What is an assignment of contract?
An assignment of contract is the easiest and probably most well known way to flip houses with no cash or credit. Here’s how it works:
Once you find a distressed property or distressed seller and execute a contract to purchase that property, you have equitable interest in the transaction. You contract is a tangible asset giving you EXCLUSIVE rights to purchase that property and at that price – that you can now sell your rights to for a fee. Note that your contract must specify that it is assignable.
Let’s say I’m purchasing a property worth $100,000 for $55,000. I can sell my contract (assign it) to an end buyer for $10,000. Now the end buyer pays $65k out of pocket, but still gets a great deal. It really is that simple. Just submit the purchase agreement and your assignment contract to the title company and wait to get paid.
Assignments are ideal because there is only one transaction that takes places. You don’t need to pay any closing costs, transactional funding fees, or put up any deposits the way you would when using some of the other house flipping methods (more on that in just a second).
You can download a copy of the assignment agreement at the bottom of this page.
Why would anyone NOT use an assignment?
Fewer and fewer sellers are allowing assignable contracts. Almost all banks will reject an assignable offer and many properties listed with a Realtor will do the same. Among other things, it can be a huge red flag that you might not close on the property.
As a result, investors are bypassing this temporary obstacle by simply doing a double closing. In addition to allowing you to flip real estate with a non-assignable contract, double closings have other advantages. When double closing for example, you do not disclose your profit to the end buyer – they only know their purchase price, not yours. When using an assignment on the other hand, the fee is agreed upon between both parties up front.
For a walkthrough of the double closing process including:
- “What is a double closing”
- “How to go about double closing – step by step”
- “The advantages of double closing”
- “The disadvantages of double closing”
- “When should I double close and when should I use an assignment” if both options are on the table
check out the entry on double closings here. (And don’t forget to download your assignment contract below)