Why Most Wholesalers Fail at Assigning Contracts (And How to Do It Right)

Let’s cut to the chase: Contract assignments are how wholesalers get paid. But here’s the brutal truth—most new wholesalers mess this up. They lose deals, upset buyers, or even get sued because they don’t understand the rules.

I’ve seen it happen too many times. A wholesaler finds a great deal, negotiates with the seller, and then… poof… the contract falls apart because of a tiny mistake.

But it doesn’t have to be that way.

In this guide, you’ll learn:

• The exact steps to assign a contract (without sounding like a lawyer).
• How to avoid legal landmines (like hiding your assignment fee).
• Real-life examples of assignments gone wrong vs. ones that closed smoothly.

Let’s fix your contract game.

What Is a Wholesale Contract Assignment?

When you “assign a contract,” you’re basically selling your right to buy a property to another investor (your buyer).

Here’s how it works:

1. You sign a contract with the seller to buy their house for $100k.
2. You find a cash buyer who wants it for $110k.
3. You “assign” your contract to the buyer for a $10k fee.

You never own the property. You’re just the middleman connecting the seller and buyer.

Step-by-Step: How to Assign a Contract (Without Screwing It Up)

Step 1: Write a Solid Purchase Contract

Your contract with the seller MUST include an assignment clause. This clause says you can transfer the contract to another buyer.

Example Wording:
“Purchase may be assigned without the sellers response or permission..”

Pro Tip: Real estate attorneys offer contracts that you can utilize, as well as templates found online.

Step 2: Disclose Your Assignment Fee Transparently

In most states, you must tell the seller you’re assigning the contract and disclose your fee. If you attempt to hide this, you could get into legal problems or lose your license.

Example Disclosure:
“Buyer intends to assign this contract to a third party for a fee. Seller acknowledges and consents to this assignment.”

Step 3: Add Contingencies to Protect Yourself

Contingencies are “escape hatches” if something goes wrong. Always include:

• Inspection contingency (if the property has hidden issues).
• Financing contingency (if your buyer’s funding falls through).

Mistake to Avoid: Skipping contingencies to “look professional.” Without them, you’re stuck buying the property yourself if the deal collapses.

Step 4: Handle Earnest Money Correctly

Earnest money (the deposit you put down to show you’re serious) is tricky in assignments:

• Option 1: Let your buyer provide the earnest money directly to the seller.
• Option 2: Use a double escrow (where your buyer’s funds replace yours).

Never pocket earnest money yourself—this is a common reason deals fail.

Step 5: Sign the Assignment Agreement

This is the paperwork that officially transfers your rights to the buyer. It should include:

• Original purchase price ($100k).
• Assignment fee ($10k).
• Buyer’s responsibilities (closing the deal, paying the seller).

Pro Tip: Include a non-refundable deposit from the buyer to ensure they don’t back out last-minute.

3 Mistakes That Void Contracts (And How to Avoid Them)

Mistake #1: Missing Assignment Clause

If your contract with the seller doesn’t explicitly allow assignments, they can legally block your deal.

Fix: Always double-check the contract wording.

Mistake #2: Not Disclosing Your Fee

In states like Texas and Florida, failing to disclose your assignment fee can lead to lawsuits or fines.

Fix: Add a disclosure clause (see Step 2 above).

Mistake #3: Skipping Contingencies

No contingencies = you’re on the hook if the buyer flakes or the house has termites.

Fix: Use an inspection contingency and a “kick-out clause” letting you cancel if you can’t find a buyer.

Real-Life Examples: Botched vs. Smooth Assignments

The Disaster Deal:

• What Happened: A wholesaler forgot to add an assignment clause. The seller refused the assignment, and the wholesaler had to buy the house or lose their $5k deposit.
• Cost: $5k loss + damaged reputation.

The Smooth Deal:

• What Happened: A wholesaler used a PropStream template contract with clear assignment terms. The deal closed in 14 days, and they pocketed a $12k fee.
• Profit: $12k + a happy repeat buyer.

Final Takeaway

Assigning contracts isn’t rocket science—it’s about clarity and transparency. Use a bulletproof contract, disclose your fees, and always protect yourself with contingencies.