I am beginning to wholesale properties and will assign/sell my contract to other Investors (Buyers). What is a good contract to use for my Assignment Contract for the Investor to sign or do I make up my own? Also, should I use the Contingent Upon Partners Agreement escape clause instead of the Inspection Contingency since I will am selling the contract? Thanks for any suggestions/advice.
Hi,
I have been so busy the last couple of weeks I can't remember when I last answered a posting!
The contract itself is where your contingencies belong, you don’t necessarily need the clause to be “Contingent Upon Partners Agreement” as an escape can be a problem with the “termite / pest report”! “Property Inspection”! or your “Loan Approval”! as any of these are exceptable to walk away from the property.
It is sometimes easier to use legitimate contingencies rather than “Partners Approval” as a seller who is educated see’s that clause as your desire to break the contract before it’s signed!
Make sure you give yourself 15 days of Termite & Inspection as a time period and try to give your self 21 days in a 45 day closing for the mortgage approval as this gives you time to make sure your end buyer has a appropriate loan to close your contract on your assignment!
I generally bring my end buyer to the inspection with me to see the house as it’s easy to include additional people during the inspection! (Inspection report is going to be paid for by your end buyer and in your end buyers name!)
Your assignment form should only outline the assignment and the terms (Price and payment structure to buy the assignment) and conditions (Closing date and contract information / purchase price) of the assignment!
Then your going to take your end buyer into escrow, introduce him or her to your closing agent, and explain that you have just assigned this contract to this buyer who will now step in and close the deal according to the contract your assigning!
GR
Gold River,
Thank you for your response. I really appreciate it! I am still a little confused even though I understand mostly what you are saying. If I am assigning/selling my contract to another Investor, why would I need to have anything to do with the Termite/Inspection? Suppose there is nothing wrong after the inspection is done, and then by end Buyer still does not follow through on buying the property for whatever reasons? If I use the Loan Approval Contingency, then I can honestly say the Buyer could not get financed for whatever reasons, right? As far as the Assignment Form, you are saying just do an Addendum page to the Purchase Contract and include the things you mentioned, correct? I just want to make sure I understand correctly and don’t want to make any mistakes that I can avoid. Once again, thanks.
Hi,
The purchase contract is between your seller (A) and you as purchaser (B) then your assignment form assigns the contract to your buyer (C).
When you walk up to your seller (A) and create the contract on lets say March 15, you will hopefully already know that on your buyers list that Mr. and Mrs. Gold River are looking to buy the exact property you just contracted, so once you open escrow you get Mr. River on the phone and say, I have the perfect property for you! You do still have a mortgage approval for $300k correct?
Absolutely Mr. Rdarick, I am raring to go, ok let me send you over the general overview of the house along with some photo’s, is this what your looking for Mr. River? "Oh, that’s exactly what were looking for says Mr. River!
So you say great I have a termite / pest control inspection scheduled for tomorrow and a home inspection scheduled for the 17th of March, can I meet you and show you the property on the 17th, lets say during the last hour of the inspection? Sure that would be great says Mr. River!
So the termite - dry rott / pest control inspections are already done before the home inspection and your making your walk through with the buyer during the last hour of the 3 or 4 hour inspection (I always ask my home inspector to alert me prior to (such and such time) if he see’s any major issues so I know if there’s a problem prior to the buyer’s meeting me)
Now I always make contact with Bob my termite - dry rott inspector and Chris my pest control inspector prior to meeting Steve my Home Inspector at the property and I say "Hey, Bob & Chris, Any problems with the property at 123 Lake Street Anywhere, USA 98765? "No Rdarick, everything was clean! Thanks guys, I will talk back at you tonight!
Now only Steve is still at the property, no phone call so I know Steve has a clean home inspection report, so when I get there I meet my Buyer Mr. and Mrs. Gold River and they walk the property and they love the place, so then I explain I have already had the termite - dry rott inspection and the pest control inspection completed, and the home inspector is just finishing, Steve How does the house look? It comes back pretty clean, a few minor issues with plug covers, a bad GFI, and the water heater vent needs to be sealed but that’s about the extent of it! Ok Thanks Steve, I will talk to you later tonight!
Now MR. River let me get Bob and Chris on the phone just to verify there reports, sure not a problem so after Bob and Chris verify there reports, I tell Mr. River and his wife that what I would like to do is assign this to you, the seller agreed to contribute 3% to buyers down payment and 3% towards buyers closing cost’s in escrow and I am seeking $15k or 5% for my assignment fee of which you will recieve $18k credit in escrow from the seller, and the payment for the inspections which will be placed in your name!
I put down $3k in earnest money and would like $5k down on the assignment with $10k due at close of escrow! Is that OK Mr. River?
Oh, that’s fantastic Mr. Rdarick that would work fine!
Ok, let’s do the assignment, prepare a check and let’s get signatures on the assignment form and we can meet at the escrow company tomorrow so I can introduce you to your closing agent Brenda?
Also would you talk to your lender in the morning just to make sure you have everything set for your escrow so we can go ahead and remove the loan contingency after we introduce you and enter your assignment form into escrow!
Then when your there at escrow your termite, pest and home inspections contingencies are removed and once the assignment is filed in escrow and the end buyer is turned over to be responsible for the contract you are removing the loan contingency with the new buyer while your there! If for some reason the end buyer can’t feel comfortable removing it yet, once the assignment is signed and you have a check for $8k and your buyer has told your inspectors to bill him for the inspection payments it’s over other than waiting for escrow to close to get your final payment!
GR
Gold River,
Thank you for your reply and explanation. I have a great understanding of what I need to do now. Thanks again!