Assignment -- When Does Money Exchange?
OK..I understand how wholesale-ing works.
Here's a hypothetical situation. It is NOT a real deal, just an example:
I found a run-down house and put it under contract for $100K. It needs some work, but not much.
FMV is $150K.
I found a rehabber who is willing to give me $115,000.
To me this is a great deal, I accept his offer.
So now we have to close on the original $100K purchase. Does the Rehabber attend this? Does he bring a check for $115K and the attorneys write me a check back for $15K?
What's the protocol here?
Thanks-
WG
I have never done an assignment but from what I understand you would get the 15k in cash, or finance it to the buyer BEFORE the property actually closes. From what I understand you are selling the contract, not the property.
[addsig]
when you do an assignment it is usually for a fixed price. yes you are selling your contract rights. it is hard in most cases because your buyer will have to be comfortable with how much your making. if he/she is an investor and knows that they are going to make double what you are for putting in the work they shouldnt mind.
you would do an assignment of contract for 15k to the rehabber, he would then proceed to close on your contract that you just assigned to him. so its basically a fee. obviously this would all happen at the same closing table, unless the buyer is dumb enough to pay the 15k before closing. some dont see it just to pay that big of a fee and might try to wait untill your contract is up and approach the seller themselves. so in some cases a double close is the way to go, using his money to fund the deal.
hope this helps.[ Edited by ZinOrganization on Date 12/24/2004 ]
I get all the legal docs. at www.alllaw.com for assignments of cantracts and alot more.. good luck.
There are a couple ways to accomplish what you are trying to do....
1) assignment: Basically you are selling your contractual right to buy the property for $100k. This is somewhat like options in the stock market. You can sell that right to buy the property. In this case you can sell for $15k cash. Your end buyer gives you 15k and you draft an assignment. If your buyer is not paying all cash then this option may be less desirable (or if you don't want the buyer to know that you are making 15k right now---they'll find out later as sales are public record)
2) double-close: It sounds like attorneys do closings around you and this is what you are talking about. In essence there are two transactions. The buyers 115k coems to closing and pays you off, immediately 100k of that 115k is used to pay off your seller. Then $75k (or whatever) is used to pay off the seller's loan. At closing the underlying mortgage company receives $75k, seller $25k, you $15k--as an example. There will be closing costs beause you are actually buying and selling property. There are no closing costs above.
So if your seller will give you 15k now, do the assignment.
If not, do the double closing and you get paid then.
Around here sellers dont' need to attend closing so IF you wanted to you could sign the deed and other docs ahead of time (same thing with your origional buyer) and then go in after closing and collect your check. If your end buyer is paying cash it makes things very simple.
I hate when investors get greedy, lol (yea even I'm guilty...so I hate myself sometimes, joking)
I always do assignments, only because the last 2 times I did the simultaneous close my tile company wouldn't do it anymore so I kept having to find ones who would. So i decided to go with the assignments from now on. Nobody seems to have a problem with them so far.
Back to the subject. Here's a trick...
maybe a little sly, but hey if a price works for an investor and what he or she is trying to accomplish, then they shouldn' get mad at me for making money as long as I leave them with enough to make what they're trying to make (and thats what I do).
back to the trick, I get sidetracked sometimes, lol.
Now this is only if I am making a little bit more than the norm and I feel someone's greed glands are going to flare at me, I will put it under contract with my buyer and collet my
Non-Refundable deposit , then I submit it all to the title company with the deposit. Then because I know my title company will want me to do an assignment, because as I said above my particular title company I work with now doesn't like the double close, I'll call my buyer and say hey, Title company wants me to just assign this to you, so I have to get an assingment of contract signed so we can get this closed.
Can they back out after they see what you're making? Yes. Will they ? Probably not. Not after giving you a deposit.
Besides if the deal is a No Brainer for the Investor and it's a great deal, even after you're insane profit margin, what's he complaining for?
But thats the key, I still have ethics, and I'm not going to wholesale a deal if it's not a good deal. I will make as much as I can, while at the same time keeping the deal great.
If you can wholesale a deal, while at the same time meeting and beating an investor's criteria, it doesn't matter if you're making $2,000 or $20,000 Period.
JB
[addsig]
I have had zero problems getting my closing agents to do double closings BUT it does make things easier if you don't have to.
I find it hard to believe that if you do enough business with the same closing agent that they won't do the double closings for you.
Another idea is to temporarily purchase a property sub2 with a 90 day owner carry mortgage (if needed) and then sell directly to your investor.
GOOD LUCK
Hey All:
Thanks for the great replies.
Sorry if I seem a little thick here, but I'm still trying to wrap my head around 'closing day', when a double closing takes place.
So let's say I put a house under contract for $100K.
I immediately find a buyer for $120K.
We set the closing for a month later.
Who shows up at closing? Do I present a check for 100K and receive one for 120K, all the same day?
This would mean I have to find a mortgage in advance, right?
If this is an assigment, does the new buyer present a check to the original owner for $120K and then it's refunded to me?
I think it'd be helpful to many of us to see these scenarios laid out.
Thank in advance, I owe you a beer.
Confused in the big city-
WG
Hey Jbinvestor, kinda curious of what that agreement would look like - is that a "Contract of Assignment of contract" to get that non refundable deposit?