If you are going to wholesale a house you will need wholesale real estate assignment contract. This is basically a purchase agreement that gives you the option to assign your rights and interests to purchase the property to another buyer. Once assigned (using an assignment agreement), the new buyer would take over your purchase agreement. All terms and conditions of the original purchase agreement would remain the same.
Why is this important? You always want to make sure your contract is legit. If there was ever a dispute between you and the seller, everything will fall back on the contract. What does the purchase agreement say? What protections do you have in the agreement? This will be your first line of defense in the event of a dispute.
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An assignment clause in a wholesale real estate purchase agreement will usually look something like this:
ASSIGNMENT AND RELEASE. Seller agrees and acknowledges that Buyer may assign its rights under this Agreement to a wholly or partially owned entity of the Buyer or a third party that will close directly with Seller. Buyer shall give notice in writing to Seller of such assignment, and Seller agrees to release Buyer from any liability or duties under this Agreement.
This is essentially your disclaimer to the seller that you may assign the contract to another buyer.
As wholesaler’s, we also need to have something in there related to marketing. Once we have the property under contract, we want to be able to market that contract to our end buyers. Here is what I use:
MARKETING. Seller authorizes Buyer to advertise the Property for sale (as a principal to this contract, not the Seller’s broker, agent or representative).
Short and sweet. Notice what’s in parentheses “not as seller’s broker, agent or representative”. Why is this important? As buyers and wholesalers, we are not representing the client. If you are a real estate agent, you work with buyers and sellers and represent them. You have a fiduciary duty and responsibility to act in their best interest. We are simply acting as buyers and are not forming an agency relationship with the seller.
Here is another clause I like to have in my wholesale real estate assignment contract to further illustrate there is no agency relationship:
AGENCY. SELLER ACKNOWLEDGES THAT SELLER HAS NOT BEEN REPRESENTED BY BUYER (Your Name), OR BY ANY REPRESENTATIVE OF BUYER WITH RESPECT TO THE PURCHASE AND SALE OF THE PROPERTY AS CONTEMPLATED BY THIS CONTRACT. SELLER AGREES AND UNDERSTANDS THAT THE BUYER AND BUYER’S REPRESENTATIVES ARE NOT ACTING AS SELLER’S BROKER OR AGENT IN THIS TRANSACTION AND HAVE BEEN ACTING SOLELY FOR BUYER’S OWN BENEFIT AS A PRINCIPAL TO THIS CONTRACT. SELLER AGREES AND UNDERSTANDS THAT BUYER HAS A FINANCIAL INTEREST IN THE TRANSACTION OTHER THAN THE RECEIPT OF COMPENSATION FOR REAL ESTATE SERVICES. SELLER ACKNOWLEDGES THAT IF SELLER LISTS THE PROPERTY FOR SALE WITH BUYER OR ANOTHER AS BROKER OR AGENT TO SELL THE PROPERTY, THE SELLER MAY RECEIVE MORE CONSIDERATION THAT BUYER HAS AGREED TO PAY, AND SELLER IS WILLINGLY SELLING IT TO BUYER WITH FULL KNOWLEDGE OF SUCH. SELLER AGREES TO HOLD BUYER FREE FROM ANY AND ALL LIABILITY REGARDING THIS PROPERTY AND TRANSACTION ARISING FROM ANY CLAIM OF AGENCY. SELLER ACKNOWLEDGES THAT BUYER IS NOT ACTING AS A LENDER IN THIS TRANSACTION.
In this business, it’s all about disclosure! As long as your wholesale real estate assignment contract has the appropriate disclosures and assignment clauses you should be in the clear. There are some other important clauses and disclosures I have in there as well but I wanted to highlight the big ones.
Looking for the full version of the contract? Shoot me an email at firstname.lastname@example.org and I’ll send you the PDF. I also have assignment contract available (1 pager). You will need this once you have an end buyer for your deal.
Disclaimer: I am not an attorney and I strongly recommended you have an attorney review any contract you use. Each state has different laws and regulations so unfortunately there is no “one size fits all contract”.