Originally posted by CHAMPAK SHAH:
I believe " Assignmenet of Contract " is fine as long as all parties involved are informed.
You believe this exactly why? Did you read the articles I posted? Jeff Radabaugh was using "Assigments of Contract" and he now owes almost $1 million in judgments. His buyers would have been signing an assignment which would have clearly informed the buyer of his fee. It would have also been on the HUD-1. This is NOT about disclosure.
Originally posted by CHAMPAK SHAH:
I disagree with Johnny's comment --yes people do make and can make over $400,000 in one year -actually in three months --as a wholesaler --if you have cash and concentrate on upscale homes --over $500,000 ---your spread - fee is much higher--
The only people you will ever hear about making anything close to that kind of money in wholesaling are gurus, and gurus say they make that much so you'll buy their product. I've actually never even seen a guru claim that they've even made that much profit. And upscale homes in this market? That's the hardest hit market in the country. I think you should get your money back, Champak. Somebody sold you a bill of goods.
Originally posted by CHAMPAK SHAH:
I am planning to get into whoelsalling this--if any one intereste d- just saw a house -previously valued at $330,000 --is now on auction with minimum bid of $70,000 ---nice to have at $100,000 and Resell for $150,000.
You haven't even done a wholesale deal and you are on here telling people what they should and shouldn't do and what they can and can't do? WHAT?!?! Really, Champak, you should try talking less and listening more.
Originally posted by CHAMPAK SHAH:
Always check with local realtor, RE Attorney and Specifically Hard Money Lender about Assignment VS Double Closing --now some people use the term - Back to Back closing --
Ahh, no. In the case of doing assignments in Indiana, check with a qualified real estate attorney. I would actually ask them specifically about this case, and see what they have to say about it. Asking a realtor about anything but comps is a mistake. They won't even know what an assignment or double closing is. And hard money lenders? I'm not sure why you would ask them about whether you should assign or double close.
In every state other than Indiana, I would recommend assigning unless you are going to show a large profit, and then I would recommend double closing. REO's and short sales you have to double close, so those are a different category.
The bottom line being that if you are wholesaling in Indiana, you need to seek competent legal advice about doing assignments solely because of this specific case.
Also I talked with the Indiana Attorney General's Office and they wouldn't give me any straight answers on the issue (which I kind of expected) but they did send me over the official complaint, judgment, and punishment. The woman I talked to said that she didn't know of any other cases since or pending that are relevant to assignments but she said that she is unable to verify completely that there aren't any others.
If anybody is interested, message me and I'll send you the file the Attorney General's office sent me.
If you’re new to real estate investing, there is a term called “contract assignment.” If you have not come across this term or you are unsure of the intricate parts of contract assignment, I am going to spell it out. If need be, re-read this article again and again. Also do not be afraid to ask questions in the comment section below.
We are in the prime selling season in most markets. During this time, investors are normally busy trying to lock down as many properties as possible. In our market, Phoenix, we are seeing an influx of buyers looking for deals. I recently had a conversation with a group of investors looking to get their hands on almost anything that will generate a profit. It would seem that we have not learned from the previous market crash how the real estate climate can change in an instance. My philosophy is ride the storm and assign as many real estate deals as possible.
If you have sat through any get-rich-quick guru pitches, the majority of them will introduce contract assignment wholesaling, but without giving you all the steps involved. Here is what they are referring to when they say “make $5,000 in the next 60-90 days.”
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What is a Contract Assignment?
Short and simple. This is when you first find a property a seller is willing to sell significantly below market value. You then resell that property to another buyer, normally a real estate investor, at a higher price.
Can This Be Done?
Absolutely, I’ve done numerous transactions in Phoenix, although it is not as easy as it’s normally taught, however it is a proven real estate investment strategy with a very low barrier to entry.
How Exactly Does Contract Assignment Work?
1. Find a motivated seller.
First let’s begin with what a motivated seller is. This is an individual who NEEDS to sell a property normally very quickly. There is usually some sort of distress going on in their lives. There is a huge disparity between want to sell and need to sell. Knowing which category your seller falls into is the first step in identifying how to handle the situation.
If I want to sell, there is no since of urgency. There’s normally no timeframe in which to finalize the sale. However, “need to sell” sounds like this :”I have to sell this house now because I’m moving to Maryland to take care of my ailing mother, and I have no other family members in the area.” This is a “need to sell” scenario.
Meanwhile, “want to sell” sounds a lot different: “I’m curious to see what my house is worth because I may be selling next year.” As you can see, there is a reason behind the need to sell versus the second scenario, where there is just curiosity.
There are numerous ways to find motivated sellers, such as driving for dollars, newspaper ads, internet marketing, direct mail marketing, etc. If you begin to research real estate marketing, you will find many forms, but make sure you use a combination of multiple strategies.
Related:Wholesalers Get a Bad Rap — But They’re Essential to Investors for These 3 Reasons
2. Get the contract.
There are many assignment contract templates on the web; however, I make sure an attorney at least has laid his/her eyes on it and approves the document. There are two reasons this is so critical. First, you will have comfort knowing your document is legally sound. Second, you will be able to utilize that attorney as counsel in the event you find yourself in litigation.
There is critical verbiage that need to be added to your assignment contract “and/or assigns.” Why is this so critical? This verbiage authorizes you to re-trade the property to another buyer who is interested in the property. When you receive the signed contract, you now have equitable interest in the property and have some legal standing in what happens to the property.
To provide clarity to the seller if asked about the “and/or assigns” clause, I inform them that we buy numerous houses, and we often have funding partners that we work with. These partners ensure we have more than one set of eyes to run the numbers.
3. Submit contract to title.
This process may differ in each state, but there is normally either a title company or a closing attorney that will conduct a title search. The title search will check the historical records of the property to make sure there are no liens on the property. It is important not to sell a property with a defective title. The title company or the closing attorney is a independent third party hired to make sure the deal is fair as agreed upon in the contract.
4. Find your buyer and assign the contract assignment.
Here is another leg of marketing. Working to find your end buyer can be daunting, but once you have a solid buyer, you can begin the process of closing the transaction. First, when you find your buyer (via Craigslist ads, Zillow, email marketing etc.), you should require a nonrefundable earnest money deposit.
Having the buyer furnish an nonrefundable earnest money deposit secures your position in making a profit. This money will become yours whether the transaction closes or not. The earnest money can be as much or as little your require within reason. I’ve seen deposits of hundreds of dollars up to $5,000. When the buyer deposits the earnest money, you then know that your buyer has a real interest in the property and is willing to move forward. This fee is normally held by the title company or the closing attorney.
5. Get Paid!
This is what most of us want to hear. We get paid when the end buyer wires in the funds for the deal. This money will cover what you stated you were willing to buy the property from the seller for, as well as your fee for facilitating the transaction. As an example, if you told the seller you would buy the house for $45,000 and you then sold your interest in the property to the buyer for $50,000, then your assignment fee is $5,000.
Related:The Harsh Truth About Wholesaling Newbies Need to Know
It is important that everything is disclosed because I’ve seen transactions stall at the closing table due to the seller or the buyer does not agreeing with you as the assignor making money. Again, this is why you inform you seller specifically that you are going to make a profit; however, ensure them that they will still receive the amount agreed upon for the price.
It is standard practice that assignments are done only on profits of $5,000 or below. But if you are comfortable with the seller and the buyer, it’s possible to assign a contract for a much higher fee.
In the event you are not comfortable with all parties in the transaction, a double close or simultaneous close will keep both legs of the transaction anonymous. Be aware not all title companies will agree to conduct a double close, so this needs to be discussed in advance.
Contract assignment cannot be done on all transactions. HUD homes, REOs, and listed properties present many barriers when trying to perform this type of transaction. With many REO properties, the lender will ensure there is a seasoning period — normally 90 days — before you can resell the property.
As you can see, there are some clear benefits to contract assignment for big paid days.
Investors: Have you ever assigned a contract? Any questions about this process?
Let me know your thoughts with a comment!