Florida assignment of contract: how a wholesale contract is assigned

What an assignment of contract is

An assignment of contract transfers your rights as the buyer under a signed purchase contract to someone else before closing. A Florida real estate law firm puts it simply: when the contract is assigned, a new buyer, the assignee, steps into the shoes of the original buyer, the assignor. The legal guidance that Florida’s Realtor association gives its members describes the same hand-off of the contract’s obligations and benefits to a party who was not in the contract.

In a wholesale deal, the assignor is you. You sign a contract to buy at one price, find an end buyer willing to pay more, and assign them the contract for a fee. The end buyer closes directly with the seller, so there is one closing, one deed and no money needed from you beyond your deposit. That is the main difference from a double close, where you buy and resell and need the first purchase funded.

Paragraph 7: the three assignability boxes

Most Florida residential sales use one of the two standard contracts approved by the state’s Realtor association and The Florida Bar, and on both, assignability is paragraph 7. On the AS IS version it reads as a choice of three boxes, and the choice is made when the contract is signed.

• Buyer may assign and thereby be released from any further liability under this Contract.
• Buyer may assign but not be released from liability under this Contract.
• Buyer may not assign this Contract.
• If no box is checked, the form says in capitals that the buyer may not assign.

Released or still liable: what the box means for you

The first two boxes both allow the assignment. The difference is what happens if your end buyer does not close. Under the release box, the association’s guidance explains, the original buyer essentially walks away and the seller’s recourse, if the assignee fails to perform, is solely against the assignee. Under the second box you stay on the hook: the Florida law firm notes that the original buyer may still be liable if the assignee fails to meet the buyer’s obligations.

Many sellers will pick the second box, or none. A Florida attorney who writes about flips observes that sellers routinely refuse to release the buyer when a contract is assigned, and that whatever the assignment clause says, a buyer who assigns remains obligated unless the contract explicitly says otherwise. On the standard form, a defaulting buyer can lose the deposit to the seller as agreed liquidated damages, which is the money at risk if your assignee walks.

Listing agents are told to raise this. The association’s guidance says a seller’s agent who receives an assignable offer should ask the seller whether they will allow the assignment and, if so, whether they want to hold the original buyer liable. Agents are also told not to explain assignability themselves and to send customers with questions to an attorney.

“And/or assigns” on a Florida contract

Some wholesalers write the buyer as “Your Name and/or assigns”, a phrase an investor education guide recommends so that whoever closes may be you, your entity or someone you assign the contract to. On the standard Florida form, though, paragraph 7 is where assignability is decided, and writing the phrase on the buyer line does not check a box. If the buyer line and paragraph 7 point different ways, that conflict is a question for a Florida real estate attorney before you sign, not something to settle at the closing table.

A close cousin is the designee clause, where the seller agrees to deed the property to a party the buyer names at closing. The same Florida attorney reports that sellers rarely accept one for an unaffiliated party, preferring the designee to be an affiliated entity so the buyer cannot profit by naming someone who pays more, and that a buyer who names a designee still remains obligated unless the contract says otherwise.

Contracts you cannot assign without consent

Some sellers write their own contracts, and many of those forbid assignment or require consent. Read the clause in the contract you were handed, and if consent is required, get it in writing before you market the deal.

• HUD homes: the HUD sales contract says it is assignable only by written consent of the seller, which is HUD.
• Fannie Mae homes: its REO contract says the purchaser shall not assign it without the seller’s express written consent, and its offer guidance says buyer names cannot be changed, removed or added later without Fannie Mae’s approval.
• Fannie Mae short sales: its servicing guide says the purchaser must not receive any funds from the sale and requires a deed clause barring any resale for 30 days, and any resale above 120% of the short sale price until day 90.
• Negotiated contracts: limits are common, a Florida attorney notes, such as allowing assignment only to an affiliated entity, or with notice to the seller, or with consent the seller will not unreasonably withhold. An affiliate-only clause does not let you assign to an unrelated end buyer for a profit.

What the assignment agreement should cover

Paragraph 7 only settles whether you may assign. The assignment itself is a separate legal document between you and the assignee, and the association’s guidance notes that the buyer may need an attorney to help draft it. The Florida law firm’s advice is the same in fewer words: every assignment should be documented in a written, signed agreement with clear and unambiguous terms.

An investor education guide lists much the same contents. Treat this as a list of questions the document must answer, not as a form, and have a Florida real estate attorney draft or review yours.

• The parties: you as assignor, named exactly as on the purchase contract, and the assignee.
• The contract being assigned: its date, the seller, and the property.
• The fee: the amount, and that it is paid at closing through the closing agent.
• Any deposit from the assignee to you, when it is paid, and when, if ever, it is refundable.
• Your original deposit: how you are repaid for it, since it is credited toward the price at closing.
• The assignee’s promise to take on the buyer’s obligations and close on the contract’s date.
• What happens if the assignee does not close, including whether the assignment ends and the contract returns to you.

The deposit, before and after the assignment

Your deposit sits with the escrow agent named in the purchase contract, by default within 3 days of the effective date on the AS IS form, and at closing it is applied toward the price. After an assignment, that credit benefits the end buyer, who brings the rest. Unless your agreement says the end buyer reimburses you for it, you have paid part of their purchase price.

The deposit is also where badly written assignments go wrong. The Florida law firm lists disputes over the earnest money deposit among the problems of an assignment that is not properly documented. Florida’s financial regulator adds that when a deal falls through, money held in escrow by a title agency cannot be returned until the closing agent has written approval from both the seller and the buyer. Put the deposit terms in the assignment, in writing.

Where the assignment fee shows at closing

In an assignment there is one closing, and your fee is money the end buyer pays at it. A title and escrow company’s general counsel describes the setup: the fee appears on the buyer’s closing statement, the seller and buyer both know the contract was assigned, and only the buyer sees the fee. The industry’s standard settlement statement comes in separate combined, seller, buyer and cash versions, which is what lets each side see only its own figures.

The fee belongs on the statement. Everyone who signs that standard statement certifies it as a true and accurate account of all receipts and disbursements, so a fee paid outside closing has no place in a clean file. If the end buyer is borrowing, their lender sees the fee too, and some lenders will not finance it: one lender’s published guidelines underwrite on the original contract price and require the borrower to pay any assignment fee themselves.

Doc stamps on an assignment

An assignment produces one deed, from the seller straight to the end buyer, and in Florida that deed owes documentary stamp tax on its consideration once. A double close records two deeds and pays the tax twice, which is one reason an assignment is the cheaper structure when it is available.

Whether the fee itself is taxed is less settled. A Florida attorney certified by The Florida Bar in real estate law reads section 201.02, which taxes writings by which any interest in real property is assigned, as reaching the assignment of a contract to buy land. On that reading the fee paid for the assignment owes documentary stamp tax, and because no deed is recorded, the tax is paid to the Department of Revenue on its return for unrecorded documents. The Department’s rules address assignments of agreements for deed but not a wholesale assignment fee by name. Ask your closing agent and a Florida tax adviser or real estate attorney how yours will be treated, before you set the fee.

Marketing an assigned contract in Florida

How you find the end buyer matters as much as the paperwork. Section 475.43 of the Florida Statutes presumes, in a case under the real estate licensing law, that a party acted as a broker if they advertised real estate for sale, generally or describing the property, when title was not in their name, and the burden then moves to that party to prove otherwise. An advertisement for your contract describes a property you do not own.

The same section declares void, in proceedings under the chapter, contracts not based on substantial consideration or used to let an unlicensed person sell real estate whose beneficial title has not passed to them in good faith for substantial consideration, with carve-outs for unconditional contracts to purchase and options backed by substantial consideration actually paid. A real deposit on a contract you intend to close sits further from that description than a token one. Have a Florida real estate attorney review your contract form and your marketing, and read whether wholesaling is legal in Florida for the licensing side.

When a double close is the better route

Assignment is cheaper whenever it is open. Some deals close it off, and then the choice is a double close or no deal.

In each of those cases you buy and resell the same day, and the purchase needs its own money. Entrusted Capital provides same day transactional funding for double close deals, funding the front-side close for up to 100% of the purchase price, which keeps your fee private and suits a contract that cannot be assigned.

• The contract forbids assignment, or requires consent the seller will not give.
• The end buyer’s lender will not accept an assigned contract. Some investor loan programs list assignments as ineligible.
• The end buyer balks at seeing your contract price and your fee.
• The end buyer is using FHA financing, which rules out both structures on a short timeline: FHA bars any assignment of the sales contract, and makes a home ineligible if the buyer’s contract is signed 90 or fewer days after the seller acquired it.

A Florida assignment checklist

Run it before you sign the purchase contract, again before you sign the assignment, and once more when the closing agent sends the draft statement.

• Paragraph 7 checked to allow assignment, and the seller’s choice on release understood.
• For an institutional seller, the assignment clause read and any consent obtained in writing.
• A real deposit, on a contract you intend to close.
• The assignment agreement drafted or reviewed by a Florida real estate attorney, covering the fee, both deposits, the assignee’s obligations and what happens if they fail.
• The closing agent told on day one that the contract will be assigned, with a copy of the signed assignment.
• The end buyer’s financing confirmed, including whether their lender accepts assignments and finances the fee.
• The doc stamp treatment of the fee asked about before the fee is set.