Assignment of Contract
ABA Assignment of Real Estate Purchase Agreement
A Comprehensive Analysis & Professional Reference
Guide
Prepared May 2025 | For
Real Estate Investors & Legal Professionals
Table of Contents
4. Legal & Ethical Considerations
1. Overview & Purpose
What Is a Real Estate Contract Assignment?
The American Bar Association's "Assignment of Real
Estate Purchase and Sale Agreement" is a standardized model form designed
to facilitate the legal transfer of a buyer's rights and obligations under a
purchase contract to a new party. It is widely used as a benchmark for quality
and comprehensiveness, though it is typically adapted by attorneys to comply
with specific state laws and transaction details.
Its primary application is in real estate wholesaling
— a practice where an investor (the Assignor) who is under contract to purchase
a property transfers their contractual position to another investor (the
Assignee) for a fee, before the original closing date.
Important Clarification: There is no single,
universal "ABA Assignment Contract." The ABA form is a template — a
starting point — not a one-size-fits-all document. Every transaction requires
attorney review and state-specific adaptation.
The Three Parties in an Assignment Transaction
|
Party |
Also Known As |
Role |
|
Assignor |
Original Buyer / Wholesaler |
Holds the original purchase contract; transfers rights to
Assignee for a fee. |
|
Assignee |
End Buyer / New Buyer |
Receives the contractual rights and assumes all buyer
obligations. |
|
Original Seller |
Property Owner / Vendor |
Originally agreed to sell the property; must consent to
the assignment. |
2. Key Components & Clauses
A well-drafted ABA-style assignment agreement contains the
following critical sections. Each clause serves a specific legal and practical
purpose in protecting all parties to the transaction.
2.1 The Core Assignment & Assumption
Assignment Clause: The Assignor formally states they
"hereby assign, transfer, convey, and set over unto Assignee all of
Assignor's right, title, and interest in and to the Purchase Agreement,"
including all rights to purchase the property and all deposits held in
connection therewith.
Assumption Clause: The Assignee accepts the
assignment and "assumes and agrees to perform all of the obligations of
the Buyer under the Purchase Agreement." This clause makes the new buyer
responsible for the deposit, purchase price, and all other buyer duties from
the effective date forward.
2.2 The "Subject To" Clause
This critical clause explicitly states the assignment is
made "subject to" all terms, conditions, and obligations of the
original Purchase Agreement. It ensures the Assignee is bound by the same deal
the Assignor negotiated — including deadlines, contingencies, and property
conditions.
2.3 Consideration (The Assignment Fee)
This section outlines the financial terms of the assignment
itself, separate from the property's purchase price:
•
The assignment fee amount the Assignee pays the
Assignor for the contract rights
•
Payment structure: typically an earnest money deposit
upon signing, with the balance paid at closing
•
How the fee flows through the closing process (often
via the title company)
2.4 Representations & Warranties
Assignor warrants: The Purchase Agreement is in full
force; no prior assignment exists; no known defaults; a complete copy of the
Purchase Agreement and all amendments has been provided to Assignee.
Assignee warrants: Independent investigation of the
property has been conducted; Assignee is financially capable of performing all
obligations; Assignee accepts the property in its "as-is" condition.
2.5 Indemnification Clauses
Indemnification is a two-way risk-management mechanism:
•
Assignee indemnifies Assignor for liabilities
arising from Assignee's failure to perform buyer obligations after the
assignment effective date.
•
Assignor indemnifies Assignee for liabilities
arising from Assignor's own actions or breaches prior to the assignment
effective date.
2.6 Seller's Consent & Release (Most Critical Clause)
"The
Original Seller hereby consents to this Assignment and agrees to recognize
Assignee as the Buyer under the Purchase Agreement. Original Seller hereby
releases Assignor from any and all obligations under the Purchase Agreement
arising after the effective date of this Assignment."
Without the Seller's written consent and release, the
Assignor remains secondarily liable if the Assignee fails to close. This is the
gold standard protection for the original buyer.
2.7 General Provisions
•
Governing Law: Specifies which state's laws
govern interpretation of the agreement.
•
Successors & Assigns: The agreement binds
and benefits all successors and assigns of the parties.
•
Counterparts: The agreement may be executed in
multiple counterparts, each constituting an original.
•
Attorney's Fees: The prevailing party in any
enforcement action is entitled to recover reasonable attorneys' fees.
•
Entire Agreement: Supersedes all prior
discussions, negotiations, and agreements on the subject matter.
3. Risk Analysis by Party
Understanding the risks each party faces is essential before
entering into any assignment transaction.
|
Party |
Primary Risks |
Mitigation Strategies |
|
Assignor |
Remaining liable if Assignee defaults; earnest money at
risk; reputation damage if Assignee is unqualified |
Obtain full Seller release; vet Assignee thoroughly;
require Assignee earnest deposit |
|
Assignee |
Inheriting unfavorable contract terms; tight due diligence
window; double-deposit risk if deal fails |
Review full Purchase Agreement before signing; confirm
financing; negotiate adequate due diligence period |
|
Seller |
Dealing with unknown buyer; more complex closing;
perception of leaving money on the table |
Include anti-assignment clause in original contract if
desired; require Seller consent before any assignment |
4. Legal & Ethical Considerations
4.1 Licensing & Brokerage Laws
Many states regulate wholesaling through real estate
brokerage laws. The general rule is that anyone who, for compensation, assists
in procuring a buyer for another's property must hold a valid real estate
broker's license. Wholesalers must be careful to sell their contractual rights
— not act as an agent finding a buyer for the seller's property.
The language used in marketing and the structure of the
transaction are critical to staying on the right side of the law. The ABA form
itself is a neutral tool, but its use in unlicensed wholesaling is an area of
significant legal scrutiny that varies considerably by state.
4.2 State-Specific Compliance
Real estate law is highly state-specific. Key areas of
variation include:
•
Whether assignments must be disclosed to the Seller
•
Recording requirements for assignment agreements
•
Licensing requirements for wholesalers
•
Restrictions on double-closing vs. assignment
strategies
•
Notarization and acknowledgment requirements
4.3 Ethical Obligations
•
Full transparency with all parties about the nature of
the transaction
•
Ensuring the Assignee is genuinely qualified and
capable of closing
•
Avoiding predatory practices targeting distressed
sellers
5. The Model Form (Annotated)
IMPORTANT LEGAL DISCLAIMER: This
model form is provided for educational purposes only and does not constitute
legal advice. Always consult with a qualified real estate attorney in your
jurisdiction before using any legal form.
ASSIGNMENT OF REAL ESTATE PURCHASE AND SALE AGREEMENT
(American Bar Association Model Form)
1. Parties and Effective Date
This Assignment is made as of [Date], 20[XX], by and
between:
Assignor: [Original Buyer's Full Legal Name] —
Address: [Street Address, City, State, Zip]
Assignee: [New Buyer's Full Legal Name] — Address:
[Street Address, City, State, Zip]
Original Seller: [Property Seller's Full Legal Name]
— Address: [Street Address, City, State, Zip]
2. Recitals
2.1 Assignor and Original Seller entered into that
certain Real Estate Purchase and Sale Agreement dated [Date of Original
Agreement] for the purchase and sale of the real property located at [Property
Address], more particularly described in Exhibit A attached hereto.
2.2 Assignor desires to assign all of its right,
title, and interest in and to the Purchase Agreement to Assignee, and Assignee
desires to accept such assignment and assume all of Assignor's obligations
thereunder.
3. Assignment, Assumption & Consideration
3.1 Assignment: Assignor hereby assigns, transfers,
conveys, and sets over unto Assignee all of Assignor's right, title, and
interest in and to the Purchase Agreement, including all rights to purchase the
Property and all deposits and earnest money held in connection therewith.
3.2 Assumption: Assignee hereby accepts the foregoing
assignment and assumes and agrees to perform all obligations of the
"Buyer" under the Purchase Agreement arising from and after the date
hereof.
3.3 Consideration: Assignee shall pay Assignor an
assignment fee of $[Assignment Fee Amount], payable as: $[Earnest Money Amount]
upon execution, and $[Balance] at closing.
4. Representations and Warranties
4.1 Assignor's Representations: (a) Purchase
Agreement is in full force and effect; (b) no prior assignment exists; (c) no
known defaults; (d) complete copy of Purchase Agreement provided to Assignee.
4.2 Assignee's Representations: (a) Independent
investigation conducted; (b) financially able to perform all obligations; (c)
accepts Property in "as-is" condition.
5. Indemnification
5.1 Assignee's Indemnity: Assignee shall indemnify,
defend, and hold harmless Assignor from any claims, liabilities, damages,
losses, and expenses (including attorneys' fees) arising from Assignee's
failure to perform buyer obligations after the effective date.
5.2 Assignor's Indemnity: Assignor shall indemnify,
defend, and hold harmless Assignee from any claims, liabilities, damages,
losses, and expenses (including attorneys' fees) arising from Assignor's
failure to perform buyer obligations prior to the effective date.
6. Seller's Consent and Release
6.1 Consent: Original Seller hereby consents to this
Assignment and agrees to recognize Assignee as the "Buyer" under the
Purchase Agreement.
6.2 Release: Original Seller hereby releases Assignor
from any and all obligations under the Purchase Agreement arising after the
effective date of this Assignment.
6.3 No Modification: The Purchase Agreement remains
in full force and effect; this Assignment does not modify any of its terms.
7. General Provisions
7.1 Governing Law: Laws of the State of [State].
7.2 Successors and Assigns: Binding upon and inures
to the benefit of all successors and assigns.
7.3 Counterparts: May be executed in multiple
counterparts, each deemed an original.
7.4 Attorney's Fees: Prevailing party in any
enforcement action entitled to recover reasonable attorneys' fees.
7.5 Entire Agreement: Supersedes all prior
discussions, negotiations, and agreements on the subject matter.
8. Signatures
|
ASSIGNOR: [Original Buyer's Name] By:
_____________________________ Name: ___________________________ Title: ____________________________ Date: ____________________________ |
ASSIGNEE: [New Buyer's Name] By:
_____________________________ Name: ___________________________ Title: ____________________________ Date: ____________________________ |
|
ORIGINAL SELLER (Consent
& Release): [Property Seller's Name] By:
_____________________________ Name: ___________________________ Date: ____________________________ |
|
Notary Acknowledgment
STATE OF _______________ | COUNTY OF _____________
On ___________, 20___, before me,
___________________________, personally appeared _________________________,
personally known to me to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged that he/she/they executed the same in
his/her/their authorized capacity(ies).
WITNESS my hand and official seal.
Notary Public:
_____________________________ [NOTARIAL
SEAL]
EXHIBIT A — Legal Description of Property
[Insert full legal description of the property as it appears
in the county recorder's records. This description must match the legal
description in the original Purchase Agreement exactly.]
6. Conclusion & Key Takeaways
The ABA model form for assigning a real estate purchase
contract provides a robust and legally sound framework for transferring
purchase rights. The following key takeaways should guide any party considering
an assignment transaction:
1.
It is not a simple form-fill exercise. The legal
and financial implications are significant for all three parties.
2.
The Seller's written consent and release is the gold
standard. Without it, the Assignor remains exposed to secondary liability.
3.
Thorough due diligence is non-negotiable for the
Assignee. The Assignee inherits the contract as-is, including all deadlines
and conditions.
4.
State law compliance is essential. Wholesaling
regulations vary significantly by jurisdiction; unlicensed brokerage activity
carries serious legal risk.
5.
Consult a qualified real estate attorney. This
is absolutely essential to ensure the agreement is properly drafted, risks are
understood, and the transaction complies with applicable state law.
Official ABA Resources
•
ABA Bookstore: https://www.americanbar.org/products/books/
•
ABA Real Property Section: https://www.americanbar.org/groups/real_property_trust_estate/
•
ABA Service Center: 1-800-285-2221 |
service@americanbar.org
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