The Power of the AND/OR Clause

One awesome characteristic to real estate investing is the flexibility and options that exist within the business that some other businesses may not offer! One such characteristic is the use of two simple words when completing a property purchase agreement. These two words are: and/or assigns. Hint: they must be used just as they are written here and/or assigns.

The use of these two words inserted after the name of the Buyer’s name in the property purchase agreement supplies the Buyer amazing flexibility. Using these words enables the Buyer to adjust who, or what entity, will actually be the Buyer of the property at the closing table.

Here is an example of how it could look: ABC Enterprises, and/or assigns, agrees to buy 123 Maple Ave from John Doe for $100,000, with closing to occur on or before January 28, 2023.

Once the words and/or assigns is inserted after the Buyer’s name, it allows the Buyer to assign the agreement and all of its articles to another person or entity, and the Seller can’t object to it, as the language allowing this to take place has just been inserted into the agreement that each party is signing.

Now the Buyer can assign the purchase agreement to anyone and charge an assignment fee to the party that the agreement is being assigned to. Or the Buyer could simply choose to assign the agreement to another entity that the Buyer has, or is creating, if they would rather take possession of the property in a different entity’s name.

Any of these things can be done without gaining the permission of the Seller, or alerting the Seller of it taking place, as the Seller has already agreed to it in writing when signing the purchase agreement.

How many business’s make it possible for you to earn revenue from something simply by negotiating and initiating an agreement to buy something, but never actually taking possession of it? I personally do not know of many, especially ones that are as easy to accomplish as real estate purchases.

Wholesalers often use this method when wholesaling a property to investors or others. They earn the assignment fee and pass the purchase agreement on to the next party to close, or assign again, on the property.

My first exposure to this and/or assigns clause was when I was buying a property from a wholesaler and was expecting to see that person at the closing table, but instead met the property owner (the actual Seller). The Seller asked who I was, and I was wondering who he was. The settlement agent explained to each of us that since the and/or assigns clause is in the agreement, the wholesaler assigned the agreement to me so that I would now be closing directly with the Seller. The wholesaler’s assignment fee was a line item on the closing HUD statement.

After that I used the phrase on every single purchase agreement that I initiated (unless it was being purchased from a bank that forbid the clause to be used) so that I had the flexibility if I chose to assign the agreement to another or another entity of choice.

There are other forms of flexibility that real estate investing promotes that are also cool, but I have always found the and/or assigns clause very cool indeed.