assignment of land definition

Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

Table of Contents

• What Is an Assignment?
• What is an Assignment in Real Estate?
• What Does it Mean to Assign a Contract in Real Estate?
• How Does a Contract Assignment Work?
• Pros and Cons of Assigning Contracts

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

• Find the right property.
• Get a purchase agreement signed.
• Find an end buyer.
• Assign the contract.
• Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won’t take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it’s compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

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The Ins and Outs of Land Contracts: What You Need to Know

May 3, 2023.

In this comprehensive guide to land contracts, you will learn about the definition, types and key elements of land contracts, as well as the legal requirements surrounding them. You’ll discover the benefits and limitations of using land contracts and how to draft and negotiate them effectively.

Additionally, this article delves into the consequences of defaulting on a land contract and how to handle disputes and resolutions. Lastly, we will explore the tax implications, reporting and record-keeping aspects related to land contracts.

Definition and Overview of Land Contracts

A land contract, also known as an installment land contract or a contract for deed, is a legal agreement between a buyer and a seller for the purchase of real estate property.

In this arrangement, the seller essentially finances the buyer’s purchase, and the buyer agrees to make regular payments, often monthly or quarterly, to the seller over a specific period, including interest. Once the payment terms are satisfied, the seller conveys the property’s legal title to the buyer.

Land contracts are commonly used when a buyer cannot secure traditional financing from a bank, or when the seller wants to expedite the sale, incentivize a buyer, or create a regular income stream.

Terminology and Concepts

Vendor and Vendee: In a land contract, the seller is called the vendor, while the buyer is called the vendee.

Legal Title and Equitable Title: One of the fundamental concepts in land contracts is the separation of the legal title and equitable title. The vendor retains the legal title to the property until the vendee pays the full purchase price, satisfying the terms of the land contract. The vendee acquires an equitable title, which grants them the right to use and possess the property.

Down Payment: A land contract typically requires the vendee to make a down payment which is a percentage of the total purchase price. This amount varies and is negotiable between the vendor and the vendee.

Interest Rate: The contract will specify an interest rate, which may be fixed or variable, for the vendee’s payments toward the purchase price of the property. Interest rates in land contracts are generally higher than those offered by traditional lenders, reflecting the increased risk for the vendor.

Balloon Payment: Some land contracts feature a balloon payment, which is a large, lump-sum payment due at the end of the contract term. This allows the vendee to make smaller, regular payments throughout the contract but requires them to secure alternative financing or make other arrangements to pay the remaining balance.

Forfeiture: In case the vendee defaults on their payments, the vendor has the right to terminate the contract and forfeit the vendee’s equitable title. In this case, the vendee loses any funds paid towards the property.

Benefits of Land Contracts

Flexibility: Land contracts are often more flexible than traditional mortgage agreements, allowing for customized payment terms and other arrangements that suit both the vendor and the vendee’s needs.

Availability: For buyers who have difficulty obtaining financing from traditional lenders due to factors such as a low credit score or self-employment, a land contract can provide an alternative pathway to homeownership.

Faster Closing: Land contracts can be processed more quickly than traditional mortgage loans, as they do not require lengthy mortgage application processes or approval from a financial institution.

No Prepayment Penalty: Many land contracts do not have penalties for early prepayment, allowing the vendee to pay off the balance of the contract without additional fees.

Limitations and Risks

Legal Risk: If the vendor defaults on their obligations or fails to convey the legal title after the vendee satisfies the terms of the land contract, the vendee may need to initiate legal action to protect their rights.

Financial Risk: If the vendee defaults on their payments, they risk losing their equitable title and any funds paid towards the property.

Higher Interest Rates: Interest rates in land contracts are often higher than those offered by traditional lenders, which could lead to higher overall costs for the vendee.

Balloon Payment: If the land contract contains a balloon payment, the vendee may face difficulty securing alternative financing or need to make other arrangements to pay the remaining balance.

Before entering into a land contract, both vendors and vendees should carefully assess the risks and consult with real estate professionals and legal advisors to protect their interests.

Types of Land Contracts

Land contracts, also known as land installment contracts, are a type of financing method for people who want to purchase a property without obtaining a traditional mortgage from a bank or other financial institution.

Land contracts allow the buyer to make monthly payments directly to the seller instead of a bank, with the seller essentially acting as the lender.

There are various types of land contracts, each suited for different types of property transactions. We will discuss four major types of land contracts: installment contracts, lease purchase contracts, option contracts, and contracts for deeds.

Installment Contracts

Installment contracts, also known as installment sales, are a common type of land contract. They involve a buyer and a seller agreeing on a purchase price for a property, with payment terms typically spread out over a set period. The buyer makes installment payments to the seller according to the agreed-upon terms, and upon successful completion of all payments, ownership of the property is transferred from the seller to the buyer.

Installment contracts are particularly useful for buyers who do not have enough money saved for a significant down payment or have difficulty obtaining a mortgage loan. These contracts afford the buyer time to make monthly payments, typically including interest, toward the purchase price of the property.

Essentially, they act as a form of “ rent -to-own” arrangement, with the buyer gradually building equity in the property as they make their payments.

Lease Purchase Contracts

Lease purchase contracts, also known as lease-to-own agreements or rent-to-own contracts, are similar to installment contracts in that they allow a buyer to make regular payments toward the purchase of a property. However, instead of making installment payments on the purchase price, the buyer pays rent to the seller for the property, with a portion of the rent applied toward the purchase price.

Typically, a lease purchase contract includes an option for the buyer to purchase the property at a specified price after a certain period, during which the buyer has been making rental payments. If the buyer exercises this option at the end of the lease term, the applied rental credits can be used as part or all of the down payment for the purchase.

Lease purchase contracts can be beneficial for individuals who want to “test out” living in a property before committing to purchasing it or need time to improve their financial situation to qualify for a mortgage.

Option Contracts

Option contracts grant the buyer the exclusive right to purchase a property at a specific price within a specified period, without obligating the buyer to complete the purchase. In exchange for this exclusive right, the buyer usually pays the seller a non-refundable option fee, which may be applied toward the purchase price if the buyer decides to exercise the option.

Option contracts can provide flexibility for buyers, as they allow them to secure the right to purchase a property while they decide whether they want to buy it, secure financing, or identify a suitable time to complete the transaction. If the buyer does not exercise the option to purchase within the specified time frame, the seller retains the option fee and can pursue other buyers or keep the property.

Contract for Deed

A contract for deed, also known as a land contract or an agreement for deed, is an arrangement where the buyer and seller agree upon the purchase price, down payment, interest rate, and other terms, and the buyer makes monthly payments directly to the seller for a certain period. However, unlike a traditional installment contract, the seller retains legal title to the property until the final payment is made.

In a contract for deed, the seller acts as the lender, providing financing for the buyer. Once the buyer has completed all payments according to the contract terms, the seller will transfer the property title to the buyer.

This kind of contract can be beneficial for buyers who do not qualify for a traditional mortgage, as well as for sellers who may struggle to sell their property on the open market.

Overall, land contracts can offer significant flexibility for both buyers and sellers, allowing property transactions to occur even when traditional financing methods may be unavailable.

Each type of land contract has its own unique advantages and considerations, making it essential for both parties to conduct thorough research and consult with legal and financial professionals before entering into a contract.

Key Elements of a Land Contract

A land contract, also known as a contract for deed or installment sale agreement, is a method of financing the sale of real property between a buyer and seller. It allows the buyer to make a series of payments to the seller while living on and using the property. Once the agreed-upon price is paid in full, the seller then transfers the title to the buyer.

The following are the key elements of a land contract that parties should include when drafting the agreement.

Property Information

One of the essential elements of a land contract is a detailed description of the property being sold. This generally includes the property’s address, legal description, and tax identification number.

The legal description is crucial for clearly identifying the property being conveyed and can be obtained from a title or abstract report, county records, or a survey.

In addition to the legal description, it is essential to disclose any easements, restrictions, or encumbrances on the property, as this may impact the buyer’s intended use of the land.

Seller and Buyer Information

A land contract must identify the parties involved in the transaction – the seller(s) and buyer(s). Typically, this information includes the full names of the parties and their respective addresses.

If the buyer or seller is a corporation or limited liability company, the contract should include the entity’s name and state of formation.

If there are co-buyers, it is essential to define their ownership interests – for example, as joint tenants or tenants in common.

Purchase Price and Terms

A vital aspect of a land contract is the agreed-upon purchase price for the property. This should be explicitly stated in the contract, along with other cost-related terms such as the:

• Required initial down payment (if any)
• Amount of each installment payment
• Number of installment payments
• Final balloon payment (if applicable)

These terms should clarify the total purchase price and provide a clear understanding of the payment structure for both parties.

Payment Schedule for Land Contracts

The land contract should include a payment schedule that outlines when each installment payment is due. Payments are commonly made on a monthly basis but can also be set for other intervals, such as quarterly or semi-annually, depending on the agreement between the parties.

It is also essential to state the grace period allowed for late payments and any late fees that apply if a payment is not made within that timeframe.

Interest Rate and Calculations

The contract should specify the interest rate and any terms related to interest accrual or adjustments. It is crucial to clearly state whether the interest rate is fixed or variable and, if variable, how and when it can be adjusted. Moreover, the contract should outline how the interest portion of each payment will be calculated.

Prepayment Penalty

Some land contracts contain prepayment penalties, which are fees charged to the buyer if they pay off their obligation pursuant to the land contract ahead of schedule. If a prepayment penalty is included, the contract should clearly state the fee amount and any conditions under which it applies.

Due on Sale Clause

A due-on-sale clause is a provision within the land contract that requires the buyer to pay off any remaining balance in the event of the property’s sale or transfer to a third party.

This clause protects the seller’s interests by ensuring they receive payment in full upon the property’s disposition.

Establishing an Escrow Account

Lastly, a land contract may require the establishment of an escrow account to hold funds for property tax and insurance payments.

If this is the case, the contract should outline who (buyer or seller) is responsible for maintaining the escrow account, the amounts required to be deposited into the account, the schedule for depositing funds, and any requirements for reporting or maintaining account balances.

Understanding Legal Requirements

When starting or running a business , it is essential to understand the various legal requirements that apply to your company. These legal obligations can include federal laws, state laws, and county or local ordinances. Adhering to these standards is crucial for the successful and lawful operation of your business, as failure to comply can result in penalties and other repercussions.

Adhering to Federal Laws

Federal laws apply across the entire United States and cover areas such as labor, taxation, workplace safety, and environmental regulations. Here are some essential federal laws to be aware of when operating a business:

Tax Law: The Internal Revenue Service (IRS) enforces US tax laws for both individuals and businesses. Companies are required to pay federal income taxes and obtain an Employer Identification Number (EIN). Depending on the type of business, you may also need to collect sales tax and pay employment taxes such as Social Security, Medicare, and unemployment taxes. Tax requirements and deadlines vary, so it is essential to understand your tax obligations as a business owner.

Labor Law: Federal labor law covers various aspects of worker’s rights, including minimum wage, overtime pay, and child labor protections. Two major federal labor laws include the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). Employers must be aware of these laws to ensure they are treating their employees fairly and lawfully.

Workplace Safety and Health Regulations: The Occupational Safety and Health Administration (OSHA) enforces federal laws to ensure a safe and healthy work environment for employees. OSHA sets and enforces standards for workplace safety, including training and recordkeeping requirements. Employers must be aware of and comply with these standards to avoid penalties and maintain a safe work environment for their employees.

Environmental Regulations: The Environmental Protection Agency (EPA) enforces federal environmental regulations. These laws oversee pollution control, hazardous waste disposal, and other environmental concerns that businesses may need to address. Companies must be aware of their environmental obligations to prevent fines and ensure compliance with federal guidelines.

Complying With State Laws

In addition to federal laws, businesses must also comply with state laws. These vary by state and can include additional labor laws, tax requirements, zoning regulations, and licensing requirements. Some key areas of state law to consider when operating a business include:

State Tax Law: In addition to federal taxes, companies generally need to pay state income and sales taxes. States may also impose additional taxes, such as property taxes, franchise taxes, or business licensing fees.

Employment Laws: State labor laws can include provisions for minimum wage, overtime pay, and paid time off, which may differ from federal standards. Employers must adhere to both federal and state labor laws to ensure compliance.

Business Registration, Licensing, and Permits: State requirements for registering a business, obtaining licenses, and securing permits can vary. Businesses must research and fulfill these state obligations to operate legally within their jurisdiction.

County and Local Ordinances

Finally, businesses must comply with county and local ordinances, which can include zoning regulations, noise ordinances, and building codes. These requirements may vary depending on the location of your business and the type of commercial activities you engage in.

Some local ordinances to consider include:

Zoning Regulations: Local zoning laws dictate where businesses can operate, the type of business activities permitted, and various requirements related to land use and development. It’s essential to understand and adhere to local zoning regulations when selecting a business location and planning any construction or expansion projects.

Building Codes: Local building codes ensure that businesses adhere to structural and safety standards in the construction and maintenance of commercial spaces. These codes may include specific requirements for accessibility, fire safety, and other health and safety considerations.

Licensing and Permits: Local governments may also require business licenses and permits, such as a health department permit for restaurants or a sign permit for storefronts. Be sure to research and obtain any necessary permits to operate legally within your jurisdiction.

By understanding and adhering to federal, state, and local legal requirements, you can minimize risks and ensure that your business operates legally and smoothly.

Drafting and Negotiating Land Contracts

A land contract, also known as a contract for deed or installment sale contract, is a legally binding agreement between a seller and a buyer for the purchase of real estate property. Entering into a land contract can be an attractive option for buyers who may be unable to obtain traditional financing or for sellers who are interested in a more flexible and direct financing option.

To ensure that the land contract is fair and legally enforceable, it is important to engage in proper drafting and negotiation processes including legal representation, due diligence, negotiation, and key contractual provisions.

Getting Legal Representation

Engaging the services of a skilled real estate attorney is crucial for both buyers and sellers in land contract transactions. Real estate attorneys can provide guidance and advice throughout the entire process, from drafting to negotiating and enforcing the land contract. They will ensure that the agreements are in accordance with local and state laws, as well as protect their clients’ interests.

Legal representation can also assist in resolving any disputes that may emerge between the parties during or after the negotiation process. Moreover, a knowledgeable attorney will be able to identify and deal with potential red flags, as well as address any complications that may arise during the closing process.

Conducting Due Diligence

Conducting due diligence is an essential part of the land contract process for both the buyer and seller. It refers to the investigation and research that buyers and sellers must undertake before entering into a legally binding agreement.

For the buyer, due diligence includes researching the property’s market value and condition. They should investigate the land’s title to ensure that there are no liens or encumbrances that could impact their ownership rights.

Buyers should also review zoning and land-use regulations, as well as obtain any necessary permits or approvals required for future development.

On the other hand, sellers must conduct due diligence by researching the buyer’s ability to make the required payments. They may want to conduct background checks, verify employment, and review the buyer’s financial statements and credit history to ensure their financial stability.

Negotiating the Land Contract

Negotiating a land contract is a critical step in ensuring that both parties are satisfied with the terms and conditions of the agreement. An experienced real estate attorney can aid in this process by assisting with negotiations, offering guidance on various aspects of the contract, and helping to facilitate communication between the parties.

Considerations during negotiation may include the purchase price, the down payment, monthly payment amounts and terms, the length of the contract, and the responsibility for taxes, insurance, and maintenance.

It is important for both parties to have a clear understanding of their respective rights, responsibilities, and obligations under the land contract.

Contractual Provisions in Land Contracts

A well-crafted land contract will include essential provisions that protect both the buyer’s and the seller’s interests. Some specific clauses that may need to be addressed in a land contract are:

Description of the property: This includes the legal description of the property, as well as any improvements, fixtures or appurtenances.

Purchase price and payment terms: The agreed-upon purchase price should be clearly outlined, along with the payment structure, interest rates, and balloon payment clauses if applicable.

Responsibilities for property taxes and insurance: The contract should specify who is responsible for payment of property taxes, insurance premiums, and any routine maintenance.

Default provisions: The contract should include measures to address default situations, such as the buyer’s failure to make timely payments or the seller’s failure to maintain clear title to the property.

Right to cure default: The parties should have the right to cure their default by paying outstanding obligations or addressing the underlying issue within a specified timeframe.

Transfer of title: The contract should delineate the conditions under which the title will be transferred to the buyer, such as payment of the full purchase price or meeting other contractual requirements.

In summary, drafting and negotiating a land contract requires careful planning, attention to detail, and professional assistance to ensure that the rights and interests of both parties are protected.

By engaging the services of an experienced real estate attorney and conducting thorough due diligence, buyers and sellers can increase the likelihood of a successful and equitable land contract transaction.

Default and Remedies

Default refers to the failure of a borrower to meet their financial obligations on time, either by not paying back a loan or failing to comply with other conditions specified in a loan agreement. When default occurs, there are various remedies that can be pursued by the lender. Let’s discuss several consequences of default as well as possible remedies for each scenario.

Consequences of Defaulting on a Loan

When a borrower defaults on their loan, the lender may take action to enforce the terms of the contract and protect their interests. Some common consequences of default may include:

Damage to the borrower’s credit score: Default can have a significant negative impact on the borrower’s credit rating, making it more difficult to obtain credit in the future.

Collection efforts: The lender may engage in collection efforts, using legal means (such as lawsuits) or hiring collection agencies to collect the debt from the borrower.

Acceleration: The lender may declare the entire outstanding balance of the loan due immediately, rather than waiting for scheduled payments.

Loss of collateral: If the loan is secured by collateral, the lender may take possession of the collateral property to recover the outstanding debt.

Additional fees and charges: Late fees, interest charges, and other fees may accumulate over time, increasing the borrower’s overall debt.

Forfeiture of Possession

Forfeiture is one of the remedies available to a lender when a borrower defaults on their secured loan. Under forfeiture, the lender takes possession of the property used as collateral for the loan. This often occurs when the borrower is unable to make the required payments on the loan, whether due to financial hardship or other reasons.

Once the lender takes possession of the collateral, they may sell the property to recoup the outstanding debt. The borrower may have the right to redeem the property before the sale, by paying off the outstanding debt and any fees. However, if the property is sold, and the proceeds do not cover the entire outstanding debt, the borrower may still be liable for the remaining balance.

Foreclosure of Property

Foreclosure is another remedy available to lenders when a borrower defaults on a mortgage loan. In a foreclosure, the lender legally takes ownership of the property used as collateral for the loan.

This process typically involves a court-supervised sale of the property, with proceeds from the sale being used to repay the debt.

The lender may either foreclose judicially or nonjudicially, depending on the state’s laws and the terms of the loan agreement. Judicial foreclosure involves a court proceeding, while nonjudicial foreclosure relies on a private trustee sale without court involvement.

Once the foreclosure process is complete, the borrower loses all rights to the property. In some cases, the borrower may also be liable for a deficiency judgment if the sale proceeds do not cover the entire outstanding debt.

Reinstatement of the Loan

Reinstatement is a remedy available to borrowers who have defaulted on their loans and wish to bring the loan current. Under reinstatement, the borrower pays the outstanding missed payments, fees, and interest charges in a lump sum to the lender. This action effectively “cures” the default and allows the borrower to resume their regular loan payments.

Typically, there is a limited timeframe during which the borrower can reinstate their loan, sometimes referred to as a “right to cure” or “right to reinstate” period. This period is often provided by state law or specified in the loan agreement.

It is important for borrowers to be aware of this timeframe, as once the reinstatement period expires, the lender may proceed with other remedies, such as foreclosure.

In conclusion, default on a loan has significant consequences for both the borrower and the lender. Various remedies, such as forfeiture, foreclosure, and reinstatement, can be pursued to address these consequences.

Borrowers should strive to meet their financial obligations to avoid default, and lenders should work with borrowers to resolve issues before pursuing these remedies.

Transfer and Assignment of Land Contracts

Land contracts, also known as installment sale contracts, land installment contracts, or contracts for deed, are agreements between a seller and buyer for the purchase of real property. The seller holds the legal title to the property, while the buyer makes regular payments to the seller over time, similar to a mortgage, until the purchase price is paid in full. Upon completion of the payments, the seller transfers the legal title to the buyer.

Land contracts are commonly used for real estate transactions, especially in situations where traditional bank mortgages may not be available or desirable.

There are situations where one or both of the parties involved in a land contract may wish to transfer or assign their rights and obligations to another party. Below, we will discuss selling land contracts, partial sales and assignments, and the associated risks and benefits of transfers.

Selling a Land Contract

Selling a land contract involves the transfer of the legal title to the property, along with the remaining payment obligations from the current seller (the original owner of the property) to a new buyer. The transfer typically requires the consent of the current buyer (the person making installment payments) and may be subject to specific terms and conditions set forth in the original land contract (such as a right of first refusal).

To sell a land contract, the parties should review the original land contract terms and seek professional advice to ensure compliance with all applicable legal and tax requirements. A written assignment or transfer agreement is usually required, detailing the rights and obligations of each party, including the payment schedule, interest rate, and other associated terms.

The transfer agreement is often recorded at the local county recorder’s office, to provide public notice of the change in ownership of the land contract.

Partial Sales and Assignments of Land Contracts

In some cases, a land contract holder (the seller/original owner) may want to assign or sell only a portion of their rights and obligations under the contract. This could involve selling a specific portion of the remaining payments owed, or assigning only a percentage of the future payments to another investor.

Partial sales and assignments are more complex than complete transfers, and careful consideration should be given to the legal and tax implications. The rights and obligations assigned or sold should be outlined in detail, and the remaining rights should be addressed in both the original land contract and the assignment or transfer agreement.

If the current buyer is cooperative, partial sales or assignments can provide a valuable source of cash for the seller, potentially enabling them to invest in other real estate or business opportunities.

It is important to work with experienced professionals familiar with land contracts, tax laws, and title issues in order to properly structure and document the transaction.

Risks and Benefits of Transferring Land Contracts

Transferring or assigning a land contract comes with various risks and benefits for all parties involved.

For the original land contract seller, the benefits often include receiving a lump sum payment for the value of the land contract or sharing the risk and reward of the future payments with a new investor. The current buyer, on the other hand, does not see a direct financial benefit from the transfer but may gain a more stable and professional counterpart to work with, especially if the original seller was an individual with limited resources.

The primary risk for the original seller is the potential loss of control over the property and the future receipt of payments. If the new buyer or investor fails to fulfill their obligations, enforcing the terms of the contract may require legal remedies, which can be costly and time-consuming.

For the new buyer or investor, the risks include the potential default of the current buyer on their payment obligations, as well as any unforeseen issues with the property, such as title defects, zoning restrictions, or environmental liabilities.

Thorough due diligence, including a review of the payment history, creditworthiness of the current buyer, and research on the property itself, can help to mitigate these risks.

In conclusion, transferring or assigning a land contract is a complex transaction that involves various risks and benefits for all parties involved. Proper structuring, documentation, and due diligence are crucial to ensure a successful outcome.

It is always advisable to work with experienced professionals familiar with land contracts, tax laws, and title issues when considering transferring or assigning a land contract.

Land Contract Disputes and Resolutions

Land contract disputes are common and can arise for various reasons. These disputes typically involve matters such as purchase and sale agreements, property boundaries, easements, and adverse possession claims.

Resolving land contract disputes is essential for both parties to protect their rights and prevent potential financial and legal consequences. Dispute resolution methods, such as mediation, arbitration, and litigation, are available to handle the complexities of land contract disputes.

Let’s examine common disputes, mediation and arbitration, and litigation as dispute resolution methods.

Common Land Contract Disputes

There are several types of land contract disputes that parties may encounter:

Contract interpretation: Conflicting interpretations of the terms and conditions of the land contract may lead to disputes between the parties. This typically involves disagreements over the meaning of specific clauses, provisions, or ambiguous language within the contract.

Property boundary disputes: Boundary disputes arise when the exact location of property lines is unclear or contested. This may occur due to outdated or inaccurate surveys, conflicting legal descriptions, or encroachments by neighboring property owners.

Easement disputes: An easement is a legal right to use another person’s property for a specific purpose. Disputes may arise if there are conflicting understandings of the easement’s scope and its permitted uses, or if one party claims a prescriptive easement (an easement obtained through continuous, open, and notorious use of another’s property without the owner’s permission).

Title disputes: These disputes involve ownership claims and issues with the chain of title (the historical sequence of legal transfers of the property). Inadequate or fraudulent title searches, forgery, and undiscovered liens can lead to title disputes.

Adverse possession claims: When an individual occupies and treats another person’s property as their own for a specific statutory period without the legal owner’s permission, adverse possession disputes emerge. In some cases, the occupier may gain legal ownership of the property, depending on the jurisdiction’s laws.

Mediation and Arbitration for Dispute Resolution

Mediation and arbitration are alternative dispute resolution methods that parties may use to resolve land contract disputes without resorting to litigation. Both methods can be more affordable, efficient, and flexible alternatives to court proceedings.

Mediation: In mediation, a neutral third party (the mediator) assists the disputing parties in negotiating a settlement. The mediator helps facilitate communication, identify common interests, and propose solutions. However, the mediator cannot impose a binding agreement on the parties. Instead, the parties must voluntarily consent to any proposed settlement.

Arbitration: Arbitration is a more formal process than mediation but still less formal than litigation. The parties agree to submit their dispute to an impartial arbitrator or panel of arbitrators. The arbitrator examines the evidence presented, applies the relevant law, and issues a binding award or judgment. Arbitration decisions are typically final, with limited grounds for appeal.

Litigation as a Means of Dispute Resolution

If alternative dispute resolution methods fail, litigation may be the last resort for resolving land contract disputes. In some cases, the parties may also choose to initiate litigation from the outset if they believe it is the best approach for their specific situation.

Court proceedings: The parties involved in a land contract dispute will present their respective cases to a judge or jury in a court of appropriate jurisdiction. The court will consider the evidence submitted, hear arguments, and apply relevant laws to make a binding decision.

Appeals: If a party disagrees with the court’s judgment, they may appeal the decision to an appellate court.Appellate courts review decisions made by lower courts for any legal errors, such as misinterpretation of the law or procedural mistakes. However, the appellate courts typically will not re-evaluate the facts of the case or overturn the lower court’s decision based on mere disagreement with the outcome.

Resolving land contract disputes can be a complicated and arduous process. The parties involved should consider consult legal professionals to guide them through the various options available and determine the most suitable dispute resolution method for their specific situation.

Taxes and Recordkeeping

Tax compliance and recordkeeping are essential responsibilities for individuals, households, and business entities. A failure to maintain accurate financial records or adhere to tax obligations can lead to a host of legal and financial consequences.

Let’s explore the various tax implications, income tax reporting, property tax responsibilities, and the need for keeping accurate records.

Various Tax Implications of Recordkeeping

There are several types of taxes imposed on individuals and business entities at various levels, including federal, state, and local taxes. Depending on the individual’s circumstances or the nature of the business, one may be subject to income tax, property tax, sales tax, payroll tax, and many others.

Income tax is a percentage levied on income earned by individuals and businesses. It is the primary source of revenue for the federal government and is used to fund public services and infrastructure. Income tax rates vary according to income levels, filing status, and other factors.

Property tax is assessed on real property, such as land, buildings, and other fixed assets. It is usually administered at the local level, with rates varying by jurisdiction. Property tax helps fund local services, such as public schools, law enforcement, and emergency services.

Sales tax is imposed on sales of goods and some services. It is collected by retailers and remitted to the state or local government. Some jurisdictions also impose use tax on goods purchased from out-of-state retailers.

Payroll tax is a tax on wages, salaries, and other forms of compensation paid to employees. It is generally split between employers and employees and is used to fund social insurance programs, such as Social Security and Medicare.

Income Tax Reporting

Income tax reporting is the process of preparing and filing an annual tax return, which details an individual’s or business’s income, deductions, credits, and tax liability. In the United States, the Internal Revenue Service (IRS) is the primary agency tasked with administering income tax.

There are different filing requirements and tax forms for individuals, businesses, and other entities like estates and trusts. For most individuals, the deadline for filing an annual income tax return is April 15.

When filing their tax returns, taxpayers must report all taxable income, including wages, salaries, interest, dividends, and capital gains. Taxpayers can also claim deductions and credits to reduce their taxable income and overall tax burden.

Deductions may include mortgage interest, state and local taxes, charitable contributions, and unreimbursed business expenses. Credits directly reduce the amount of tax owed and may include the Child Tax Credit, Earned Income Tax Credit, and education-related tax credits.

Property Tax Responsibilities of Property Owners

Property tax is imposed by local governments and paid by property owners. Taxing jurisdictions, such as cities, counties, and school districts, determine the tax rates and assessed property values. Tax rates can vary widely by jurisdiction, and assessments are typically based on a percentage of the property’s market value.

Property owners must pay property tax on a recurring basis, typically annually or semi-annually. Failure to pay property taxes can result in penalties, interest, and ultimately the loss of the property through tax foreclosure or tax lien sales.

It is essential to stay informed about local property tax laws and the assessment and appeal process. If a property owner believes that their property has been over-assessed or incorrectly classified, they may have the right to appeal the valuation, which can result in a reduction in taxes.

Keeping Accurate Records and Documentation

Accurate recordkeeping is critical to comply with tax laws and minimize the risk of audits, financial penalties, and legal issues. Taxpayers should maintain records of all income, expenses, deductions, and credits, as well as any supporting documentation, such as receipts, invoices, canceled checks, and bank statements.

For businesses, maintaining proper financial records includes tracking income and expenses, recording transactions, and retaining supporting documentation. It also involves maintaining and storing accurate employee records, payroll, and benefits information.

Keeping accurate records can help taxpayers and businesses comply with tax laws, prepare financial statements, monitor their financial progress, and manage cash flow. It can also help in preparing and filing accurate tax returns, substantiating claims for deductions and credits, and resolving disputes with tax authorities.

In summary, understanding the different types of taxes, complying with income tax reporting requirements, fulfilling property tax responsibilities, and maintaining accurate financial records are crucial for individuals and businesses alike.

Proper tax compliance and recordkeeping are necessary to avoid legal and financial problems and ensure a smooth and successful tax filing process.

Land Contracts FAQs

What is a land contract and how does it work.

A land contract, also known as a contract for deed or installment sale agreement, is a financing method used for purchasing real estate. The seller finances the sale and retains legal title, while the buyer takes possession and makes payments. Transfer of the title occurs after the buyer pays the agreed-upon amount (Molinsky, 2014).

Are land contracts a good alternative to traditional mortgages?

Land contracts can be a viable alternative for buyers who cannot secure a traditional mortgage. It allows them to purchase property without involving a bank or other lending institution. However, the buyer should carefully review the terms and ensure they can make the required payments before entering into the agreement (MacLaurin, 2016).

What are the risks and benefits of a land contract for buyers?

Benefits for buyers include easier qualification, potentially lower closing costs, and fewer origination fees. Risks involve the possibility of default, resulting in loss of investment and property, and the seller not holding a clear title or failing to make mortgage payments themselves (MacLaurin, 2016).

What are the risks and benefits of a land contract for sellers?

Benefits for sellers include a potentially faster sale, retaining the title as collateral, and earning interest on the loan balance. Risks involve the need to repossess the property in case of buyer default, which may involve legal action, and a lack of immediate lump-sum payment (Molinsky, 2014).

Can a land contract be refinanced or modified?

Yes, a land contract can be refinanced or modified through mutual agreement between the buyer and seller. In many cases, a buyer may seek to refinance through a traditional bank loan, allowing them to obtain the title and pay off the remaining balance with the seller directly (Federman, 2012).

What happens if the buyer defaults on a land contract?

If the buyer defaults on a land contract, the seller may repossess the property, usually through a process called forfeiture. Depending on the terms of the contract and state laws, the buyer may lose all rights to the property and any equity built up during the contract term (Molinsky, 2014).

References: Federman, M. (2012). Seller-financing restrictions under Dodd-Frank. Probate & Property, 26(1), 1–3. MacLaurin, J. A. (2016). Installment land contracts: The pitfalls for homeowners. Probate & Property, 30(4), 1–4. Molinsky, A. (2014). Homeownership in the United States: A primer on government-supported single-family mortgage finance. Probate & Property, 28(6), 1–5.

About the Author

Carlos Reyes

As a native Washingtonian, Carlos Reyes’ journey in the real estate industry began more than 15 years ago when he started an online real estate company. Since then, he’s helped more than 700 individuals and families as a real estate broker achieve their real estate goals across Virginia, Maryland and Washington, DC. Carlos now helps real estate agents grow their business by teaching business fundamentals, execution, and leadership.

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General Principles of Assignments in Real Estate Transactions

Assume a seller, ABC Company, enters into a contract to sell a parcel of land (referred to here as “Blackacre”) to Ms. Green. Ms. Green subsequently assigns her interest in the contract to Mr. Smith. Such assignments of contracts of purchase and sale raise a number of practical issues—e.g. notice to the seller, payment for the assignment, and transfer of the deposit—that affect not only the seller but also the original purchaser and the eventual purchaser. A party wishing to assign its interest in a contract of purchase and sale to a new party should not assume that the matter is as simple as entering into an assignment with the new party and then walking away and forgetting about the contract.

A real estate contract will often contain provisions that limit or prohibit an assignment of a party’s interest in the contract. If the contract is silent as to the rights to the parties to assign their interests in the contract, then the rights of the parties, with few exceptions, can be assigned. Normally, assignments of contracts relating to the purchase and sale of real estate involve the purchaser assigning its interest in the contract; however, it is not unheard of to have the seller assign its interest in the contract.

In our scenario, to be binding on it as the seller, ABC Company must be given notice of the assignment, although it does not have to receive a copy of the assignment or the business terms relating to the assignment. If ABC Company has been given notice that Ms. Green’s interest in the contract has been assigned, it may be concerned that she is ‘flipping’ her interest in the contract for a profit. Consequently, ABC Company may wish to seek advice as to whether the contract is enforceable.

Assuming that Mr. Smith is paying Ms. Green a specified amount of money for the assignment, the question arises as to when this money will be paid. Ms. Green will want the money to be paid when they enter into the assignment but Mr. Smith will want to pay at the time that they complete the purchase and sale of Blackacre. In most cases, the latter time period is the norm but, in any case, money paid for an assignment is subject to the Goods and Services Tax.

Ms. Green will likely have paid a deposit to ABC Company pursuant to the contract and will want the deposit to be repaid to her at the time of the assignment rather than having to wait until the purchase and sale of Blackacre is completed. It would not be unusual for Mr. Smith to reimburse the deposit to Ms. Green at the time that they enter into the assignment.

Mr. Smith should look to obtain assurances by way of representations and warranties from Ms. Green that the contract to purchase Blackacre is in full force and effect and that her interest can be assigned to him. In turn, Ms. Green should look to obtain representations and warranties from Mr. Smith that he will fulfill her obligations to complete the purchase of Blackacre since an assignment will not release Ms. Green of her obligations under the contract unless such release is specifically provided for—and has been agreed to by ABC Company.

Frequently, and contrary to the scenario presented here, a contract for a real estate transaction will often limit the right of the purchaser to assign its interest in the contract. A common limitation is that “. . . the purchaser may only assign its interest in the contract with the consent of the seller, such consent not to be unreasonably withheld.” In most cases, it would not be unreasonable for the seller to insist that the assignee contract directly with the seller to fulfill the obligations of the assignor under the contract so that, if there is a default, the seller has the right to seek remedies against both the assignor and the assignee.

So long as all parties to a contract of purchase and sale are aware of their rights and obligations, the completion of a purchase and sale where a contract has been assigned can and should proceed in a straightforward manner.

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Assignment is a legal term whereby an individual, the “assignor,” transfers rights, property, or other benefits to another known as the “ assignee .”   This concept is used in both contract and property law.  The term can refer to either the act of transfer or the rights /property/benefits being transferred.

Contract Law   

Under contract law, assignment of a contract is both: (1) an assignment of rights; and (2) a delegation of duties , in the absence of evidence otherwise.  For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C.  That is, this assignment is both: (1) an assignment of A’s rights under the contract to the $50; and (2) a delegation of A’s duty to teach guitar to C.  In this example, A is both the “assignor” and the “delegee” who d elegates the duties to another (C), C is known as the “ obligor ” who must perform the obligations to the assignee , and B is the “ assignee ” who is owed duties and is liable to the “ obligor ”.

(1) Assignment of Rights/Duties Under Contract Law

There are a few notable rules regarding assignments under contract law.  First, if an individual has not yet secured the contract to perform duties to another, he/she cannot assign his/her future right to an assignee .  That is, if A has not yet contracted with B to teach B guitar, A cannot assign his/her rights to C.  Second, rights cannot be assigned when they materially change the obligor ’s duty and rights.  Third, the obligor can sue the assignee directly if the assignee does not pay him/her.  Following the previous example, this means that C ( obligor ) can sue B ( assignee ) if C teaches guitar to B, but B does not pay C $50 in return.

            (2) Delegation of Duties

If the promised performance requires a rare genius or skill, then the delegee cannot delegate it to the obligor.  It can only be delegated if the promised performance is more commonplace.  Further, an obligee can sue if the assignee does not perform.  However, the delegee is secondarily liable unless there has been an express release of the delegee.  That is, if B does want C to teach guitar but C refuses to, then B can sue C.  If C still refuses to perform, then B can compel A to fulfill the duties under secondary liability.

Lastly, a related concept is novation , which is when a new obligor substitutes and releases an old obligor.  If novation occurs, then the original obligor’s duties are wiped out. However, novation requires an original obligee’s consent .  

Property Law

Under property law, assignment typically arises in landlord-tenant situations.  For example, A might be renting from landlord B but wants to another party (C) to take over the property.   In this scenario, A might be able to choose between assigning and subleasing the property to C.  If assigning , A would be giving C the entire balance of the term, with no reversion to anyone whereas if subleasing , A would be giving C for a limited period of the remaining term.  Significantly, under assignment C would have privity of estate with the landlord while under a sublease, C would not. 

[Last updated in May of 2020 by the Wex Definitions Team ]

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How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

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Easement: Definition, Types, and Examples

James Chen, CMT is an expert trader, investment adviser, and global market strategist.

What Is an Easement?

An easement, or easement agreement, is a real estate concept that defines a scenario in which one party uses the property of another party, where a fee is paid to the owner of the property in return for the right of easement. Easements are often purchased by public utility companies for the right to erect telephone poles or run pipes either above or beneath private property. However, while fees are paid to the property owner, easements can negatively affect property values in that unsightly power lines, for example, can lower the visual appeal of a piece of land.

Key Takeaways

• An easement is an agreement between two parties, where one is granted land access in exchange for a fee.
• Utility easements are the most common, such as when a telephone or power company runs lines through a property for which they've been granted an easement.
• A private easement agreement is a deal between two parties that gives one the right to use a piece of the other's property for their personal needs.
• An easement of necessity happens when an individual needs to use another individual's property so as to gain access to their own.

How an Easement Works

Used to describe a high-level agreement between the owner of a property and another party—either a person or an organization—a typical easement agreement outlines a form of payment by the petitioner to the owner for the right to utilize the subject of easement for a specific purpose.

An easement is unique to the agreement between the two parties involved. As such, easement agreements are structured so that the specific use of the property is explicitly outlined and there is a termination of easement given to the property owner. Such agreements are sometimes transferred in a property sale, so it's important for potential buyers to know if there are any easements on the property being evaluated.

Examples of an Easement

There are three common types of easement agreements. Which type of easement is granted will depend on the goals of the individual parties.

The first is a utility easement. This type of easement is an agreement between a property owner and a utility company that allows the utility company to run power lines, water piping, or other types of utilities through a property. Utility easement agreements are often included in a property's deed or held by a city or municipality.

The second type of common easement is a private easement agreement between two private parties. This easement is fairly standard in that it gives one party the right to use a piece of property for personal needs. A farmer may need access to a pond or additional agricultural land, for example, and a private easement agreement between his neighbor and himself gives him access to these needs. Further, if piping or a similar utility is required to be run through a neighboring property for a person's well system, the agreement is handled through a private easement.

Finally, there is a third common easement agreement referred to as an easement by necessity. This type of easement is more liberal in that it does not require a written agreement and is enforceable by local laws. An easement by necessity arises when one party is required to use another person's property. For example, when a person is required to use a neighbor's driveway to access his home, it's considered an easement by necessity.

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Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

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Updated on: November 24, 2023 · 3 min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

• The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
• The assignor must agree to assign their rights and duties under the contract to the assignee.
• The assignee must agree to accept, or "assume," those contractual rights and duties.
• The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

• First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
• All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
• Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

• Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
• The effective date of the assignment and assumption agreement
• Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
• Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
• Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
• A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Assignment Of Leases And Rents

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What is an assignment of leases and rents.

The assignment of leases and rents, also known as the assignment of leases rents and profits, is a legal document that gives a mortgage lender right to any future profits that may come from leases and rents when a property owner defaults on their loan. This document is usually attached to a mortgage loan agreement.

Assignment of leases and rents allows lenders to a degree of financial protection in case a loan default occurs. This document is an agreement made between a borrower and a lender of mortgage loans. It often details an exact amount the lender will be entitled to if a default happens.

Common Sections in Assignments Of Leases And Rents

Below is a list of common sections included in Assignments Of Leases And Rents. These sections are linked to the below sample agreement for you to explore.

Assignment Of Leases And Rents Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.9 10 d368735dex109.htm ASSIGNMENT OF LEASES AND RENTS , Viewed October 4, 2021, View Source on SEC .

Who Helps With Assignments Of Leases And Rents?

Lawyers with backgrounds working on assignments of leases and rents work with clients to help. Do you need help with an assignment of leases and rents?

Post a project  in ContractsCounsel's marketplace to get free bids from lawyers to draft, review, or negotiate assignments of leases and rents. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.

Meet some of our Assignment Of Leases And Rents Lawyers

Erdal Turnacioglu of Erdal Employment Law focuses on providing employment solutions to both employees and businesses, whether through litigation, review of employee handbooks, workplace investigations, or training seminars.

Charlton M.

Charlton Messer helps businesses and their owners with general counsel and contract drafting services. He has helped over 500 businesses with their legal needs across a variety of industries in nearly a decade of practice.

Dan "Dragan" I.

I received a bachelor’s degree in philosophy from Northwestern University in 1996 and then got my JD at University of Illinois College of Law in 1999. I have been a lawyer helping people with legal issues in the United States and Internationally since then. That includes litigation as well as contracts/transactions. I am also passionate about helping small and medium businesses with trademark registration and trademark-related legal projects. The law can be confusing and complicated for people, and I am passionate about providing professional legal services to my clients while simultaneously making the legal process less confusing and stressful for them. My goal is to help clients navigate through both good and difficult times by tailoring my skills, experience, and services to their specific needs. I am currently licensed and authorized to practice before the Illinois courts and the United States District Court for the Northern District of Illinois. Internationally I am one of a select few American attorneys licensed and authorized to practice before the United Nations ICTY/IRMCT, the International Criminal Court, and the State Court of Bosnia-Herzegovina. Clients have retained me internationally alongside local counsel in several European countries, Australia, and Africa in private legal matters. I have also been appointed by the United Nations to represent persons at the ICTY/IRMCT and chosen by indigent accused to represent them. Since 2009 my law firm has handled domestic and international cases, including Trial litigation (including Commercial, Premises Liability, Personal Injury, Criminal Defense, and General Litigation) and Transactional work (Contracts, Corporate formation, and Real Estate Transactions). I enjoy helping less experienced practitioners and students evolve and improve. I served as an instructor/lecturer on Oral Advocacy and Trial Practice for the participants of the ADC-ICT & ICLB Mock Trial since 2014, and have presented Advocacy Training lectures for the ADC-ICT on several topics as well as regularly lecturing to visiting University and Bar groups from around the world. If you or a loved one have a legal matter of importance, let's see if I can help you with it!

Current practice includes: employment law, family law, business law and personal injury.

Hi there. My practice focuses on several aspects of business law, including business entity formation and organizational documents, trademark and copyright, tax disputes, and contracts. I work with quite a few creative entrepreneurs, such as photographers, artists, and musicians.

I am a New Mexico licensed attorney with many years of world experience in real estate, transactional law, social security disability law, immigration law, consumer law, and estate planning.

Brent has been in practice since 2007 and been the principal attorney and owner of The Walker Firm, LLC since 2014. Brent focuses on providing an array of general counsel services to individuals and companies in a variety of industries.

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Assignment of Rents

What you need to know about Assignment of Rents and Leases

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