The real estate industry encompasses a range of subcategories, including investors and agents. The terms of the contract dictate the course of the real estate sale. When selling a house, there are multiple routes to take, whether it’s selling directly to an investor, utilizing a realtor, or using the services of an assignee to facilitate the transaction. Most of the time, investors doesn’t have the tools and resources to acquire their own deals. Therefore, a wholesaler or real estate assignee will bridge the gap between the real estate investor and the homeowner. In this blog post, we will describe what is an assignee in real estate and the benefits of using this home-selling method.

What is an Assignee in Real Estate?

An assignee in real estate is an individual who connects the property seller with a buyer. Essentially, an assignee or wholesaler serves a similar function as a realtor; the only difference that the home’s sold off-market. When using the services of a real estate assignee, the seller will sign a contract with the assignee, and then the assignee sells that contract to another buyer at a higher price.

How the Assignment of Contract Works

1. The first step will be the homeowner reaching out to the real estate assignee, typically through an online search such as Google. Wholesalers or assignees also reach out to potential sellers through phone calls, emails, and even direct mail.
2. Both the seller and the assignee agree upon a sales price and the terms of the contract. The contract states the wholesaler’s name or company along with the phrase “and/or assignee.”
3. Next, the assignee will reach out to their network of buyers or market the property to a list of investors to sell the property.
4. Lastly, the assignee and buyer will begin the title search with a local title company, completing each step in the process, from inspections and submitting necessary documents.

For a contract to be assigned, the contract must clearly state an assignment clause allowing the wholesaler to transfer the contract to another buyer before closing. It’s important to note that some states or cities require a real estate license to wholesale a home. Therefore, it’s vital to review your local real estate wholesaling laws to protect yourself from fines and other consequences.

Roles of an Assignee in Real Estate

• The assignee agrees to the contract terms, whether it’s waiving inspections or purchasing the property requiring repairs or a cleanout. Furthermore, a closing date is set within the contract; if the process goes beyond the set closing date, the assignee and seller need to sign a contract addendum.
• There’s financial obligations involved with assigning a contract. Although most of those obligations are the duties of the buyer. Such as placing an earnest money deposit and usually covering closing costs.

The role of an assignee is short-lived; once a buyer is in place, it’s on the investor to handle the process to ensure the property closes within the contract date. Although most real estate assignees protect themselves by utilizing their own contract, with ways to back out of the deal without any consequences. However, there are still some potential risks associated with assigning a contract.

Assignment Fee: How the Assignor Gets Paid

An assignment fee is the money paid to the wholesaler for finding a buyer for a homeowner to purchase their property. The amount of the assignment fee can vary depending on the sales price and what the buyer is willing to pay. The assignee receives payment after the property closes through the title company. It’s typically the buyer’s responsibility to pay the assignee, and at times, it has no direct impact on the amount of money the seller receives. Furthermore, the assignment fee’s similar to those of a real estate agent, without the seller needing to complete any repairs, inspections, or even showings. Therefore, it provides a quicker closing without all the hassle of a traditional real estate sale.

Potential Risks for a Real Estate Assignee

• Although it’s rare, at times, sellers will hire a real estate attorney to draft a contract that doesn’t allow transfer of the rights, also known as a non-assignability clause.
• Potential financing challenges. Sometimes a lender is strict; unless the buyer is funding their own deal and coming to the closing table with cash, the lender may not approve the deal, which can be a huge drawback for the assignee, seller, and buyer.

Tips for Assignees in Real Estate

• Review your local rules and regulations for assigning a property. Some places don’t allow real estate wholesaling without a license, while other states and cities force the assignee to disclose that they are wholesaling the home.
• It’s vital to pre-qualify the assignor, ask for proof of funds, and request recently completed projects to ensure the assignor can close on the property.
• As a real estate assignee, ensure you’re transparent with both the buyer and seller. Furthermore, ensure you use documents and contracts with legal standing to ensure the deal goes smoothly.
• It’s beneficial to work closely with trusted real estate attorneys, title companies, and agents. In real estate, to have success, you need to utilize your network and resources.

Property Sellers can benefit from using an Assignee

Although most homeowners prefer dealing directly with the investor, there are endless advantages to using a real estate assignee. Furthermore, when selling a home using an assignee, the deal is off-market, meaning most of the time the seller can sell the home as-is, completing no repairs or inspections. Therefore, this can be beneficial for distressed properties or sellers who desire a fast closing. As a wholesaler or assignee, it’s important to obey the laws, along with being transparent with the seller and buyer. Most of the time, sellers accept using an assignee/wholesaler because it’s similar to using an agent without the hassle of completing multiple steps and a multiple-month process.

As for wholesalers, there are potential risks associated with being an assignee, although the reward outweighs the drawbacks. Therefore, keep in mind, honesty is key, and as a real estate professional, there’s ethics and a reputation to keep. Therefore, after reading this article, if you’re interested in starting a career in real estate as an assignee or wholesaler, reach out to our company for more details.