The WRA Legal Hotline regularly receives questions about assigning an offer to purchase. Sometimes parents write an offer intending to purchase a property for a child, only to later decide the child should take title instead. Other times, a child writes the offer but later learns financing may be easier to obtain if a parent purchases the property. In other situations, investors may want to assign their rights under an offer to another buyer.
While these scenarios involve different facts, they all raise the same question: Can a buyer assign an accepted offer to purchase to someone else?
In many cases, the answer is yes. Under Wisconsin contract law, a buyer generally may assign the buyer's rights under an offer to purchase to another party and delegate the performance of the buyer's contractual obligations without first obtaining the seller's consent. The assignment should always be in writing.
Does the original buyer walk away?
Not necessarily.
Although the buyer may assign the contract, the original buyer generally remains liable for the performance of the contract unless the parties agree otherwise. If the assignee fails to close or otherwise defaults, the seller may still have a claim against the original buyer.
For that reason, buyers considering an assignment should obtain legal advice regarding their continuing obligations and potential liability.
How is an assignment accomplished?
An assignment does not require the offer to have been written "and/or assigns," although including that language can help avoid confusion and reduce the likelihood of disputes.
While an assignment may be accomplished through a written notice from the buyer, some parties may prefer to document the transaction with an amendment signed by the original buyer, the assignee and the seller. Although seller consent is generally not required to make the assignment effective, involving all parties creates a clear record identifying who will be completing the transaction and helps minimize misunderstandings at closing.
In many transactions, there is also a separate assignment agreement between the original buyer and the assignee. That agreement documents the terms between those parties and is separate from the offer to purchase. A licensee would not draft an assignment agreement but rather would refer the parties to legal counsel.
Assignment and wholesaling
Assignments frequently arise in connection with wholesaling.
In a wholesale transaction, the wholesaler typically enters into an offer to purchase as the buyer, obtains an equitable interest in the property through that contract, and then assigns the contractual rights to another buyer rather than purchasing the property themselves. The wholesaler is assigning the purchase contract, not selling the real estate itself.
Wis. Stat. § 710.13(1)(b) defines a “real property wholesaler” as:
“a person that enters into a purchase agreement as a buyer and intends to assign the person’s rights as buyer under the purchase agreement to a 3rd party for consideration.”
Wholesaling involves specific statutory disclosure requirements in Wisconsin.
A wholesaler acting as the buyer must disclose to the seller that they are a wholesaler no later than the time the offer to purchase is entered into.
If the wholesaler later assigns the contract, the wholesaler must also disclose to the subsequent buyer that the wholesaler holds only an equitable interest in the property and is assigning rights under the purchase agreement rather than conveying title to the real estate. This disclosure must be made no later than entering into the assignment contract.
Failure to provide the required disclosures may give the seller or the subsequent buyer the right to rescind the transaction at any time before closing.
Practice tip
Licensees should remember that assigning a contract is different from adding or substituting a buyer through an amendment. Assignments affect the contractual rights between the original buyer and the assignee and may involve continuing liability for the original buyer as well as statutory disclosure requirements if the transaction involves wholesaling. Because assignments can have significant legal consequences, buyers should be encouraged to consult legal counsel before proceeding.
