First Time Investment Deal And It's Huge
This is actually a reposting...my previous message was deleted since I accidentally used caps in the first message. Will the four people who responded so far please resubmit your responses. I meet with the owner in a few hours and would really like to see your advice. My situation is as follows:
I'm a real estate agent who's just getting into real estate investment. I attended a seminar last week on the subject matter and soon will be taking more intensive training. It was at this seminar that I heard the term 'contract assignment' for the first time. The opportunity that is in front of me involves a 45-acre property for $2M and we have potential buyers who have expressed an interest in this property and are willing to pay much more than that. My questions are:
1. The owner originally entered into a contract with a real estate agent which has since expired. Is a contract assignment the appropriate instrument to use in this scenario even though there's not an existing contract in place?
2. If we're certain the buyers will pay more than the asking price are we obligated to inform the buyer of the original asking price?
3. How does the assignment fee work? Is this essentially our expected profit and when does this get paid?
4. Lastly, I've done some research (comp analysis, tax records, review of existing legislation potentially affecting the property, etc.) and still need to do much more. In preparation for our first face-to-face meeting with the owner, we've prepared questions in addition to our research. Are there other recommended materials that we should bring/discuss so that we don't come across as newbies?
Any advice on the subject will be greatly appreciated. Thanks in advance.
Quote:
On 2004-10-17 15:54, PTInvestors wrote:
1. The owner originally entered into a contract with a real estate agent which has since expired. Is a contract assignment the appropriate instrument to use in this scenario even though there's not an existing contract in place?
No. You need a new contract.
2. If we're certain the buyers will pay more than the asking price are we obligated to inform the buyer of the original asking price?
No. But, I don't see anything wrong with telling them.
3. How does the assignment fee work? Is this essentially our expected profit and when does this get paid?
You come up with an assignment fee. This could be negotiable. It shoud be paid at the closing.
4. Lastly, I've done some research (comp analysis, tax records, review of existing legislation potentially affecting the property, etc.) and still need to do much more. In preparation for our first face-to-face meeting with the owner, we've prepared questions in addition to our research. Are there other recommended materials that we should bring/discuss so that we don't come across as newbies?
Hard to answer, need more details.
Any advice on the subject will be greatly appreciated. Thanks in advance.
Thanks a great deal for your timely response. Regarding your answer to the first question, are you saying that a new contract assignment is needed? I guess I was assuming that an existing contract had to be in place before it was "assigned" to us as the investors.
I understood your post to say that a contract on this property has expired. Basically, in order to assign a contract you have to have an existing one in place. All you need to do is create a new, assignable contract between you and the seller.
Got it - thanks.
Here's what you do:
You approach the seller and make an offer to buy at $2MM. You give yourself some time, due dilegence, and a way out in case you can't close.
Next you market the property as your own and find a buyer that is willing to pay more.
You work to do a double close.
The purchase agreement between you and the sellers gives you equitable title to be able to resell the property. It is important that you record either a copy of the purchase agreement or an affidavit and memoradum of agreement. This will cloud title to prevent the sellers from selling to anyone else AND bring your name up when title work is done as the person able to sell the property.
GOOD LUCK
Here's my re-post.
If the parcel didn't sell before when it was listed for $2mil, why do you think it will sell now for $3-4mil? Whoever puts this property under contract should include the customary development and subdivision contingencies. There's value only if the parcel is suitable for the buyer's intended use.
Make sure you comply with your state's disclosure requirements (with respect to your dealings both with the property owner and any assignees) since you're RE licensed.
Quote:
On 2004-10-17 21:54, myfrogger wrote:
Here's what you do:
You approach the seller and make an offer to buy at $2MM. You give yourself some time, due dilegence, and a way out in case you can't close.
Next you market the property as your own and find a buyer that is willing to pay more.
You work to do a double close.
The purchase agreement between you and the sellers gives you equitable title to be able to resell the property. It is important that you record either a copy of the purchase agreement or an affidavit and memoradum of agreement. This will cloud title to prevent the sellers from selling to anyone else AND bring your name up when title work is done as the person able to sell the property.
GOOD LUCK
Thanks for the advice. With this scenario (me purchasing directly from owner) are you suggesting I use a land purchase contract and do away with contract assignment?
Quote:
On 2004-10-18 08:24, NancyChadwick wrote:
Here's my re-post.
If the parcel didn't sell before when it was listed for $2mil, why do you think it will sell now for $3-4mil? Whoever puts this property under contract should include the customary development and subdivision contingencies. There's value only if the parcel is suitable for the buyer's intended use.
I listing period was not that long and the owner opted not to use an agent again. There were actually a couple of offers on the property; financing fell through on the first and the second ended up going elsewhere because the property was tied up at the time. Also, based on the comps that I pulled, I believe the property can sell for much higher.
Make sure you comply with your state's disclosure requirements (with respect to your dealings both with the property owner and any assignees) since you're RE licensed.
Thanks for the excellent advice. I'll be sure to keep this in mind.