Assignments of contract may be a profitable real estate strategy. In this article, we’ll define the term “assignment of contract” and explains how it applies to real estate.
An assignment of contract refers to a legal process in which one party, known as the assignor, transfers the rights and responsibilities of a contract to another party, known as the assignee. This means that the assignee essentially takes the place of the assignor in terms of their obligations and benefits under the contract.
Assignments can be used for a variety of reasons, such as when a company wants to transfer ownership of a project to a different entity or when a party needs to delegate responsibilities to a subcontractor. The process typically involves a written agreement that outlines the terms of the assignment and is signed by all parties involved.
Assignment of contract is common in real estate investing, where investors use assignment contracts to purchase a property without actually taking ownership of it.
With an assignment contract, an investor signs a purchase agreement with a seller, but instead of closing on the property, the investor assigns the contract to a third party who will ultimately close on the property. The third party, or assignee, agrees to take on the responsibilities and benefits of the purchase agreement, and the assignor, or original investor, receives a fee for the assignment.
Assignment contracts are a useful tool for real estate investors because they allow them to secure a property without having to finance it themselves. Investors can then assign the contract to a third party who can close on the property and take ownership. This process allows investors to earn a profit without having to purchase the property themselves.
However, it's important to note that the use of assignment contracts may be subject to certain legal restrictions, so it's essential to consult with an experienced real estate attorney before using them.