I’m a new wholesaler, I have a decent buyers list, and now I’m ready to start
looking for deals. I have some questions about the assignment contract.
I’ve downloaded a couple contracts, one from Bronchick’s site, and another from
some other RE sites on the internet. My question is, does the seller have to sign
the assignment contract?
The one I downloaded from Bronchick’s site has a space for the seller to sign, and
I have 2 others that do not. Do you tell the seller that you are going to
assign the contract for a fee? I was going to tell them something like
“I work with a couple partners, and they may be the ones getting the financing”
I’m just trying to straight before I start putting properies under contract.
If you want to keep your transaction private, you may want to not use a contract assignment form at all. When I wholesale property, I use a standard contract, one for buying and one for selling the property. I submit both to the title company and they do a double closing, using the buyers’ cash to fund the purchase price to the seller and cutting me a check for the difference.
I’m sure there’s more information elsewhere on this site about double closings, why they’re favorable to contract assignments, and how they work.
I live in Texas too and have heard that all contracts are assignable, but I still put and/or assigns after my name. I just like to be sure. I have had one person ask me what that meant and I explained it to them that I do not know what I am going to do with it. I may assign it to another company that I am involved with. That is not a lie, just a veiled truth. I am involved with the guy/gal I am flipping to in that I am going to make money from them.
Somebody above said you can circumvent the assignment process with a double close. While this is true, I usually save that technique for large profits (over 5K) because I would have to pay two sets of closing costs and a title policy. Besides, my investors don’t get spooked if I make 5K.
No need to put and/or assigns, but you can. We’ve never had a seller make an issue of it, but if they do, they’d be in default if they chose not to close. I think most people discuss assignments to make sure the seller doesn’t get upset when the deal is almost done.
I’m in a contract now and the buyer is asking my seller to sign his assignment contract. He said the buyer’s lender is requiring that the seller acknowledge the assignment. I told the agent he may want to do a double-close to keep my seller out of that side.
I agree that you want to double close. I have never had any luck with lenders allowing either a double close or an assignment. They don’t like the double close because of title seasoning. They don’t like the assignments because they only want to fund the amount on the purchase contract. I require all my buyers to buy with cash only.
Brandon’s right, traditional lenders don’t like assignments or double closings. Your buyer has to have cash or use a lender doesn’t have seasoning requirements. Most banks won’t fund deals where the seller has been on title only a short time OR accept an assignment of contract, but there are some that will.
And, yes, in a double closing the title company uses the buyer’s funds to pay the seller. You, as the wholesaler, shouldn’t have to bring any cash to the table and the closing costs are typically less than 2 complete closings.
This is where it all gets complicated. Some lenders want seasoning…FHA especially. Some conventional loans won’t require seasoning but unless the end buyer works with the same company doing the simul-close, then anything can happen up to the last moment. I am concerned this aspect of REI (assignments) are going to become a thing of the past. Leaving cash as the only option for investors doing simul-closes or flips.
It isn’t hard to find cash buyers, though. Go to the foreclosure auction. Everyone there is buying houses all cash. If you are dealing with a newbie who has no cash, line them up with some hard money. That is the only type of loan I will allow my buyers to use. HML’s don’t care about assignment fees or seasoning. That is what I love about America. If there is a demand for something, somebody will supply it.