The Assignment Contract Explained: How Wholesalers Get Paid

The assignment contract is the legal mechanism that makes real estate wholesaling possible. Understanding exactly how it works — and what it must contain — is essential for running a compliant, professional wholesale business. Here's a complete breakdown of the assignment contract and how wholesalers get paid at closing.

What Is an Assignment Contract?

An assignment of contract is a legal document that transfers a party's rights and obligations under an existing contract to a third party. In real estate wholesaling, this means the wholesaler (the original buyer on a purchase contract) transfers their right to buy the property to a cash buyer (the assignee) in exchange for an assignment fee.

Importantly, the original purchase contract between the seller and the wholesaler remains intact. The seller still sells to the same terms; it's just that the identity of the buyer changes at closing.

Key Elements of a Purchase Contract for Wholesaling

Before you can assign a contract, you need a solid purchase agreement in place. Your purchase contract should include:

• Assignability clause: "Buyer may assign this contract without seller's consent." This is non-negotiable for wholesaling purposes.
• Inspection contingency: A due diligence period (7–14 days) that gives you time to find a buyer before you're committed.
• Earnest money: A modest deposit ($500–$2,000) that shows good faith. Keep it low — it's at risk if the deal falls through.
• Extended closing timeline: 30–45 days gives you time to market the deal and close.
• "And/or assigns" after your name on the contract as buyer.

The Assignment Agreement Document

Once you have a cash buyer lined up, you'll execute an Assignment of Contract Agreement. This document typically includes:

• Identification of the assignor (wholesaler), assignee (cash buyer), and the property
• Reference to the original purchase contract (date, parties, purchase price)
• The assignment fee amount and payment terms
• Acknowledgment that the assignee has reviewed and accepts the original contract terms
• Signatures of both parties and a notarization if required by your state

How the Assignment Fee Is Paid

Your assignment fee is collected at closing — not before. Here's how it works:

1. The assignee (cash buyer) pays the full purchase price plus your assignment fee at closing
2. The title company distributes funds: the original purchase price goes to the seller, and the assignment fee goes to you
3. You receive a check or wire transfer at or shortly after closing

Some wholesalers collect a portion of the assignment fee upfront as a non-refundable deposit when the buyer signs the assignment agreement, with the balance paid at closing. This protects against buyers who back out at the last minute.

Texas-Specific Requirements

Texas has specific disclosure requirements for real estate transactions. Under Texas law, if you're assigning a contract, you may be required to disclose that you are not a licensed real estate broker and that your interest in the transaction is to earn an assignment fee. Working with a Texas real estate attorney to review your contracts is strongly recommended.

Additionally, Texas Senate Bill 2212 (effective 2021) added requirements for certain real estate wholesaling activities, including disclosure to sellers that the contract may be assigned.

Double Closing as an Alternative

If a seller objects to assignment or if you want to keep your assignment fee private, a double close (also called a simultaneous close) is an alternative. This involves two back-to-back closings: you buy from the seller and immediately sell to your end buyer. The buyer's funds can often be used to fund the first transaction, eliminating your need for cash, though this requires coordination with the title company.

Learn more about wholesale real estate legal requirements by visiting our resources page, and feel free to reach out with specific questions about contracts in your market.