What Is an Assignment Request in Real Estate?
Understand real estate assignment requests: learn how contractual rights to purchase property are transferred and how it differs from other sales.
Real estate transactions involve various methods for transferring property interests. This article clarifies what an “assignment request” in real estate entails, outlining its purpose and how it functions.
Understanding Real Estate Assignment
In real estate, an “assignment” refers to the transfer of a buyer’s contractual rights and obligations under an existing purchase agreement to a third party. The original buyer, known as the “assignor,” does not take ownership of the property. Instead, the assignor sells their right to purchase that property to another buyer, termed the “assignee.” This process allows the assignor to exit the transaction before closing while enabling a new party to step in and complete the purchase.
Three primary parties are involved: the assignor, the assignee, and the original property owner, known as the “seller.” Assignments commonly occur in pre-construction property sales, where a buyer sells their interest before the property is built, or in real estate wholesaling, where an investor contracts to buy a property and then assigns that contract to another investor.
Key Elements of an Assignment Agreement
The legal document facilitating this transfer is called an “Assignment of Purchase and Sale Agreement.” This agreement identifies all parties involved, including the assignor, assignee, and a reference to the original purchase agreement. It specifies the assignment fee, which is the compensation the assignor receives for transferring their contractual rights. This fee can range from a few thousand dollars to tens of thousands, or a percentage of the original price.
The agreement outlines how the original deposit made by the assignor will be handled, often requiring the assignee to reimburse or pay the deposit directly. Details regarding the closing date are also included, clarifying the transaction’s finalization. Seller consent is required, often stipulated in the initial purchase agreement, and an assignment cannot proceed without this approval.
Procedural Steps for an Assignment
The assignor identifies a suitable assignee who is willing to take over the original purchase contract. Following this, the assignor and assignee negotiate the specific terms of their agreement, including the assignment fee the assignee will pay to the assignor. Once terms are agreed upon, the Assignment of Purchase and Sale Agreement is drafted and formally signed by both the assignor and the assignee.
A crucial procedural step involves formally requesting and securing the original seller’s approval for the assignment, if the original purchase agreement requires it. This action typically occurs after the assignment agreement between the assignor and assignee is in place. All relevant parties, such as the original seller’s attorney or agent and the title company, are then notified of the assignment. Financial aspects are also addressed, which includes the transfer of any original earnest money deposit from the assignor to the assignee and the payment of the agreed-upon assignment fee from the assignee to the assignor. Ultimately, the assignee proceeds to close the transaction directly with the original seller under the terms outlined in the initial purchase agreement.
Distinctions from Other Property Transfers
A real estate assignment differs significantly from other common methods of transferring property interests. In a traditional property resale, the seller already holds ownership of the property and directly conveys the title to the buyer. Conversely, in an assignment, the assignor transfers only their contractual right to purchase the property, not the property itself, as they have not yet taken ownership. This distinction is fundamental to understanding the nature of an assignment.
The process of assignment also contrasts with novation. Novation involves replacing an existing contract with an entirely new one, which extinguishes the original parties’ obligations and liabilities. In an assignment, the assignor remains secondarily liable for the original contract’s obligations unless explicitly released by the seller, meaning they could still be responsible if the assignee defaults. Assignments are often completed more quickly than traditional sales, as they leverage an existing contract rather than initiating a new property marketing and sale process.