An assignment of contract rights allows a contractually obligated person to assign the contract rights over to another person. In Florida, this is a common real estate practice, especially with regard to preforeclosure real estate sales. The property owner assigns rights to an investor. The investor then either closes or assigns those rights to a second investor.
First Investor
Florida allows for multiple layers of investors when it comes to contract assignments of rights. The initial investor seeks out property to purchase. This can be in the form of real estate, vehicles or other property. However, it typically involves real estate. The investor makes an offer to the owner and, if the offer is accepted, both parties are bound by contract to the deal.
Enter the Second Investor
The investor has the right to follow through and close on the property and become the owner. The investor also has the right to enter into a contract with a second investor, through an assignment of contract rights. Florida law also allows the first investor to make a profit in the assignment. For example, the first investor locates a property about to go into foreclosure. The note on the property is $110,000. The property is worth $200,000. The first investor makes an offer of $110,000. The offer is accepted and the first investor then turns around and accepts an assignment of rights contract by the second investor for $130,000. Thus the first investor will make a profit of $20,000 on the deal.
Property Owner Rights
Florida law views the second investor as contractually entitled to own the property for $130,000, even though the property owner will only receive enough to pay the $110,000 note owed to the lender. This is because that was the contractual agreement the second investor made with the first.
Potential Pitfalls
Assignment of contract rights provides a venue for profit for investors. The first investors on the scene make the initial purchase and then decide at what price to set the assignment of rights contract. The second investor must, by virtue of the contractual process, see how much the first investor paid for the property. The second investor may decide that the first investor is trying to make an unfair profit and balk at the asking price.
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Writer Bio
Candace Webb has been writing professionally since 1989. She has worked as a full-time journalist as well as contributed to metropolitan newspapers including the "Tennessean." She has also worked on staff as an associate editor at the "Nashville Parent" magazine. Webb holds a Bachelor of Arts in journalism with a minor in business from San Jose State University.