What is Assumption Agreement?
The Short Answer
Assumption Agreement explained simply
An Assumption Agreement is a legal document. It’s used when one party agrees to take on the financial obligations or liabilities of another party. This is common in real estate transactions, where a buyer might assume the seller’s mortgage. It also happens in business sales, where a buyer takes over existing contracts or debts.
Real-World Example
Buying a Business with Existing Debt
Imagine you’re buying a small manufacturing business. The business has an outstanding loan for a piece of equipment. Instead of the seller paying off the loan, you, as the buyer, sign an Assumption Agreement. This means you legally agree to take over the responsibility for that equipment loan.
Why this matters
This agreement is important because it clearly defines who is responsible for specific debts or obligations after a sale. It protects both the buyer and the seller by making the transfer of liabilities clear and legally binding. It can also make a deal more attractive if the existing terms are favorable.
Always have a lawyer review an Assumption Agreement. Make sure you fully understand what you are agreeing to take on. It’s a big commitment.
Always have a lawyer review an Assumption Agreement. Make sure you fully understand what you are agreeing to take on. It’s a big commitment.
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