Assignment of Contract: How to Tell If Your "Cash Buyer" Is Really a Wholesaler

How assignment works

When you sign a purchase contract, the buyer gets a contractual right to buy your home, and you keep the title until closing. In an assignment, that buyer transfers their contractual rights to someone else, called the assignee.^[1] The contract doesn't go away: the new buyer is bound by the same price, closing date, and terms, and you close with the new buyer.^[1]

The original buyer is usually paid an assignment fee by the new buyer.^[1] That fee is the gap between what you agreed to and what the end buyer pays. This is the business model often called “wholesaling.”

How to spot an assignment clause

• “and/or assigns” after the buyer's name is the classic sign. In Texas, signing a contract with that phrase indicates the seller agreed to assignment.^[1]
• A clause that says the buyer may “assign this agreement” or “transfer its interest.”
• A very long closing date or inspection period, which gives the buyer time to find an end buyer.
• A clause allowing a “memorandum” or “affidavit” to be recorded against your home. See memorandum of contract.^[3]

Is it legal?

Generally yes, unless the contract prohibits it. In Texas, assignment is generally allowed unless the contract says otherwise, but the assignor must give written notice of intent to assign.^[1] A growing number of states now regulate wholesaling directly. Pennsylvania, for example, requires wholesalers to be licensed, to disclose their intent to assign, and to give sellers a right to cancel.^[2] See our state-by-state wholesaling laws.

Assignment vs. double closing

In an assignment there's one closing and the original buyer never takes title. In a double closing, the investor actually buys your house and resells it in a second closing, usually the same day.^[4]

What to ask before you sign

1. “Are you buying this house yourself, or might you assign the contract to someone else?”
2. “If you assign it, who pays the fee, and will I see the new buyer's name before closing?”
3. “Can we remove ‘and/or assigns’ from the contract?” A buyer who truly plans to buy can usually agree.
4. “What happens to my earnest money if the end buyer backs out?”

Wholesaling isn't automatically bad, and a good wholesaler may find a buyer who pays a fair price. The problem is not being told. CashBuyerRated's seller reviews ask whether the buyer was clear upfront about assigning the contract.