ASSIGNMENT OF CONTRACT DEFINED:

With assignment of contract, you find a property under market value and get it under contract (obtaining a purchase agreement on the property). Let’s say you have a purchase contract on a property that has $30,000 in equity. You then find a buyer and assign that contract for a profit. Your buyer will pay you $7500 for the property right now. He then closes on it and there is still some profit in the deal for him.

A great thing about “assignment of contract” is that you avoid the issue of acting as a real estate broker because you have an interest in the property. Your interest is evidenced by your contract. However there can still be some problems with assigning contracts. One is that you get a property under contract and you don’t have the ability to close on the property or get the contract assigned, and then you have to walk away from the deal.

This is usually accomplished by what’s known as a weasel clause. A weasel clause is an easy way to get out of your obligation of fulfilling a contract. A good example would be “subject to approval of my partner.” You tie the property up under contract and, if for some reason you can’t find a buyer to assign or flip it to, it’s no problem. You back out as per the weasel clause and get back your earnest money.

The problem I have with this is, if you can’t close or aren’t sure you can assign the contract; you shouldn’t be out tying up these properties. Essentially what you are doing is putting people’s lives (the seller) on hold, while they incur additional holding costs. They now have to put the property back on the market and try to get it sold again. Would you want someone doing that to you? Probably not! There are definitely better and easier ways to make money in real estate instead of going around tying up properties of which you can’t dispose. You’ll get a bad reputation in your area pretty quickly from doing this sort of thing.

However if it’s done right, assignment of contract can be very rewarding as well as carrying very little risk with it. You’re just not likely to build up any kind of long-term wealth doing it.  It is more of a strategy for newbies and people who don’t like a lot of risk in their real estate investing. We’ve included the following “flow” chart to map out what we have found is a great way to do assignments. An integral part of any real estate investing strategy has to be “finding” the properties. If you can’t find a deal then you have no deal… nothing else matters period. The Area Property Scan (APS) Software is a very important component to finding the deals.