How to Assign a Purchase Contract to Your Syndication LLC
To assign a purchase contract to your syndication LLC, sign the contract in a form that allows assignment, usually by naming the buyer as you "and/or assigns" or by adding a clause that lets you assign to an entity you control, then sign an assignment agreement that moves the contract and the earnest money credit to the deal LLC before closing. Read the contract's assignment clause first: many sellers limit assignment or require consent, and you generally stay liable on the contract unless the seller releases you.
Most first-time sponsors find a building before the deal's LLC exists. That is normal. Assignment is the bridge between the person who signed the contract and the company that will own the building. This guide covers the clauses, the timing and the traps. It is not legal advice, and contract law varies by state, so have a real estate attorney review your contract.
Why assign the contract at all?
Timing. You often sign a letter of intent and purchase contract within days of finding a deal, while forming the LLC, getting its tax ID and opening its bank account take a bit longer. See the timeline from LOI to first wire.
The lender also cares who owns the building. Fannie Mae's Multifamily Guide requires the borrower to be a domestic single-asset entity formed for the sole purpose of owning the property, and tells lenders to confirm it has been a single-asset entity since formation (Fannie Mae Guide, Part I, Chapter 3). A fresh LLC formed for this one building fits that rule. See how to form an LLC for a syndication.
How do you write the contract so you can assign it?
There are three common approaches. Your attorney should pick the wording.
| Approach | How it reads | Seller's view | Trade-off |
|---|---|---|---|
| "And/or assigns" | Buyer: "Jane Sponsor and/or assigns" | Some sellers accept it; some strike it | Flexible, but some contracts still limit assignment elsewhere |
| Affiliate assignment clause | Buyer may assign to an entity controlled by the buyer without the seller's consent, with notice | Common and easy to accept | You must actually control the assignee and give notice on time |
| Sign in the LLC's name | The LLC is formed first and signs as buyer | Cleanest | You form and pay for an LLC before you know the deal will close |
Watch for clauses that cut the other way: an anti-assignment clause, a requirement for the seller's written consent, a deadline to name the assignee, or a rule that the original buyer stays liable. If the contract says nothing, state law fills the gap, and that is a question for your attorney.
What happens to the earnest money?
The earnest money deposit sits with the title company or escrow holder under the contract. When you assign the contract, the deposit goes with it: at closing, it is credited to the LLC as buyer. Because you paid it personally, the LLC normally reimburses you at closing from the funds raised.
Show that reimbursement as a line in your sources and uses and disclose it in the offering documents. The same goes for other costs you paid before closing, such as inspections or loan deposits. See earnest money and the letter of intent.
Do you stay liable after you assign?
Usually, yes, at least in part. Under general contract law, when a party delegates its duties to someone else, the original party stays secondarily liable unless the other side expressly releases it. A full substitution that releases the original party is a novation, and it needs the other party's consent (Cornell LII: assignment, novation).
In practice, that means if the LLC fails to close, the seller may still look to you. That is one more reason not to sign a contract you cannot back with a realistic raise plan and the right deposit terms.
Can you charge your own deal an assignment fee?
You can, but call it what it is. A fee you pay yourself for assigning the contract to a deal you sponsor is a sponsor fee. It must be disclosed to investors along with every other fee, and it should be tied to real work. Hiding it in the purchase price or the closing statement would mislead investors, which Rule 10b-5 prohibits. Some states also have rules for people who market or sell contract interests for profit, so ask your attorney before you charge one. See syndication fees.
A step by step timeline (made-up example)
The dates below are a made-up example for a contract with a 60 day closing. Your contract's deadlines control.
| Day | Step | Who |
|---|---|---|
| 0 | Sign the purchase contract as "Jane Sponsor and/or assigns," with an affiliate assignment clause | Sponsor, seller |
| 3 | Deposit $100,000 earnest money with the title company | Sponsor |
| 5 to 10 | Form the deal LLC and get its tax ID (EIN) | Sponsor |
| 10 to 20 | Apply for the loan in the LLC's name | Sponsor, lender |
| 20 | Sign the assignment and assumption agreement; deliver notice to the seller, title company and lender | Sponsor, LLC |
| 60 | Closing: the LLC takes title; the $100,000 deposit is credited to the LLC; the LLC reimburses the sponsor $100,000 from the raise | Title company |
Check that the numbers match on closing day: the deposit credit and the reimbursement are the same $100,000, so the sponsor is made whole and the LLC paid for its own deposit. For the tax ID step, see how to get an EIN for an apartment LLC.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from their friends and followers under Rule 506(b) or 506(c). It forms the deal LLC, prepares the standard offering documents, files Form D and state notices, and verifies accredited investors for 506(c). DoorRaise does not draft or review your purchase contract or the assignment: those belong with your real estate attorney. Investors fund by wire into escrow at Enterprise Bank & Trust, an FDIC-insured bank. Fees are $1,500 to set up (non-refundable), $5,000 at closing (only if the deal closes) and $3,500 a year, with no percentage of the raise.
Raise your apartment deal from the people who already follow you.
DoorRaise is built for apartment buildings with 5 or more units: one link for the deal, escrow until closing and a standard fee card.
Ready to raise? Create your free sponsor page or see pricing.
FAQ
Do I need the seller's permission to assign?
It depends on the contract. Many contracts allow assignment to an affiliate with notice; others require written consent. Read the clause before you sign.
Should I just form the LLC before I sign the contract?
It is the cleanest path, but you pay for an LLC on a deal that may not close. Many sponsors sign as "and/or assigns" and form the LLC right after.
Does the lender care about the assignment?
Yes. The lender underwrites the borrower, so the LLC should be the applicant, and the lender will want to see the assignment and the LLC's documents.
Am I off the hook once the LLC closes?
After closing, the contract has been performed. Before closing, you can stay liable unless the seller releases you.
Is assigning to my own LLC "wholesaling"?
Assigning to an entity you control for your own deal is different from selling contracts to outside buyers for a fee. State rules differ, so ask your attorney if you are unsure.
Next step: read how to form an LLC for a real estate syndication so the LLC is ready when the assignment is due.
Sources
- Fannie Mae Multifamily Guide, Part I, Chapter 3 (single-asset entity)
- Cornell LII Wex: assignment
- Cornell LII Wex: novation
- 17 CFR 240.10b-5
This article is general information, not legal, tax or investment advice. Talk to a real estate attorney about your contract and a securities attorney about your offering. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.