Mastering the Assignment of Purchase Agreement for TCs

As Transaction Coordinators, we deal with a cascade of contracts, addendums, and forms. One document that can sometimes feel like deciphering ancient scrolls is the assignment of purchase agreement. It’s a crucial mechanism in real estate, particularly in wholesaling, but understanding its nuances is vital for ensuring a smooth transaction. Let’s dive in and demystify this powerful piece of paper!

What is an Assignment of Purchase Agreement?

Simply put, an assignment of purchase agreement is a legal contract where a buyer (the assignor) transfers their rights and obligations under an existing purchase agreement to a new buyer (the assignee). The assignee then steps into the original buyer’s shoes, assuming their position in the deal.

This doesn’t just happen automatically, of course. The original purchase agreement must typically allow for assignment, often with the seller’s consent. When executed correctly, the original buyer (the assignor) often steps away from the transaction upon assignment, and the new buyer (the assignee) closes directly with the seller.

How Does the Assignment Process Work?

The process usually follows these steps:

1. Original Contract: The first buyer (Assignor) enters into a purchase agreement with the seller. This contract should Ideally have an assignability clause.
2. Find an Assignee: The Assignor finds a new buyer (Assignee) willing to purchase the property under the terms of the original contract, plus an assignment fee.
3. Assignment Agreement: The Assignor and Assignee sign a separate document – the assignment of purchase agreement – transferring the Assignor’s rights and obligations to the Assignee. This document outlines the terms of the assignment, including the assignment fee.
4. Seller Consent: If required by the original contract, the seller must consent to the assignment.
5. Closing: The Assignee closes the transaction with the original seller, typically paying the purchase price agreed upon in the original contract plus paying the assignment fee to the Assignor.

Why Does Assignment Happen?

Assignments are common in scenarios like:

• Wholesale Real Estate: Wholesalers contract properties at a discount and then assign their rights to cash buyers for a fee, without ever closing on the property themselves.
• Flipping: An investor might contract a property, secure financing or partners, and then assign the contract to their entity or a partner before closing.
• Unexpected Circumstances: Sometimes, a buyer may need to back out but finds someone else willing to take over the contract to avoid default.

TC Tips for Handling Assignments

Alright, TCs, listen up! Assignments add layers of complexity. Here are some tips to keep those files pristine (file that under ‘must read’!):

1. Verify Assignability: Always review the *original* purchase agreement immediately. Look for clauses regarding assignment. Does it require seller consent? Are assignments prohibited? Knowing this upfront is critical.
2. Secure the Assignment Agreement: Obtain a fully executed copy of the actual assignment contract between the Assignor and Assignee. This document is paramount.
3. Confirm Seller Consent: If seller consent is required, ensure you have written proof of this consent. Don’t proceed without it.
4. Update Contact Information: Get the Assignee’s full contact details, closing entity information, and ensure they are properly introduced to necessary parties (escrow/title, lender if applicable, though assignments are common with cash).
5. Coordinate Fees: Understand how the assignment fee will be paid (usually at closing, disbursed by escrow/title). Ensure the assignment agreement clearly states the fee and payment terms for the closing statement.

Why Understanding the Assignment of Purchase Agreement Matters to TCs

Our role is to facilitate a smooth and compliant closing. The presence of an assignment significantly changes the transaction’s dynamics. The buyer you started with is no longer the buyer closing the deal. This impacts names on documents, escrow instructions, fund transfers, and potentially timelines. A lack of understanding here can lead to significant closing delays, legal issues, or incorrect disbursements.

Analysis & Insights

Assignments, while useful, can sometimes signal potential complications, especially if the original contract was entered into without a genuine intention to close if an assignee isn’t found. From a data perspective, transactions involving assignments, particularly in the wholesale space, can sometimes have a higher failure rate if the assignee isn’t secured promptly or if title issues arise that the original buyer didn’t fully vet. Best practice dictates clear communication with all parties – the seller (or their agent), the assignor, the assignee, and the escrow/title company – from the moment the assignment is contemplated or executed. Ensure the closing instructions accurately reflect the Assignee as the buyer and clearly outline the assignment fee disbursement.

FAQs About Assignments

Q: Can a purchase agreement be assigned if the contract is silent on assignment?
A: Generally, yes, unless the contract specifically prohibits it. However, contracts often include clauses requiring seller consent.

Q: What happens to the original buyer’s earnest money deposit?
A: Typically, the original buyer’s earnest money deposit is credited to the new buyer (the Assignee) at closing. The assignment agreement should clarify this.

Q: Does the seller get any of the assignment fee?
A: Usually, no. The assignment fee is typically a separate agreement between the original buyer (Assignor) and the new buyer (Assignee).

Q: Who prepares the assignment of purchase agreement document?
A: This is often prepared by one of the parties’ attorneys or sometimes by the parties themselves, though using a legal professional is highly recommended.

Q: Does an assignment affect the closing timeline?
A: It can, especially if seller consent is delayed or if the Assignee requires new financing (though assignments are more common with cash buyers).

Resources

• Sample Assignment of Contract for Purchase and Sale (Placeholder Link)
• Understanding Real Estate Wholesaling (Placeholder Link)
• Rebillion’s Real Estate Blog

Conclusion

Navigating the assignment of purchase agreement requires diligence, attention to detail, and clear communication. For Transaction Coordinators, it’s about ensuring all parties are aware, all necessary documents are executed and collected, and the closing instructions accurately reflect the assigned contract. By mastering this process, you help ensure a compliant and successful closing for everyone involved. Stay sharp, keep those files organized, and remember that platforms like Rebillion.ai are designed to help TCs manage these complex transactions efficiently. For more insights into real estate processes and TC best practices, keep following Rebillion’s Real Estate Blog!