Hi,
I’m a new property locator in Raleigh, NC so forgive me if I say something stupid in the next couple of months 
If you are talking to a seller and it is a FSBO, do you tell them that you will be assigning the contract before they sign with you or is this something to not mention unless it comes up? I ask because I’m concerned that some sellers might back out if you are not the one ultimately purchasing the property.
Thanks,
Jean
It depends how motivated the seller is. Some FSBO’s may not be that motivated and will have a problem with you selling the contract. Not to mention, many people don’t even know that so you would confuse them by bringing it up.
My feeling is to tell what you need to but never lie. I can’t imagine a seller will even care if you assign their contract as long as the closing happens on the date for the price they agreed to.
I would’nt say anything unless they ask.You’re contract should have it in there or you should include it after you sign.If they ask then don’t lie to them and just tell them,but i’d keep it hush until they bring it up.
Disclose. It’s a lot easier if everyone involved in a transaction knows the numbers before they, or their lawyer, see a copy of the contract and addendum. State the fact that you may be assigning the contract to a prequalified buyer (it should be a contingency in the contract if this is your intention), and state your fee. Much easier all around.
Personally i would keep your mouth shut unless asked! Your contract should say it.If you tell a homeowner that your just tieng a contract up so that you can find someone to assign it to,then personally I would’nt want you wasting my time ( and keeping other buyers from buying it)
Your option agreement should say somewhere near the signings box, X JOHN DOE for my assigns, assignees, associates, heirs, successors in title. etc.
It should say On this date this agreement was finalised and concluded, and nothing NOT mentioned in this agreement shall be binding on the parties.
If you assign it, the assignee needs to inform the vendor/property owner its been assigned to him, 0r it becomes void. You cannot exercise it without notice of assignment. An attorney lost me a lot of money by not giving notice of assignment.
And don’t tell them, if they raise the subject say sometines you need to assign it to a finance house to raise funds, or to your parent company, don’t forget a viewing at at any time clause as well [viewing by the assignees, agents, and valuers]
Thank you for all the responses. I did not know that if the party you assign the contract to does not inform the property owner that they now have the contract, the deal can be nullified.
Good info - thanks again!
Jean, about 25 years ago I worked with someone who had and used this expression, he said> In property dealings you have Mr Greed, Mr Mrs Greed and all the little Greedys to deal with. He was so right. And with Options you can have the disgruntled party to deal with scenario.
So read what you can about Options, read about contract law, and always get them to sign. Then get them to sign later that this copy [you have given them] is accurate, read and understood. Have it prepared for signature. I took a guy to Court who said he had not read the agreement, how could I prove he had read it three times, and spent an hour thinking it over. My good sense was to have him sign 7 days later that this was his 2nd copy, he had read it, he understood it, and he was happy with the terms. He had forgotten all about this 2nd signature note and receipt. So we won / he lost. Months later we got a story he could have sold it for more money- and that was the real beef. For what its worth if you sign something without reading it, you are bound by its terms. Some people do not know this and think its a good excuse to get out of a deal.
O.K. first of all… I’m not sure if you are using YOUR STATES LEGAL REAL ESTATE CONTRACT or not, I sure hope so.(doesn’t sound like it) You can find them on your states website, they are free and you should use those only.
The contracts spell out everything for you, with the third party financing to the inspection, survey, and apprasial periods. These are ALL you outs if need be. Please read your states contracts!
On the very top of the contract it has the place for you to write in the parties to the transaction where it has Seller/Buyer names …put your “company name &/or Assigns”… That tells the seller “I may Assign this contract”
make sense?..hope so.
Just my two cents…
Do you mean the Sales Contract, these are quite common and listed everywhere, but few sites have an Option to Buy Contract. I’ve never found any on State sites.
No I mean STATE. Your state has a website that has the forms you need. Your SALES contract is your option. You are putting the property under contract to buy…if any of the …a. finanicing…b. inspection period…c. survey…d. appraisial… does not TURN out RIGHT (you find your end buyer) then, that is your OPTION to either buy or walk.
Make sense?
My understanding is that a sales contract is not binding, it appears on the face of it to be binding- but the buyer or seller can always find some reason not to go ahead and either can pull out of it. It contains to many subject to/s, whys and wherefores’. Whilst an Option Agreement is binding on the vendor, he cannot opt out of it, say no, or find excuses not to proceed. The Option buyer as the choice to buy or not to buy the land or property. An Option is binding and easily enforceable / a sales contract is not.
A sales contract is binding…it is a legal document. However, I am glad that there are several ways to get out of it, you should be too. For example: You are the buyer and I’m the seller…
You are wanting to purchase my property… like it says in the contract you are having your inspection, apprasial, and survey done…
O.k… You have also put up lets say 5K earnest money with the title company…
Now your inspection comes in and says that all the electrical wiring is old and not up to code. It is a binding, legal contract, remember, but now you don’t want the house cause its gonna cost you 20K to get it rewired and up to snuff.
However, it also states that if the inspection, survey, &/or apprasial are not fitting to the lender, it is a null contract.
I would release your earnest money from the title company, you get it back and carry on… Arent you glad those are in there? I am…
Just my 2 cents…
LonestarState:
Any contract that contains loopholes and get out clauses is not binding. Thats why Option Agreements are so popular, theres no way of getting out of it for the vendor/seller. Having said that an [sneaky] Attorney might argue that its void for unertainty, vodi for incapacity, for feebleness of mind and give you the legal -paper work runaround. But with a good agreeemt your covered. I have had 3 contested, all lost in Court.
A contract usually does two things:
Obligates the buyer, and seller, UNLESS certain ‘out’ clauses are activated.
Usually requires a substantial deposit.
I have seen many cases go to court where the potential buyer wanted out, because he ‘felt’ the out clauses were valid in his favor, but the judge ruled that there wasn’t enough to cause the seller to lose out on the escrow deposit. The judge most likely didn’t force the buyer to buy, but allows the seller to retain the deposit, or a good portion of it, to offset losses caused by the home being off the market. (those losses pile up quick)
An option doesn’t obligate the Buyer to anything, it just states that he has the right to purchase at the previously agreed to terms. For the option to be enforcable, though, there must be compensation for the Seller, for his involvement in the option. An implied, or intended, benefit for the seller won’t suffice. Plain old UCCC definition of a valid contract.
Disclose up front to Seller, that you WILL be assigning the option. Explain that this is what you do and that you have worked for a long time to gather your contacts, make arrangements, dealt with attorneys on contracts, placed advertisements, and spent countless hours working with buyers and sellers alike to earn your profits. Besides, tell him/her it shouldn’t matter if you make money, as long as he/she gets what they want, which is getting their house sold. Also explain that a realtor would be getting thousands of dollars to list their home, and would probably not work as hard to sell it, they just put them on the MLS and hope that another realtor brings a buyer.
Failure to disclose is actionable in all jurisdictions. You will be seen as trying to take advantage of the Seller. Not good for business relations, and the time/money of defending in court, when not needed, are a bullshit waste of time and money. And that’s if you win!
An Option is valid if you pay $1-00 in cash for it. You must pay something to buy “the right to purchase the property at a future date”. In theory you could pay him my watch, my horse, my car, my donkey, my shoes, but its better to use cash. This sum is called the consideration.
Because the sum of $1 looks a poor deal, you normally add the words Pay the sum of $1-00, [one dollar] and OTHER VAUABLE CONSIDERATION. Meaning the chance to sell the property to the Option buyer- at a future date.
If the agreement says Assigns, or Assignees, this is seen as good and valid notice. As in [by] John Doe, his heirs, assigns, and successors in title.
Believe me, the law is unclear on how the judge must proceed on that matter. If you get lucky, he might side with you if you had simple verbiage like “and Assigns” on your option.
Then again, he could slam you on the floor, they could publicize, they can issue an injunction preventing further REI in their county, lots then can do if they “feel” that the lesser educated are being taken advantage of. I have personally seen it happen on an option my best friend had. He was only going to make $1,000 on it for about an hour of work. The seller was awarded $3,000 in damages, my friend was admonished and ‘threatened’ never to be seen again for a similar matter in these courts, or the total remedies allowable by law would be assessed.
While the law may not require it, and you’d be safe more times than not, (especially if you bought the house through a real estate agent, or from an experienced investor), a decent lawyer will advise that you not only inform the seller, that your option contain a special provision that the seller must sign his name to, with witness, that he fully understands the assignment.
You can play it any way you want to, but I will, and I will always advise, that you divulge everything. This includes Seller’s Disclosure and Lead Paint doc’s, even if the situation doesn’t require it, per se.
Why cause yourself unnecessary problems? I have never had anything more than a minute objection to anything related to an assignment issue. They want to sell, they don’t want to impede the sale.
Yes, any compensation makes the deal legal. The term “other valuable consideration” is open for interpretation, and have heard of it being problematic because of it being vague. I would spell out any and all expected ‘valuable consideration’.
A Judge is there to administer the Law, and not to rewrite contracts. He must decide what was agreed from what was written and stop there. Otherwise chaos would rule.
The Judge you mention is unfit to sit on the Bench.
Most probably are. My friend deserved what he got. I, in fact, told him what was probably going to happen with our liberal judges. I suggested that he offer to split the difference, $500, out of court, in exchange for a written promise not to trash talk about him later, and chalk it up to a lesson learned. Cost him alot more than he thought it would.
The UCCC is a Code of Conduct. Many of it’s principles are not written in stone as law, per se.
If you have ever been a member of any Board of Realtors, and read any of the articles that come down the information tree, you’d see that there are hundreds, if not thousands, of lawsuits, the results of which are very much counter to what to are proposing as “law”. Your argument on the semantics of whether or not to divulge pertinent information, is, was, and always will be ‘invalid’. Divulge everything and you won’t have 1/10th the worries.
If your lawyer advises to just use those couple of words “and Assigns”, do what he says. He gets paid to represent you, and I’m sure would like to represent you ‘many more times’. Win or lose, he gets paid. Besides, my name isn’t on the contracts, and won’t be dragged through the moral mud. But it’s always safer to err on the side of good judgment, decency, and how you would want to be treated by an investor, if you were the seller, or how you would want your grandparents, or child, who knows nothing about contract law or real estate, to be treated. Albeit, its fairly, with nothing withheld from them.
All it takes is one pissed off Seller with a few extra bucks, to ruin your name in an area, legally, through an advertisement. It’s not slander, or libel, as long as someone claims that he ‘believes’ you intended this or that. It only takes one pissed off son, or friend, of an ill-rubbed seller to knock your door in and stomp you into a coma. Crooks look over their shoulder wherever they go, as do those perceived as such by others, as well they should because there isn’t any justifiable reason to conduct business that way.
This is a business where the goal is to try to make everyone happy. That means buyer, seller, investor, title company, mortgage company, etc. You do that and you’ll thrive if you put the right effort into it. No one wants to be associated with the investor who is considered unscrupulous. Someone might as well throw their address book in the fireplace, move out of town, get one deal, and move again.
Sneaking around and hiding behind little clauses in a contract, hoping no one notices until after you get your check, and hoping no one gets pissed off about it, is NOT GOOD BUSINESS, and you shouldn’t advise people to do it. An Inc., LLC, or a trust, won’t protect you from a vendetta.
Done with this argument that shouldn’t have occurred.
RandyF: I agree in spirit and actions with eveything you said. What you need to appreciate is that during my negotiations with the property owner I try and mention any “black clouds ahead” issues. But I cover myself by adding no agreement can incorporoate eveything discusssed, its a standard agreement which incorporates all the main terms. Sign it if you want to grant me this Option. No matter how careful you are 1 in 6 will beef about it.
*In Law people are supposed to be able to read, to understand and not to sign anything they have not read or understood. To rule otherwise would be bad-law. Every Tom and Dick could say I didn’t read it, understood it, or appreciated what I was doing - so its void. Commercial life would then stop because contracts are the basis for trade. The only get out is the Imbecile clause. Old age does not void a contract, and even minors can sign if its for self-maintenance items like food, bedding, tablets.