Yes. Real estate assignment contracts are legal in Texas when they are properly structured and used in compliance with state law. An assignment contract generally allows a buyer who has a contractual interest in purchasing real property to transfer that contractual interest to another buyer. Texas law specifically permits a person to acquire an option or interest in a real estate purchase contract and then assign or offer to assign that interest without holding a real estate license, provided the person does not engage in unlicensed brokerage and satisfies required disclosure rules.
What Is a Real Estate Assignment Contract?
A real estate assignment contract is an agreement under which the original buyer, known as the assignor, transfers contractual rights to another person, known as the assignee. The original seller remains a party to the underlying purchase agreement, while the assignee generally steps into the buyer’s contractual position.
For example, an investor might sign a purchase agreement with a property owner and later assign the right to purchase the property to another investor. The original buyer may receive an assignment fee in exchange for transferring the contractual interest.
Does Texas Require a Real Estate License?
Not necessarily. Texas Occupations Code Section 1101.0045 specifically allows a person to acquire an option or an interest in a contract to purchase real property and then sell or offer to sell the option or assign or offer to assign the contractual interest without a real estate license, provided the person does not use the arrangement to engage in real estate brokerage.
Texas Real Estate Commission rules contain a similar provision. Under TREC Rule 535.6, a person may assign an interest in a purchase contract without a license if the person does not use the contract to engage in brokerage and properly discloses the nature of the equitable interest.
What Disclosures Are Required?
Disclosure is one of the most important requirements.
Texas Property Code Section 5.0205 requires a person, before entering into a contract to sell an option or assign an interest in a contract to purchase real property, to disclose in writing to the potential buyer that the person is selling only an option or assigning a contractual interest and does not hold legal title to the property. The person must also disclose in writing to the property owner that the person intends to sell the option or assign the contractual interest.
These disclosures help prevent a buyer or seller from mistakenly believing that the wholesaler or assignor actually owns the property.
Can You Assign Any Purchase Contract?
Not necessarily. The underlying purchase agreement should be reviewed carefully before an assignment is attempted. Some contracts may contain provisions restricting assignment or requiring the seller’s consent.
The parties should also understand whether the original buyer remains liable under the contract after assignment. An assignment of contractual rights does not automatically mean every obligation of the original buyer disappears. The wording of the purchase agreement and assignment agreement matters.
Is Wholesaling the Same as Assignment?
Assignment is commonly used in real estate wholesaling, but the concepts are not identical.
In a typical wholesale transaction, the wholesaler enters into a purchase agreement and later assigns the contractual interest to another investor. The wholesaler may receive an assignment fee. TREC has confirmed that wholesaling can be legal when the person accurately represents the interest being offered and follows applicable disclosure requirements.
However, marketing the property as though the wholesaler owns it can create a different legal issue. TREC explains that offering property for sale when the person does not own it can constitute real estate brokerage requiring a license.
What Happens at Closing?
In an assignment transaction, the assignee generally completes the purchase under the assigned contract. Depending on the transaction structure, the original buyer may receive an assignment fee, while the assignee becomes responsible for completing the purchase according to the underlying agreement.
The title company and closing professionals should receive accurate documentation showing the contractual arrangement.
Should an Assignment Agreement Be Written?
Yes. A written agreement is strongly advisable because real estate transactions involve significant financial and contractual obligations. The agreement should clearly identify the original contract, parties, assignment rights, consideration or assignment fee, closing obligations, deadlines, and representations concerning the assignor’s interest.
What Are the Risks?
Assignment transactions can create disputes if the underlying contract prohibits assignment, required disclosures are omitted, the property is misrepresented, or the parties misunderstand who remains responsible for contractual obligations.
Using an assignment structure also does not allow someone to perform brokerage services for others without the required license. The key legal distinction is whether the person is assigning their own contractual interest or acting as an intermediary for another party.
Conclusion
Real estate assignment contracts are legal in Texas when properly structured and used within state law. Texas specifically permits a person to acquire an interest in a real estate purchase contract and assign that interest without a real estate license, provided the person is not engaging in unlicensed brokerage and complies with disclosure requirements.
Before assigning a contract, parties should review the original purchase agreement, confirm that assignment is permitted, make all required written disclosures, and accurately describe the contractual interest being transferred.
