Do I Need Any $ To Flip A Contract???
This is my first deal. I made an offer and he accepted, now he wants an earnest money deposit. I plan on assigning the contract within a week. Couldn't I just get the deposit from the buyer I'm assigning to, and use that as my deposit? Is the contract still enforcable, even though I didn't give him an initial deposit? Plus its only an offer to purchase and not a sales contract, can I still assign it or do I have to get him to sign the sales contract? How does this work exactly?
Please Advise, Thanks for your help!!
Earnest money goes straight to the principal due. It is standard for most contracts. I have seen earnest deposits range from 1% to 30%. If you plan on flipping this contract then don't ruin it by not forking over an earnest deposit. Do you have an assignment clause signed in the contract?
Matt[ Edited by flynny on Date 08/28/2003 ]
Yes, there is an assignment clause in the offer. So, I don't need him to sign a sales contract, the offer to purchase is OK? Could I put the earnest deposit in escrow w/ a title company or attorney to secure agreement? What do you think?
You need to get a purchase contract signed and make sure it is assignable. If you go to a new buyer with an offer the new buyer can go to the seller with his own offer. When you sign the contract, the seller will want earnest money. Make sure you give yourself plenty of time to close in the contract, like 90 days incase you have trouble with the buyer. Then assign the contract to your buyer and get earnest money plus your assignment fee from him.
It may vary in different states, but a contract must have "consideration" to be valid. Earnest money, even if it is just $1 is consideration. Some states will view the price in the offer to purchase as consideration. You may want to check with a local attorney for your states' law
never use your own cash unless you know 100% for sure your investor will not back out. Earnest deposit: $$$$
I've heard you can use a promisary note which states how much it is for as your deposit to be held in escrow, but funds do need to be there on or before closing day. Put prom note term and conditions under "special provisions clause" "see attatchment A" in your offer to purchase:
Also don't forget to put in promisary note after you name. and or assigns. Make sure prom. note states to be "subject to" terms and conditions within the contract must met. if not prom. note returned to buyer without delay and without recouse and is void and null. If all terms and condition are ment within, then a sum of $$ to be paid on or before closing day of ??/??/????
Please talk to your attorney he/she can clarify the ins-n-outs of it. It will be money well spent if you can use throughout your carreer.
if anyone has used this successfully please let me know. God Bless us All