is paid .

When you hire a listing agent , they will typically agree to cover upfront costs such as professional photography, signage, and other marketing materials. They’ll earn this money back at the end of the transaction when you pay their commission.

If you close on a deal after your contract expires, you may still have to pay your agent’s commission. For example, let’s say you accept an offer the week after your contract ends — chances are, your agent’s marketing contributed to the deal.

Your contract will cover these types of contingencies, so be sure to read it closely to avoid any surprises.

If you feel uncertain or want a second opinion about your listing agreement, you could seek advice from an attorney — or just walk away.

Types of Listing Agreements

Most sellers sign exclusive right to sell listing agreements.

In an exclusive right to sell listing agreement, you’ll work with a single listing agent who will market your home. That means you’ll have to pay your agent’s fee regardless of whether they find the buyer, you find the buyer, or the buyer finds you.

Agents generally prefer exclusive right to sell listing agreements. In fact, many agents choose not to offer other types of listing agreements at all.

Most agents will cover the upfront costs to market your home out of their own pocket. They also invest a ton of time and energy into your sale before seeing a dime.

An exclusive right to sell agreement offers more assurance that they’re not burning their money and time and will be paid for their efforts in the end.

For sellers, there are also compelling benefits to signing an exclusive right to sell listing agreement.

• You’ll receive dedicated service from an agent who’s fully committed to selling your home.
• You’ll avoid the messy complications that make other types of listing agreements considerably less common.

» MORE: Read This Before You Sign an Exclusive Right to Sell Listing Agreement.

Exclusive agency listing agreements are rare

In an exclusive agency listing agreement, you’ll commit to working exclusively with one agent — but you will also retain the right to market and sell the home yourself.

If this arrangement sounds confusing, that’s because it is.

Unlike an exclusive right to sell agreement, you will only pay your agent’s commission if they bring a buyer into the transaction. If you find your own buyer, you’ll be able to switch to a FSBO transaction.

Note that you will still be responsible for covering the upfront costs of listing and marketing the home. If you find your own buyer, you may be able to hire your agent’s brokerage to coordinate the transaction.

This type of listing agreement is uncommon — and for good reason. Agents don’t like the lack of certainty around their commission or the idea of being pitted against their client in a race to sell the property.

It can also be tricky to prove exactly who is responsible for bringing a buyer into the sale. For example, you might end up selling your home to a neighbor. But can you definitively prove that they weren’t initially interested because they saw the sign your agent set up in your front yard?

The average seller will not encounter an exclusive agency listing agreement. But understanding the drawbacks can help illuminate why exclusive right to sell agreements are so popular.

» MORE: What is An Exclusive Agency Listing?

Open listing agreements can be useful for FSBO sellers

Open listing agreements allow sellers to enlist the help of local agents to market their property while retaining the right to list and sell their home FSBO.

Note: An open listing agreement is not a traditional listing agreement since FSBO sellers don’t work with a listing agent.

In a nutshell, FSBO sellers can sign multiple non-exclusive open listing agreements with different agents.

Open listing contracts promise to pay an agent a commission if — and only if — they bring a buyer who ultimately closes on the home.

There are some compelling reasons for FSBO sellers to consider an open listing agreement:

• You can market your home to buyers through local agents, without paying a flat fee MLS company’s upfront fee.
• At most, you’ll pay one agent’s commission instead of two.
• You’re still free to find your own buyer and avoid paying any commission at all.

Benefits aside, an open listing agreement won’t solve the underlying cons to a FSBO sale.

Buyer’s agents might be more motivated to share your listing with their clients, but you’ll still have to market, negotiate, and navigate the sale on your own.

If you're looking for other ways to market your FSBO home, consider hiring a flat fee MLS service . These companies add your listing to the local databases buyers’ agents scour while looking for properties to show their clients.

» MORE: Selling FSBO? Here's How an Open Listing Agreement Can Help.

What is a net listing?

In a net listing agreement, the seller agrees to pay their listing agent any profit that exceeds the agreed-upon listing price.

For example, let’s say you list your house at $500,000 and sell it for $575,000. Your agent’s commission would be $75,000 — the "net" difference between the listing and selling prices.

This is radically different from a conventional commission, which would typically be a percentage of the sale price or a flat fee.

Most sellers will never encounter a net listing agreement for the simple reason that it’s illegal in many states.

The National Association of Realtors also does not allow its members to offer net listings — primarily because net listings present a risky, unconventional payment structure.

For example, a house could sell for far more than its listing price, leaving the seller feeling misled by their agent. Or, a house could sell for its exact listing price or lower, forcing the agent to walk away at a loss.

» MORE: What Is a Net Listing?

Terminating a listing agreement

Your contract will contain terms for cancelling a listing agreement, but under certain circumstances, your agent may allow you to walk away if things don’t work out.

If you decide to back out of a listing agreement, it’s important to do so the right way. If your agent doesn’t formally release you from the contract, you could end up being on the hook for their commission — even if you end up relisting your house with someone else.

If your home is already under contract, you’ll face steeper legal odds. Sellers who attempt to back out of a sale the wrong way can be sued by both their listing agent and the buyer.

Reasons for backing out

Sellers who want to cancel their listing agreement are generally dealing with one of two circumstances:

• Dissatisfaction with the service
• A major life change

Sometimes a seller puts their faith in a bad agent. They might receive subpar marketing, spotty communication, or a total personality clash.

If things are stalling out — or going off the rails — you may have grounds to break up with your agent and change realtors .

Other times, a seller experiences an unexpected change that throws their plans out the window. A death in the family, divorce, job loss, or other significant life event could alter a seller’s ability to move forward with the sale.

If you don't have a real reason to terminate — and your agent is holding up their end of the bargain — you'll have a much harder time backing out of your listing agreement.

How to terminate a listing agreement

There are three main steps you should take while figuring out how to back out of your listing agreement.

1. Revisit the listing agreement you signed

Legally, you are bound to its terms. Though sellers typically can’t decide to cancel a listing agreement on their own, most contracts include a process for mediating disputes and terminating the contract.

For example, some — but not all — contracts will charge you a cancellation fee for backing out early.

2. Have an honest conversation with your agent

Agents generally want to protect their reputations — and that means keeping clients happy. If the situation isn’t working out, your agent may be willing to let you walk away.

Your agent might also suggest that you work with a different colleague within their brokerage. This can help you get a fresh start with a new agent, without breaching the original listing agreement you signed.

3. Request a written release from your listing agreement

If the dispute cannot be resolved, request to be released entirely. You’ll need to submit a written request to be released from the contract, citing specific reasons your agent is not fulfilling their responsibilities.

If you don’t obtain a written release from your contract, be aware that your agent may still be legally entitled to their commission — even if you sign with a second broker.

Related reading

How to Terminate a Real Estate Listing Agreement

What Is a Listing Agent?

Authors & editorial history.

Our experts continually research, evaluate, and monitor real estate companies and industry trends. We update our articles when new information becomes available.

• April 11, 2024 Written by Jessica Johansen
• June 8, 2021 Written by Michelle Delgado

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Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

Table of Contents

• What Is an Assignment?
• What is an Assignment in Real Estate?
• What Does it Mean to Assign a Contract in Real Estate?
• How Does a Contract Assignment Work?
• Pros and Cons of Assigning Contracts

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

• Find the right property.
• Get a purchase agreement signed.
• Find an end buyer.
• Assign the contract.
• Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won’t take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it’s compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

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What if You Don’t Check an Assignability Option?

September 30, 2017

From the Desk of Dave Dinkel

I guess I have explained for 15 years to anyone who would listen about the assignability of a contract. My statement has been very simple, “If a contract does not specify it is not assignable, it is assignable.” I have claimed that this applies to any legal and binding contract – not just real estate contracts.

This concept was further supported by a Youtube video I saw where the AG of Ohio was interviewed about the legality of investors selling properties without being licensed. When she was asked about assignability she said almost the identical words I used. But let’s get to the real everyday world of dealing with this issue.

Let’s first talk about why it even matters. There are three types of real estate contract assignment. In this case the investor “B” would be the Assignor and the “C” buyer would be the Assignee.

1. Buyer may assign the contract but not be held liable for what the Assignee does or doesn’t do with regard to the terms of the contract.

2. Buyer may assign the contract but he will be held liable for what the Assignee does or doesn’t do with regard to the terms of the contract.

3. Contract may not be assigned…

When an investor deals with a seller directly, the issue of assignability seldom, if ever, comes up. However, when dealing with listing agents, it comes up the vast majority of the time. It is my belief that listing agents believe that if a contract is assignable the chances of closing are greatly diminished so they immediately check the “may not assign” option on the contract.

In reality, if the buyer was allowed to assign the contract it is far more likely that the property would be resold to another investor or rehabber and everyone would be paid. More often than not, the fact is the buyer can’t resell the property in time with any profit so he defaults on the contract which results in everyone losing.

We have had feedback from agents, brokers and attorneys who say this thesis of assignability that I set forth is hog wash, it invalidates the contract if no option is checked and various dastardly things will happen to the investor buyer if the contract doesn’t stipulate whether the contract is assignable.

He found that in an appeal to the Florida State Supreme Court, the Court’s opinion was “In general, contracts are assignable unless forbidden by the terms of the contract, or unless the assignment would violate some rule of public policy or statute, or unless the terms of the contract are such as to show reliance on the personal credit of the purchaser.”

What was even more interesting with this case was the result of an investor trying to add and use the term “and, or assigns” into the purchase contract and the Court went on to invalidate the contract for this reason. Remember this when Guru’s are telling you just to use these words to make your contract assignable. When this doesn’t work is when you need it the most and most of the time it may not matter but what if it happens and you lose the deal and attorney’s fees besides?

What is much more powerful and legal is to use language in the Addenda Section of your contract that stipulates your ability to use the end-buyers funds to fund your deal at closing. This statement will likely create a firestorm of comments but just remember whatever your feeling is about this; it is being done nationwide legally thousands of times a month.

Remember, the above information is for educational purposes only and not intended as legal advice, always consult the advice of an attorney when doing contracts in real estate. When someone tells you it can’t be done ask them how they know that and if you could see the Statute that says that. Then have your attorney check what the Supreme Court in your State ruled rather than assuming an archaic Statute is still legal and binding and that people run around quoting. As to why closing agents won’t cooperate on complicated closings it is more often the title insurer or the closing agent’s comfort level rather than a specific law or regulation.

Just be careful out there….

I wish you limitless success, Dave Dinkel

Visit  davedinkel.com  for full privacy policy, terms of use, etc.  Be sure to contact us through the website at  davedinkel.com  if you have questions or concerns ( [email protected] ).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.

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What Is an Assignment of Contract? [How It Works In Real Estate]

What Is an Assignment of Contract?

One intriguing strategy in real estate investing that often stirs interest among newbie investors is the assignment of contracts. This approach, which allows an investor to pass the contractual rights and obligations of a property purchase contract to another buyer, is seen to provide highly profitable opportunities.  

If you are an investor who wants to try this technique to achieve financial freedom, this blog is for you! Here, we'll delve into the nitty-gritty of contract assignment, explaining its mechanism, benefits, potential pitfalls, and the crucial steps involved. We hope that after reading this blog, you can navigate the real estate market with confidence!

What Is an Assignment of a Contract in Real Estate?

In real estate wholesaling, an investor agrees to buy a personal property, often at a below-market price, then assigns the contract to a different buyer, often another investor, for a higher price. 

The difference between the contracted price and the price paid by the end buyer represents the wholesaler's profit, known as the assignment fee. 

For example, an investor might secure a contract to purchase a personal property for $100,000, then find an end buyer or new party willing to pay $120,000 for the same property. By assigning the contract to the end buyer, the investor earns a $20,000 assignment fee. 

However, it's crucial to note that not all real estate contracts can be freely assigned. Some contracts may include a "no assignment" clause that prevents the transfer of the contract to another party. 

Thus, an investor needs to ensure that assigning contractual rights is allowed before proceeding with this strategy. If an assignment clause is not present in the contract, the investor may need to negotiate with the original party or owner to include in the contract rights it or find an alternate method to transfer the property to a new party.

In essence, an assignment contract is a way for real estate investors to connect sellers and buyers, while generating a profit from the transaction without needing to purchase, own, or manage the property themselves. It's a strategy that requires careful planning, thorough due diligence, and an understanding of real estate laws and market conditions.

Assignment Contract vs. Double Closing

Both assignment contracts and double closings are strategies used in real estate investing, particularly wholesaling, but they function differently.

As previously discussed, an assignment of contract involves the wholesaler (assignor) transferring their contractual rights in a property purchase agreement to another party (assignee), typically another investor. 

The wholesaler never actually purchases the property . Instead, they sell their contract to buy the property. The assignee pays an assignment fee to the wholesaler, then proceeds to close the deal with the original seller. In this arrangement, the end buyer is aware of the wholesaler's profit.

Meanwhile, double closing , also known as a "simultaneous close," involves the wholesaler actually purchasing the property before quickly reselling it to the end buyer. This is perhaps the main difference between the two.

Essentially, there are two separate transactions: one where the wholesaler buys from the original seller and another where the wholesaler sells to the end buyer. 

Both transactions of the contract occurs back-to-back, even on the same day. The wholesaler uses the funds from the end buyer to pay the original seller and keeps the difference as profit. This approach allows the wholesaler's profit to remain hidden from all parties.

Is an Assignment Contract Considered Legal?

Yes, an assignment contract is generally considered legal in real estate transactions. It is a common practice, especially in real estate investing and wholesaling.

However, the legality can depend on several factors, including the terms of the original contract and the laws in a particular area.

Some contracts may disallow assignment through a clause that "prohibits the assignment of the contract without the consent of the other party." In such cases, assignment of the written contract without consent would violate public policy and could potentially lead to legal repercussions. This may also encourage litigation.

Additionally, while an assignment contract is generally legal, some states in the U.S. have specific rules and regulations about how real estate contract assignments and wholesaling, more generally, should be conducted. 

Some require specific disclosures to be given to the other party to the contract or have particular rules about how the transaction can be advertised. Some do not also allow material alteration, In some jurisdictions, regular wholesaling activity might require a real estate license, contract expiration date for commercial contracts, etc.

Pros and Cons of Assignment of Contract in Real Estate

The assignment of contracts in real estate comes with its own set of advantages and disadvantages, which investors need to consider carefully before entering any deal.

To help you decide if this real estate investing strategy is indeed for you, read the following pros and cons.

Pros of Assignment of Contract

• Less Capital Required: Because the wholesaler is simply assigning the contract and not actually purchasing the property, less capital is required compared to traditional real estate transactions.
• Profit Potential: Assigning a contract can be profitable, especially when properties are secured under market value and the seller and buyer guarantees performance. The difference between the contract agreement price from the assignee and the purchase price the end buyer pays can result in significant earnings.
• Faster Transactions: Assignments often lead to faster transactions as the assignor is not taking possession of the property. They don't have to do heavy obligations such as a title search, contact a company to make repairs, etc. Once a suitable assignee is found, the existing contract can be assigned and the transaction completed.

Cons of Assignment of Contract

• Dependent on Buyers: Wholesalers are reliant on finding end buyers and getting a closing date. If an assignee can't be found in time, the wholesaler may be forced to back out of the deal or risk legal consequences.
• Limited Control: The wholesaler doesn't own the property and therefore has limited control over it. They can't make improvements or changes to increase its value since it isn't part of their obligations.
• Transparency of Profit: In an assignment, the assignee can see how much profit the assignor is making, which could potentially lead to negotiations or dissatisfaction in the obligations. But, of course, the assignor warrants that the fee is fair.
• Legal Considerations: You cannot assign rights to all types of contracts, and the federal government law may have specific regulations around how assignments work. Wholesalers must be aware of the legal landscape to ensure they conduct business following the law and that the two parties they will involve know the legal term of transfer.

Steps in Contract Assignment in Real Estate

Contract assignment in real estate can be a profitable strategy when done correctly. Each step in this process requires careful attention to detail and due diligence so as not to break the law. It is ideal to consult with a real estate attorney or other professionals before doing any transfer of property.

Nevertheless, here are the steps typically involved in a contract assignment in real estate.

Step 1. Find the Right Investment Property

The first step in contract assignment is identifying a suitable investment property. You need to find a property that can be purchased under market value and resold at a profit. 

This could be a distressed property, a foreclosed property, or simply a property that a seller needs to unload quickly. Market research and property analysis are critical at this stage.

Step 2. Prepare the Real Estate Contract 

Once a property has been identified, you need to prepare a real estate purchase agreement. This is the contract agreement that you will eventually assign to another buyer. It's crucial that this original contract either expressly allows for assignment or at least does not prohibit it.

If you are using a template from others or it has a trade name, make sure you are not going against the intellectual property law. There are already certain claims in the past about this, so be cautious.

Step 3. Submit the Contract

After preparing the original contract, it needs to be submitted to the seller. The seller may accept the contract as is, reject it outright, or propose changes. If changes are proposed, negotiations will take place until an agreement is reached. 

Step 4. Find an End Buyer Who Will Accept the Contractual Obligations

With an accepted contract in hand, you can now seek an end buyer to whom the contract will be assigned.

This could be another investor or a traditional homebuyer. Marketing the original contract can involve networking, advertising on real estate platforms, or working with a real estate agent.

Step 5. Assign the Contract to an End Buyer

After identifying an end buyer, you will assign or transfer the existing contract agreement to them (this may be an individual or a real estate company).

This involves an assignment agreement, which transfers your contractual rights and obligations under the original purchase contract agreement to one party or the end buyer (real estate company or investor).

The assignment agreement should clearly outline the original terms of the assignment, including the assignment fee that you, as the assignor, will receive.

Step 6. Collect the Fee

After the assignment agreement has been signed and transferred on the closing date, you can collect the assignment fee from one party. This is your profit from the assignment contract transaction.

The closing process then proceeds between the original seller and the end buyer, without any further involvement on your part. The property ownership will be transferred to the end buyer and you would no longer have any responsibilities or duties with them.

Final Thoughts: What are Assignment Contracts? [How Does Assignment of Contract Work in Real Estate]

Whether you're a seasoned real estate wholesaler or just starting, it's clear that understanding assignment contracts and how they function within the real estate sector can open doors to new opportunities and potentially profitable ventures. 

With the right approach, a keen understanding of the property market, negotiation skills, thorough due diligence, and creativity, these contracts can be your main income stream.

If you want to find leads on properties that you can assign to another buyer, reach out to us at Property Leads . We offer highly motivated seller leads in your target area for a very reasonable price. We guarantee a high conversion rate since we generate our leads through SEO.

Fill out our form below to start finding the best contract reassignment deals!

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Pitfalls Concerning Assignment of Purchase Agreements

Over the years, we have been contacted by many clients regarding purchase party defaults, after having permitted the initial buyer under a purchase contract to assign the agreement to a newly – created buyer affiliate or unrelated, third party assignee. As a result of not seeking legal advice regarding a buyer’s right to assign purchase agreement prior to the execution of the contract, two problems often result: 1) a shell purchasing entity is substituted as the buyer, and 2) the original buyer, which normally has assets, is now relieved of its obligations under the purchase agreement.

Unfortunately, prior to the close of escrow, if the new shell purchasing entity defaults on its obligations, and the seller seeks to recover the initial deposit based upon breach of contract, the seller is often left with less than a full recovery. When the replacement purchasing entity is a shell company with no assets, the seller may be unable to fully recoup its expenses, including attorney fees and escrow and title cancellation expenses.  Furthermore, even if a legal judgment is obtained against the purchasing assignee entity, it is often worthless because the purchaser has no assets.

Why Legal Advice Should be Sought Regarding the Buyer’s Right to Assign the Purchase Agreement

Anticipating that this issue may occur, we draft assignment provisions in the purchase agreement prior to signing that require two things. First, any newly – formed affiliate assignee buyer must expressly assume, in writing, all obligations of the original buyer under the purchase agreement. This includes the obligation to pay all costs and expenses (such as attorneys’ fees and escrow and title cancellation fees) resulting from any pre-closing default by the new assignee purchaser. Second, the provision should state that any such assignment to a new buying entity will NOT relieve the original buyer of its obligations under the purchase contract.

By doing so, the seller will have a remedy against both the newly – formed defaulting assignee and the original purchaser. The seller, therefore, can pursue both entities for the initial deposit and if, upon default, the new buyer refuses to release the initial deposit from escrow, the seller can sue both entities for recovery of the initial deposit and all costs and expenses (including attorneys’ fees, cancellation expenses and interest).

Additionally, the judgment will be “joint and several,” meaning that the seller can recover from either entity, permitting the seller to concentrate its collection efforts against the original purchaser (which has assets), rather than wasting time and money pursuing the shell entity.

The aggrieved seller can also prevent the shell purchaser simply walking away from the transaction without liability for the additional costs and expenses incurred due to the breach of the purchase agreement. The seller can avoid being blackmailed into settling for only a portion of the initial deposit in order to avoid incurring the cost, expense and delay of suing the shell assignee.

Other Benefits of Properly Drafting an Assignment Provision

Proper drafting of the assignment provision also can avoid an even worse scenario: one in which a defaulting assignee buyer files a lis pendens on the property. In such a case the seller could be faced with tremendous legal expenses required to remove the lis pendens – none of which will be recoverable from the newly – formed shell assignee buyer, which has no assets. We also recommend that our clients include an increase in the initial deposit following waiver of contingencies and/or the release of the initial deposit upon the buyer’s waiver of contingencies.

Having provided over three decades of legal advice and counsel to our clients, the lawyers at Narvid Scott are well – versed in avoiding potential pitfalls for the unwary. While we certainly cannot guarantee the elimination of all problems, our experience minimizes our clients’ risk and exposure. By contacting Narvid Scott before the letter of intent or negotiations for the sale or purchase commence, we can better protect our clients.

Remember: Before executing your next purchase agreement (whether as a buyer or purchaser) or better yet, before you even negotiate the Letter of Intent, I would be happy to review your transaction and provide effective and efficient advice and counsel.

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What Is a Listing Agreement? Definition, Types and How They Work

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What Is a Listing Agreement?

A listing agreement is a contract under which a property owner (as principal) authorizes a real estate broker (as agent) to find a buyer for the property on the owner's terms. In exchange for this service, the owner pays a commission .

Less commonly, the term listing agreement also refers to a contract made between a security issuer (e.g., a public company ) and the financial exchange that hosts the issue. Examples of exchanges include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), and the London Stock Exchange (LSE).

Key Takeaways

• A listing agreement is a contract between a property owner and a real estate broker that authorizes the broker to represent the seller and find a buyer for the property.
• The three types of real estate listing agreements are open listing, exclusive agency listing, and exclusive right-to-sell listing.
• The listing agreement is an employment contract rather than a real estate contract: The broker is hired to represent the seller, but no property is transferred between the two.

How a Listing Agreement Works

A listing agreement authorizes the broker to represent the seller and their property to third parties. The listing agreement is an employment contract rather than a real estate contract: The broker is hired to represent the seller, but no property is transferred between the two.

Under the provisions of real estate license laws, only a broker can act as an agent to list, sell, or rent another person's real estate. In most states, listing agreements must be written.

Because the same considerations arise in almost all real estate transactions, most listing agreements require similar information, starting with a description of the property. The description typically includes a list of personal property that will be left with the property when it's sold, as well as a list of personal property the seller expects to remove (for example, appliances, and window treatments).

The listing agreement also specifies the listing price, broker's duties, seller's duties, broker's compensation, terms for mediation, an automatic termination date, and any additional terms and conditions.

Though listing agreements are legally binding, it's possible to terminate the contract in certain situations—for example, if the broker does nothing to market the property. In addition, the listing agreement will be terminated if the property is destroyed (e.g., by a fire or natural disaster), or upon the death, bankruptcy, or insanity of either the broker or seller.

Types of Listing Agreements

With an open listing, a seller retains the right to employ any number of brokers as agents. It’s a nonexclusive type of listing, and the seller is obligated to pay a commission only to the broker who successfully finds a ready, willing, and able buyer. The seller retains the right to sell the property independently without any obligation to pay a commission.

The Multiple Listing Service (MLS) is a shared database established by cooperating real estate brokers to provide data about properties for sale. MLS allows brokers to see one another's listings of properties for sale with the goal of connecting homebuyers to sellers. Under this arrangement, both the listing and selling broker benefit by consolidating and sharing information and by sharing commissions.

Exclusive Agency Listing

With an exclusive agency listing , one broker is authorized to act as the exclusive agent for the seller. The seller retains the right to sell the property without obligation to the broker. However, the seller is obligated to pay a commission to the broker if the broker is the procuring cause of the sale.

Exclusive Right-to-Sell Listing

An exclusive right-to-sell listing is the most commonly used contract. With this type of listing agreement, one broker is appointed the sole seller's agent and has exclusive authorization to represent the property. The broker receives a commission no matter who sells the property while the listing agreement is in effect.

Whiterock Locators. " Can you terminate a real estate listing agreement? And if so, how? " Accessed July 13, 2021.

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Home Resources Real Estate Assignment vs. Sublease

Assignment vs. Sublease: What Are the Key Differences?

Updated September 26, 2024 | Written by Sara Hostelley Reviewed by Brooke Davis

When leasing property, you might encounter situations where you need to transfer your lease or share your rented space. Assigning a lease and subletting are potential solutions, but you should first understand their implications.

In this article, we explore the differences between a lease assignment and sublease, explain how these arrangements work, and discuss the rights and responsibilities they entail.

What Is a Lease Assignment?

A lease assignment is when the tenant transfers all their rights and obligations under a lease agreement to another party. The new tenant (the “assignee”) accepts all of the responsibilities and benefits of the leased property.

The assignment of a lease helps you when you need to get out of a lease before it expires. For example, suppose you’ve signed a 12-month lease for a commercial space. If your business relocates after six months and needs to get out of the commercial lease early, you can assign the lease to another entity to relieve your company from the lease responsibility.

What Is a Sublease?

A sublease agreement lets a tenant rent out all or part of their rented property to another person (the “subtenant” or “sublessee”). This arrangement is beneficial when you (as the direct tenant) need to temporarily vacate your rental unit or share the space with someone else. Subletting offers flexibility for short-term housing needs and can help you avoid breaking your lease .

When you enter a sublease, you’ll still be responsible for fulfilling the terms of your original lease, including paying rent and maintaining your unit. Additionally, you’ll assume landlord-like duties toward your subtenant, such as addressing maintenance issues and collecting rent.

Assignment vs. Sublease: Key Differences

Here are the key differences between a lease assignment and a sublease:

• Assignment: Three main parties—the landlord, the original tenant (the assignor), and the new tenant (the assignee).
• Sublease: Two main parties—the original tenant (the “sublessor”) and the subtenant (the “sublessee”). The landlord isn’t a direct party in a sublease.
• Assignment: The original tenant transfers all their rights under the rental agreement to the new tenant. The assignee takes over the lease for the rest of the term.
• Sublease: The original tenant keeps their lease rights but grants the subtenant rights to use an entire rental unit (or part of it) for a certain period. The subtenant’s rights are secondary to the original tenant’s.
• Assignment: The new tenant assumes liability for the lease, but the original tenant may remain secondarily answerable to the landlord if the assignee defaults.
• Sublease: The original tenant remains fully liable to the landlord for the lease’s obligations. The subtenant is only responsible to the original tenant.
• Assignment: The assignee pays rent to the landlord.
• Sublease: The subtenant pays rent to the sublessor; they have no financial obligation to the landlord. The sublessor must make full rent payments to the landlord.
• Assignment: The assignee can use the leased premises in the manner outlined in the original lease. Any conditions or restrictions that applied to the original tenant now apply to the assignee.
• Sublease: The subtenant uses the property as described in the sublease, which may or may not be consistent with the original lease’s terms. The original tenant must ensure that the sublease’s terms don’t violate the original lease.
• Assignment: The original lease agreement stays in effect, but all responsibilities transfer to the assignee. Any changes to the lease may require the landlord’s consent.
• Sublease: The original lease governs the sublessor’s obligations, while the sublease dictates the sublessor-subtenant relationship. The sublease cannot override the original lease’s terms.
• Assignment: The landlord must typically issue approval before the original tenant can assign the lease to a new tenant. Most leases have clauses that allow the landlord to approve or reject an assignment based on reasonable grounds.
• Sublease: A sublease also typically requires the landlord’s consent . Some leases may allow subletting without further consent from the landlord, as landlords have fewer concerns because the original tenant keeps their promises in the lease.
• Assignment: The landlord and the new tenant (the assignee) enter a relationship.
• Sublease: The landlord has no direct involvement with the subtenant. The subtenant answers to the tenant, while the tenant answers to the landlord.

How to Choose Between Assigning a Lease and Subletting

Here are some factors that may influence your choice between assigning a lease and subletting:

• Duration of Need: Consider how long you plan to vacate the property. If you want the option to return, choose subletting. If you plan not to return, choose assigning the lease.
• Liability: Think about how much responsibility you want to have. Assigning a lease minimizes your liability, while subletting keeps you liable if the subtenant defaults.
• Lease Terms: Check your lease for an assignment or sublease clause. If your lease favors subletting and restricts assignments, you may opt for a sublease.
• Landlord’s Approval: If your landlord is willing to let you assign the lease to someone else, you may choose this option because it provides a cleaner break. However, it might be easier to get approval for a sublease than for an assignment.
• Control Over the Property: Subletting may be right for you if you wish to retain some control over the property. However, if you no longer have an interest in using or benefiting from the property, you may pursue a lease assignment.
• Market Conditions: In a renter’s market, you may be able to sublease to another individual and charge payments that cover your monthly rent and let you profit. If the rental market is weak in your area, you may opt to assign the lease instead.

Privity of Contract and Privity of Estate in Lease Assignments and Subleases

You can further distinguish between lease assignments and subleases by determining the presence or absence of the privity of contract and privity of estate between the involved parties:

• Privity of contract: A relationship between two parties that lets them enforce the terms of their contract against each other.
• Privity of estate: A relationship between two parties with an interest in the same property.

This table summarizes whether privity of contract and privity of estate exists between the parties in an assignment:

This table summarizes whether privity of contract and privity of estate exists between the parties in a sublease:

Example of Privity of Contract and Estate in an Assignment

Sophia owns Riverside Apartments. She leases Riverside Apartments to Mark for a term of 4 years. In the third year of the lease, Mark decides to assign his interest in Riverside Apartments to Jordan.

Here’s whether privity of contract and privity of estate exist between the parties:

• Sophia and Mark: Sophia and Mark retain privity of contract but not privity of estate because the original lease is still valid, but the interest in the property goes to Jordan.
• Sophia and Jordan: Sophia and Jordan maintain privity of estate because Jordan now holds the present interest in the property. Sophia doesn’t have privity of contract with Jordan, as the original lease agreement remains between Sophia and Mark.
• Mark and Jordan: Mark and Jordan share privity of contract because of their agreement regarding the lease assignment. However, they don’t have privity of estate because Mark no longer has a possessory interest in Riverside Apartments; he has fully transferred his rights to Jordan.

Example of Privity of Contract and Estate in a Sublease

David owns Greenfield Plaza. He leases Greenfield Plaza to Brittany for a five-year term. In the fourth year of the lease, Brittany decides to sublease her rights to Emily for the remaining year.

• David and Brittany: David keeps privity of contract with Brittany because their original lease is still in effect. David also has privity of estate with Brittany, as she keeps a legal interest in the property.
• David and Emily: David and Emily don’t have privity of contract because the sublease is a separate agreement between Brittany and Emily. As a result, David has no direct legal obligations or rights concerning Emily. Furthermore, David and Emily have no privity of estate.
• Brittany and Emily: Brittany and Emily have privity of contract and privity of estate because of the sublease they entered into together.

Understanding the Differences Between Assignments and Subleases

Understanding the nuances between assignments and subleases can significantly impact tenants navigating their rental agreements. This knowledge helps them make informed decisions when circumstances require them to transfer or share their leased space.

Review your original lease, talk to your landlord, and talk to a lawyer to protect your interests and create flexibility in your living or business arrangements.

Sara Hostelley

Legal Content Editor

Sara Hostelley is a legal and SEO content editor with a bachelor's degree in English from the University of South Florida. She has ample experience writing informative content pieces within various...

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Assignments – How to Complete the Forms

There is a standard form Agreement for assignments prepared by OREA. You should be using it.

I do understand that quite a few real estate agents are unfamiliar with the document and not quite sure how to fill it out correctly.

Therefore, I have reproduced the document, in part here. My commentary appears in Italics. I have chosen not to reproduce those parts of the Agreement that would otherwise appear in the standard Agreement of Purchase and Sale.

Also, we will go through an example.

John Smith bought a condo from ABC Developers Inc, at the pre-sales when the site first opened for $400,000 with three deposits of $15,000.00 each. So far he has paid two deposits.

The market has escalated and he has now sold the condo to Mary Jones for $575,000,00.

So, the question is: how do we fill out the form?

Brian Madigan’s Annotated Abbreviated Assignment Agreement

Assignment of Agreement of Purchase and Sale Condominium

Parties to Agreement

          Assignor:     John Smith

          Assignee:     Mary Jones

THE ASSIGNOR’S INTEREST IN THE REAL PROPERTY:

Also includes

together with seller’s proportionate undivided tenancy-in-common interest  in the common elements appurtenant to the Unit

The reference to seller here means ABC Developer Inc.

Purchase Price:      $575,000.00

Deposit:                $20,000.00

That was the full purchase price on the second deal, not just the assignment uplift. The deposit will be held by the Listing Agent for John Smith.

The Assignee and Assignor acknowledge that the Purchase Price noted above includes both the purchase price the Assignor is paying for the property as indicated in the Agreement of Purchase and Sale between the Assignor and the seller of the property attached hereto as Schedule C, and also includes the amount being paid by the Assignee to the Assignor as payment for the Assignment Agreement.

That means the original purchase price of $400,000.00 plus the market uplift of $175,000.00.

The Assignee and Assignor agree that the funds for this transaction will be calculated and paid as set out in Schedule B attached hereto and forming part of this Agreement.

This is the “paid on closing arrangement” and the outline for the funds.

Assignee agrees to pay the balance as more particularly set out in Schedules A and B attached.

Schedules A, B (Calculation of funds for this Agreement),

Schedule A is the regular one that you will come across. Schedule B is the actual breakdown and calculation of the various funds. It is peculiar to assignments.

We will break this down later.

C (Agreement of Purchase and Sale that is the subject of this Assignment),

This is a full and complete copy of the original Agreement from ABC Developers Inc.

2. ASSIGNMENT: The Assignor agrees to grant and assign to the Assignee, forthwith all the Assignor’s rights, title and interest, in, under and to the Agreement of Purchase and Sale attached hereto in Schedule “C”.

This is the assignment and the full transfer of rights under the underlying Agreement.

3. ASSIGNEE COVENANTS: The Assignee hereby covenants and agrees with the Assignor that forthwith upon the assignment of the Agreement of Purchase and Sale it will assume, perform, comply with and be bound by, all obligations, warranties and representations of the Assignor as contained in the Agreement of Purchase and Sale as if the Assignee had originally executed the Agreement of Purchase and Sale as buyer with the seller.

This is the assumption by the assignee, the new Buyer to take over.

4. ASSIGNOR COVENANTS: The Assignor covenants and represents that:

(a) the Assignor has the full right, power and authority to assign the prior Agreement of Purchase and Sale attached hereto as Schedule “C” (the “Agreement of Purchase and Sale”) and the Assignor’s interest in the property;

(b) the Agreement of Purchase and Sale attached hereto as Schedule “C” is a full and complete copy thereof and has not been amended, supplemented, terminated or otherwise changed in any way and is in good standing and has not previously been assigned.

(c) the Assignor will not amend the Agreement of Purchase and Sale without the Assignee’s prior written consent;

(d) after acceptance of this Assignment Agreement until the earlier of termination or completion of the Agreement of Purchase and Sale attached hereto as Schedule “C”, the Assignor will not further assign the Agreement of Purchase and Sale.

(e) neither party to the Agreement of Purchase and Sale (Schedule C) has done any act in breach of the said Agreement of Purchase and Sale or committed any omission with respect to the said Agreement of Purchase and Sale.

This is the outline of the new role for the Assignor.

7. FUTURE USE: Assignor and Assignee agree that there is no representation or warranty of any kind that the future intended use of the property by Assignee is or will be lawful except as may be specifically provided for in this Assignment.

The property started out as a farm and it is in the process of becoming a residential condominium. But, the Assignor doesn’t promise that.

8. INSPECTION: Assignee acknowledges having had the opportunity to inspect the property or the plans and documents for the property to be constructed and understands that upon acceptance of this offer there shall be a binding Assignment agreement between Assignee and Assignor.

Very, very peculiar, looking at the plans is an “inspection”. This makes no sense! It really should be here like that, but it is, so you have to be aware and make sure that the second Buyer is aware of that too. There really are no inspections!

10. RESIDENCY: (a) Subject to (b) below,

the Assignor represents and warrants that the Assignor is not and on completion will not be a non-resident under the non-residency provisions of the Income Tax Act which representation and warranty shall survive and not merge upon the completion of this transaction and the Assignor shall deliver to the Assignee a statutory declaration that Assignor is not then a non-resident of Canada;

(b) provided that if the Assignor is a non-resident under the non-residency provisions of the Income Tax Act, the Assignee shall be credited towards the Purchase Price with the amount, if any, necessary for Assignee to pay to the Minister of National Revenue to satisfy Assignee’s liability in respect of tax payable by Assignor under the non-residency provisions of the Income Tax Act by reason of this sale. Assignee shall not claim such credit if Assignor delivers on completion the prescribed certificate.

This is consistent with the Buyer’s obligation to verify the residency of the Seller in most transactions.

12. PROPERTY ASSESSMENT: The Assignee and Assignor hereby acknowledge that the Province of Ontario has implemented current value assessment and properties may be re-assessed on an annual basis.

The Assignee and Assignor agree that no claim will be made against the Assignee or Assignor, or any Brokerage, Broker or Salesperson, for any changes in property tax as a result of a re-assessment of the property, save and except any property taxes that accrued prior to the completion of this transaction.

This disclaimer doesn’t really work as it applies to those who are not party to the transaction.

15.  APPROVAL OF THE AGREEMENT: In the event that consent to this Assignment is required to be given by the seller in the Agreement of Purchase and Sale attached hereto in Schedule C, the Assignor will apply, at the sole expense of the Assignor, forthwith for the requisite consent, and if such consent is refused, then this agreement shall be null and void and the deposit monies paid hereunder shall be refunded without interest or other penalty to the Assignee.

From time to time, there will be a restriction upon assignment. Some clauses are enforceable and some are not. In some cases, there is a fee that is required to be paid to the Seller.

16. AGREE TO CO-OPERATE: Except as otherwise expressed herein to the contrary, each of the Assignor and Assignee shall, without receiving additional consideration therefor, co-operate with and take such additional actions as may be requested by the other party, acting reasonably, in order to carry out the purpose and intent of this Assignment.

This is important. The transaction may continue for several years. This states that the Assignor, John Smith will continue to assist in the transaction as required, and no further compensation need be paid.

But, what if John becomes mentally disabled or dies? In that case, Mary Jones needs a Continuing Power of Attorney for Property that applies only to this property and is not revoked upon death. There is no requirement or obligation for this otherwise in the standard form.

17. DEFAULT BY SELLER: The Assignee and Assignor acknowledge and agree that if this Assignment Agreement is not completed due to the default of the seller for the Agreement of Purchase and Sale (Schedule C) that is the subject of this Assignment, the Assignor shall not be liable for any expenses, losses or damages incurred by the Assignee and this Assignment Agreement shall become null and void and all moneys paid by the Assignee under this Assignment Agreement shall be returned to the Assignee in full without interest.

What if the original condo developer runs into financial trouble? John Smith is not responsible, although he does agree to refund all the money. That might be quite a challenge after he has spent it all and left the country.

20. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Assignment (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Assignment including any Schedule attached hereto, shall constitute the entire agreement between Assignee and Assignor. There is no representation, warranty, collateral agreement or condition, which affects this Assignment other than as expressed herein. This Assignment shall be read with all changes of gender or number required by the context.

This provision is important because it contains an “entire agreement” clause.

BALANCE OF PAYMENT UNDER THIS ASSIGNMENT AGREEMENT:

The Assignee will deliver the balance of payment for this Assignment Agreement as more particularly set out in Item 6. on Schedule B, subject to adjustments, with funds drawn on a lawyer’s trust account in the form of a bank draft, certified cheque or wire transfer using the Large Value Transfer System,

to the Assignor prior to completing the transaction in the Agreement of Purchase and Sale attached hereto as Schedule “C”

to be held in trust without interest pending completion or other termination of the Agreement of Purchase and Sale attached hereto as Schedule “C”.

The title transfer date is the final closing. Funds are to be held in trust until then. That could be quite some time. Opting for an earlier occupancy closing could be risky.

The Assignee and Assignor agree that the calculation of funds to be paid for this Assignment Agreement, subject to adjustments, is as set out in the following Items:

1. Total Purchase Price including the original Agreement of Purchase and Sale and this Assignment Agreement:

2. Purchase Price of original Agreement of Purchase and Sale as indicated in Schedule C:

3. Deposit(s) paid by Assignor to the seller under the original Agreement of Purchase and Sale as indicated in Schedule C, to be paid by the Assignee to the Assignor as follows:

It is important to get the correct calculations here.

• This is $575,000.00.
• This is $400,000.00
• This is $30,000.00 (one more $15,000.00 payment is yet to be made)

(Upon acceptance of this Assignment Agreement and receipt of consent to assign from original seller, if applicable)

(Upon occupancy by the Assignee and receipt of consent to assign from the original seller, if applicable)

(Upon final closing of original Agreement of Purchase and Sale and this Assignment Agreement)

          4. Payment by Assignee to Assignor for this Assignment Agreement:

5. Deposit paid under this Assignment Agreement (in accordance with Page 1 of this Assignment Agreement):

6. Balance of the payment for this Assignment Agreement:

Kindly note that you have to figure out when the closing will be, now, occupancy, or title transfer.

• $175,000.00 (that’s the market lift),
• $20,000.00 (this is the deposit on the assignment not the ABC deal),
• $185,000.00, (that’s the market lift, less the deposit paid, plus credit for the Assignor’s deposit paid to ABC, so $175,000.00 less the $20,000.00 deposit ($155,000.00) plus the  $30,000.00 in deposits paid so far to ABC, or $185,000.00. The Assignee will pay the next deposit instalment in favour of the Seller when it becomes due.

It is noteworthy that the Assignment transaction could be closed upon occupancy or upon the final title transfer. Title transfer would be much preferred and the least risky alternative. The Schedule A requirement is to pay the funds ahead of time.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Brian, this is fabulous. Helps to understand clause construction and the 3 schedules (A,B,C) of an assignment deal. This actually makes me think of a dozen more questions but for next time.

Thanks very much!

Hi Brian, I found this helpful. Thankyou. What form would you use for a Potl? Condo or freehold?

OREA Form 111

Wow this really helped with filling out the forms. Thank you so much. You’re a life saver.

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