An assignment of contract is how most wholesalers make money without ever buying the house. Instead of purchasing a property and then reselling it, the investor (the "assignor") signs a purchase contract with the seller, then sells their right to buy under that contract to a second buyer (the "assignee") for an assignment fee. The assignee steps into the assignor's shoes and closes directly with the original seller.
How It Actually Works
Say you put a distressed property under contract for $150,000. You never intend to close on it yourself — you're looking for an end buyer, usually a cash investor or another flipper, who will pay more for the right to take over that contract. If you find someone willing to pay $160,000 for the property, you assign your contract to them for a $10,000 fee. At closing, the new buyer pays the seller the original $150,000 and pays you the $10,000 assignment fee separately (or it's built into the closing statement, depending on how the deal is structured).
The mechanism is a short addendum or assignment agreement added to the original purchase contract, typically along the lines of "[Assignor] hereby assigns all rights, title, and interest in this Agreement to [Assignee]." Once signed, the assignee is now the buyer of record and the assignor is out of the transaction — collecting only the fee.
What You Need in Place
- An assignable contract. The original purchase agreement has to allow assignment. Many standard residential contracts do by default unless a clause specifically prohibits it — check for language like "buyer and/or assigns."
- Seller awareness. Sellers don't always need to formally approve the new buyer, but many contracts and most ethical wholesalers disclose that the buyer may assign the contract. Some sellers, especially with agent-listed properties, will push back on assignment clauses or require the wholesaler to disclose the intent up front.
- A qualified assignee. If the deal requires financing (rare in wholesale deals, since most assignees pay cash or use hard money), the new buyer needs to be able to close on the agreed timeline.
Assignment vs. Double Close
Assignment isn't the only way to flip a contract. When a deal is more sensitive — a large spread that the seller might object to, a lender-owned property that prohibits assignment, or a state where assignment fees must be disclosed in ways that complicate the deal — investors use a double close instead. In a double close, the wholesaler actually buys the property (often using transactional funding for a few hours or days) and immediately resells it to the end buyer in a second, separate closing. It costs more in closing costs but keeps the assignor's profit private and avoids assignment-clause issues entirely.
What to Watch Out For
- Non-assignable contracts. Bank-owned (REO) properties and many agent-listed deals explicitly bar assignment. Read the contract before you count on flipping it.
- State disclosure and licensing rules. A handful of states have added specific disclosure requirements or licensing questions around wholesaling and assignment fees in recent years. Rules vary by state and change, so verify current requirements with a local real estate attorney before you build a business around it.
- Seller pushback at closing. Some sellers feel blindsided when they learn at the closing table that their buyer is someone else entirely. Being upfront in the original contract avoids this.
- A buyer list you can actually count on. An assignment only pays off if you have a real buyer ready to close. Wholesalers who assign contracts before they have a confirmed buyer risk losing their earnest money if the deal falls through.
Frequently Asked Questions
Is assigning a contract the same as flipping a house?
No. Flipping means buying the property, renovating it, and reselling it — you take title and carry the renovation risk. Assigning a contract means you never take title; you sell your contractual right to buy before closing.
Does the seller have to agree to the assignment?
It depends on the contract. If the purchase agreement is written as assignable (commonly "Buyer and/or Assigns"), the seller has already agreed to the possibility when they signed. Some contracts require separate written consent.
How much can an assignment fee be?
There's no fixed cap in most states, but the fee is simply the spread the assignee is willing to pay above the assignor's contract price. It's negotiated deal by deal.
What happens if I can't find an assignee?
You're still the buyer of record under the original contract. If you can't assign or close, you risk losing your earnest money deposit unless the contract has a contingency that lets you exit cleanly.