If you`re in the process of buying or selling a property, you may have come across the term “purchase agreement with assignment clause.” This type of agreement is used when a buyer wants to transfer their rights and obligations to another party, usually a third-party investor, before the sale is completed. In this article, we`ll explore more about what a purchase agreement with assignment clause is and why it`s important.
What is a purchase agreement with assignment clause?
A purchase agreement with assignment clause is a legal document that outlines the terms and conditions of a sale, as well as the rights and obligations of the buyer and seller. The assignment clause allows the buyer to assign their rights and obligations under the agreement to another party, usually without the seller`s consent. The third-party investor who takes over the buyer`s rights and obligations is known as the assignee.
Why is a purchase agreement with assignment clause important?
A purchase agreement with assignment clause is important for buyers and investors because it provides a way for them to profit from a property without actually purchasing it. For example, if a buyer finds a property that they believe will increase in value, they can enter into a purchase agreement with an assignment clause and then assign their rights to an investor who is willing to pay a higher price for the property.
From a seller`s perspective, a purchase agreement with assignment clause may not be ideal because they have no control over who the buyer assigns their rights and obligations to. However, if the seller is motivated to sell quickly, they may be willing to accept this type of agreement.
What are the risks of a purchase agreement with assignment clause?
The main risk of a purchase agreement with assignment clause for the buyer is that they may be unable to find an investor who is willing to take over their rights and obligations. In that case, the buyer would still be obligated to complete the purchase and could potentially lose their deposit if they are unable to do so.
For the seller, the main risk is that they may not receive the full sale price for the property if the assignee is only willing to pay a lower price. Additionally, the seller may not have any input on who the assignee is and may not be able to verify their financial ability to complete the purchase.
In conclusion, a purchase agreement with assignment clause can be a useful tool for buyers and investors who are looking to profit from a property without actually purchasing it. However, it`s important to understand the risks involved and to work with experienced professionals, such as real estate attorneys and investors, to navigate the process. As always, it`s essential to carefully review and understand any legal document before signing on the dotted line.
