What is Contract Assignment?
Many have heard of the term contract assignment but, are not sure exactly what it is.
When someone goes into contract with the seller of a property, they obtain what is known as an “equitable interest” in that property.
Equitable interest allows the contractee (buyer) certain rights to the property as well as a determined price or set of terms for which the property will be obtained.
Since they are now in the process of “due diligence” (time period where they are able to review the current state and history of a property), they are afforded a certain measure of control.
This is why it’s important,
the contract itself is something of value. When most contracts are written on a property, that prevent the seller from entering into a similar situation with another party. This “tieing up” of the subject property produces something of value.
Here is what you need to know…
Since the contract is something of value, it can be assigned to a third party for consideration.
This can be helpful in situations where the buyer is no longer able to close on the contract for some reason.
Buyers who assign contracts on property are performing a wholesale, which was coined due to the similarity of wholesaling property to wholesaling other products to major buyers. (This is not the only means of wholesaling.
Wholesaling also includes the process of purchasing a property at a discount and then reselling under market price.)
All contracts are assignable unless the contract specifically stipulates that the contract cannot be assigned, which is the case with most Board of Realtor contracts (see the contract specifically for your state).
It does not matter the type of contract.
It can be a lease purchase (lease option) contract, an Option contract (this may not be true in the state of Florida, consult an attorney!!!), a purchase and sale agreement, etc.
Most assignments are written as separate, legal, documents that stipulate that the the contractee is assigning all of their rights, within the contract, to the secondary buyer for a specific consideration.
The assignee can then exercise their rights in the contract as if they were the original buyer.
***Please note that this information is disseminated as information only and does not constitute legal advice, nor are we attorneys. Please seek the advice of a competent attorney.