Banks and Contract Assignment

I just got off of the phone with one of the realtors that I am working with. He told me that most banks that he has dealt with do not allow people to assign contracts. Has anyone had this problem with a bank asking you to sign a paper that says you can’t assign a contract?

I recently took an investment seminar and we touched on this subject. Your realitor is right, but there is a way around it. You would sign Joe Doe Trustee and/or assigns. The only draw back is that you must actually be a trustee of a trust. You can speak to a lawyer about setting up a trust.

Not sure here, but I believe if the bank won’t let “people” assign, they probably wouldn’t let a trust do it either. A trust is just another entity, like a corporation, that gives legal protections, but usually doesn’t grant ‘special privileges’, other than tax wise.

Find another bank. Seems that there isn’t any real reason for them to not allow an assignment. Either their comfortable with the price they agree on, or not. Shouldn’t matter whether or not someone profits.
You’d be completely amazed at some of the ‘corporate decisions’ made by over paid people.

Thanks for the info.

I just talked to a friend who’s done a fair number of short sales, and he said he doesn’t believe that any document you sign with the bank which prevents you from assigning the contract is valid. Something about violation of Free Trade rules/laws. He said to try submitting an offer, and when they send over their package, don’t sign the document in question, and include “and/or Assigns” on the signature line, in readable print. (I always advise full disclosure, when working with the general public, but the banks are a different matter, they are supposed to be fully knowledgable. ) The whole thing doesn’t make a lot of sense, a sale is a sale, and as long as they get the money they want, there shouldn’t be any sort of problem with the bank.

It almost seems like the realtor doesn’t want the deals to go through. Maybe he/she isn’t going to make enough on it, or maybe he/she sees some problems with the title/closing agent, and would rather have an easier to deal with situation. I’ve been a licensed agent for years, and many agents are very lazy and unwilling to take on something they don’t have experience with. Not sure that’s the case, but you might want to personally contact one of the banks in question and ask the right people to see for yourself. If the info is incorrect, a different real estate agent might be an option.

Not all real estate agents are created equal.

my experience on 5 short sales has shown me that the bank will not allow assignment of the deal. The way around this that ive done is a double closing. Hav your buyer place the funds in the title companies escrow account proving proof of funds which allows you to purchase the property. Have the double closing set up. You are doing the deal with the bank which is what they want then your deal follows right behind. Its worked for me on short sales, foreclosures, and bank owned. Dont know if that helps but hopefully it does. Its legal from what i know because the banks and title companies have never questioned it.

That is nice to know. I went ahead and submitted an offer to the bank. We will see what happens.

Well, the bank now wants $500 earnest money. How do I get around putting the money down if I plan on wholesaling the house? I hate to put the money down then not find a buyer.

Put it down – you’d still get it back at closing…it’s just going to be earnest money.

Keith

But what if we don’t close? Do I still get the money back? I don’t really want it as a rental property and I live a little too far away to rehab it.

If you don’t close for a valid reason (defined by the contract/state RE laws), you’ll get your money back…

Personally, I don’t let the bank or the seller dictate the earnest money…but that’s me. My word is my bond. If I tell you I’m gonna close as long as you keep your end of the bargain - it’s gonna close.

Keith

unfortunately a bank could care less whether your an upstanding citizen or not. Banks will always want earnest money and more often than not if you cancel" because they didnt disclose something" is the only way you get the cash back. If the 500 is going to strap you dont do the deal. Its not worth it if you will really put yourself under. If you can afford to purchase the house with the 500 down ask for a 3 or 4 week closing, it gives you some time to find a buyer. I prefer to always find a buyer before i ever put a house under contract" this is mainly if you plan on flipping the house" if you are going to rehab then sell this is different because you have more to gain. But never place yourself in a situation where you will hurt yourself more, its not worth it

$500 will not make or break me. I just want to be cautious and not lose money from being stupid. Thanks for the info. The deal seems to be a good one. I will put the money down and hope for a sale. If not, I may just rehab it myself.

earnest money is part of the game. That’s why you figure that into your wholesale fee so you get some or all of it back. If you usually charge 4K for assignments and this time around you put 1K down for a deposit then make your assignment fee 5K so you recover that money. Here’s a little trick I read about the other day.

Instead of trying to assign a REO put your offer in under a LLC. I.E. Property address is 123 bank lane. Your offer is written under bank lane LLC. If its accepted you go to your state, create the LLC, and then look to “sell” the LLC to an end buyer. End buyer “buys” your LLC for your assignment fee and they close on it and the bank knows no difference. Just a thought,

Nate-WI

Question, if you are using the money in escrow as proof of funds could you not also use the title company to hold the check for 500 in escrow. That way you do not really need to use 500 just a check in escrow that can not be cashed until closing. I have not tried that but now that I think of it may have to and see what happens.

some banks yes and some banks no. Sometimes if they see the full asking price in escrow they will allow it. Other times they want the 500 or 1000. Its not abinding contract till you put atleast $1 down. once money has been exchanged then its binding. You would have to check with the listing agent or bank as to what they will accept

gordo2417
Isn’t setting up an LLC expensive?

In WI its 125 bucks. I can do it over the Net in a matter of minutes.

Nate-WI

i formed an llc in Nevada which is a great place for trying to protect your assets. You can form an llc on your own but there are alot of things besides just sending a few papers in and sending a few hundred bucks. They can range from a few hundred to 900 i believe. Now thats for nevada. 900 gets it done overnight and your done. Its 125 per year to keep your llc registered. My recommendation is have someone that does this all day long form one for you. Whatever the cost its not as expensive as losing everything to some degenerate that slips and falls on one of your properties.