Have any of you heard of John Alexander? Inverse Purchase?

[JasonG]

@MarkyMark

So here is the million-dollar question. So if you have a contract. And it says “and or assigns” this can be a no no also? The problem then becomes a double closing or an assignment fee for new buyer.

I can see from net that it looks like a double contract. One with the seller at abc price and one with the buyer at xyz price. You are the middleman and that seems to be the problem if not licensed. I like to learn how I can solve this problem with out double closing.

Has anyone have any luck with John Alexander system? And if you used his system how does it affect disclosure on all parties?

You can legally assign contracts in California. But you have to disclose the double closing and profit margin of the Investor to the Buyer.

[gypsy1]

Hello All,

What do you mean by assign the contract. I have been doing this since July 06 and have Several getting ready to close. IF I NEED TO ASSIGN the purchase agreement I need to Know. And can you explain what the two principles are I am in NY and i just want to make sure i am not breaking the law buy doing this. If i am acting as principle I am not breaking the law right? please help.

Gypsy1

[apbowman]

I just went through the program, and would like to know for the people who have it. Did you use the Sdt contracts or did you use state contracts?

[GoSoonersGo]

Do you have an assignment agreement that you would consider sharing?

[rgf11]

I am a licensed Real Estate Broker in Michigan, and I also see some problems with an “implied” relationship with the Seller, and possible conflict of interest, and excess profits issues.

I also see several ways around this issue:

1. As either an agent, or an individual investor, one would need to disclose either that they are, or are not, an agent/broker, and also that the intention of the “investor” is to make as large a profit on the assignment of this purchase contract, as is possible, and that investors profits are to be considered the results of investors extensive advertising, marketing, and networking efforts. (Other value added items can be inserted to show why the large profits are valid and expected.) Seller by signing this document agrees to all terms included herein, and is advised to consult with his/her own attorney prior to placement of signature.

2. If an agent/broker, an additional clause would need to be added stating that: by signing this document, Seller agrees that Investor is not acting in the capacity of an agent/broker, and thus owes no fiduciary responsibility to Seller, Buyer, or any Assigns. It can be added that: any profits received by Investor are expected by Seller, and Seller hereby waives any rights to question, argue, or litigate any matters relative to Investor profits.

3. A purchase option is another method that can be used, with similar clauses inserted, along with an assignment agreement.

As previously stated above, make sure that it is spelled out in any purchase agreement, that the Seller retains all responsibilities for maintenance, upkeep, damages to the dwelling and property, and also for the cleanup/removal of any substances/hazards discovered on the property, or conditions revealed that may reduce the value or salability of property, prior to closing. Clausing should also state that the Seller is to maintain insurance in sufficient amounts to cover any losses to the dwelling or property and liability insurance in sufficient amount to cover the state minimums for your area. If it is unacceptable to Seller to maintain insurance, make sure that you can immediately get a policy to cover unforseen events, preferrably in advance of the signing of a purchase agreement, with a policy that automatically goes into effect at the moment of signing.

Please note, that in most areas, the Buyer immediately assumes responsibility for these liabilities, unless previously stated and agreed to by the Seller IN WRITING. With everyone wanting to make a quick profit from a lawsuit these day, it’s better cover your butt.

[gypsy1]

Thanks,

That helped so much! my lawyer has fixed the legality problem and is writing up the new contract. we got it all squared away. Every state calls this process something different so to anyone reading this explain the process to you lawyer first. Then have them tell you how to set it up.

Gypsy

[apbowman]

I agree with RGF & GYPSY… This type of buy and sell system does work…You just need to be up front about everything.(in writing) That way no one can say you where deceptive about what you are doing, and then take you to court. I have the coarse and went through it and realized that’s what I have been doing with my mentor…(just called it something different) Even if you don’t use what is laid out in the coarse by John Alexander its still good in formation. Just another tool you can use.

[Wickede]

@shelby1961 post:20

yes, i have used the inverse purchse program and it works! my first contract was with a fsbo and i had to send the contract and all the docs to their lawyer. no problems and its all legal if you do it exactly as it is laid out. don’t add or subtract anything. it took me 11 days to find a buyer and the home closed without a hitch. made $6,000. total out of pocket expense was about $30 which was for advertising. the homeowners have given their neighbors my number as they were grateful and impressed. i continue to use th ip with much success. happy investing!

You all seem like you know a little something about investing in real estate but if your like me, with no experiance, could this program be helpful? I mean are things explained such as a fsbo and such? I know that nothing is as easy as it is put up to be but after doing research on this system I am thinking about giving it a try. Any help would be great.

Thanks so much.

[Korb1]

A good link for information on several TV RE “gurus”…

John
http://www.real-estate-made-easy.com/alexander.html

General website with a few more so-called “gurus”
http://www.real-estate-made-easy.com/

[Korb1]

Another from Rip Off Report (ok - Im done…but still out $70.)
http://www.ripoffreport.com/reports/ripoff207705.htm

[gt5323b]

Does this program still work? I heard that mortgage companies are tightening up and not giving out subprime loans anymore? Also, what’s the marketing that you use to find the buyers?

[My2Cents]

Well as far as I know the way it works is you go to contract with a seller for X price disclosing that you are an investor. You the find a buyer and go to contract with them for Y amount and the spread is the profit. You then see about getting him set up with a subprime loan if possible. Then you invoice the original seller a fee for an amount up to the amount of the spread in order for you to Release him from the original contract so the seller and buyer can then go into contract for the purchase amount. Sounds like the seller is technically buying you out or paying you to let him out of the contract. So basically a 3rd contract is written up between the seller and buyer you found and this is submitted to the title company along with your investor disclosure form, the invoice/release form and all other necessary documents for closing. At closing presumably the title company will come across your invoice/release and cut you a check. That is how I understand it.

[AlexLock85]

I think people are missing the fact that the inverse purchase method is DIFFERENT than simply assigning a contract. It allows those with lower credit scores the ability to purchase…therefore you don’t have to sell fixer uppers, but rather can sell nice houses and make a nice spread after the discount the note buying company takes.

Would still like to hear if anyone has used this method and if so, could share a personal experience? Thanks guys…and I know this topic is a little old

[thebuzz909]

hello everyone i know this is old but i myself stumbled across this program too, i went ahead and read all the info they provided me with and it seems something i can pull off im not a negative person but dont want to be naive at the same time. so far some have made money and some haven’t and some got sued. now that worry’s me because i don’t want to put a great deal of effort to then be sued for something i wasn’t aware of. how can i be sure this is legal in California. thanks

ps i’m new to this site and to real estate investing in general.

Carlos.

[christopher_w]

Carlos,

In 2007 I worked with a wholesaler that utilized the inverse purchase and she closed quite a few deals. However with all of the new guidelines in place It is very difficult to utilize the inverse purchase. The main problem being that once the lender for your end buyer sees your large commission being paid out by the seller on the HUD they will not fund the loan. Most if not all if the large national banks (Wells Fargo, Bank of America, Citi, etc…) have started requiring the seller’s side of the HUD to be disclosed before HUD approval to be sure that large marketing fees are not being paid out to unlicensed third party persons like the wholesaler.

The main reason is because the sales price for the house is being inflated to encompass the marketing fee. If the end buyer and the initial seller were to get together the sales price would be thousands of dollars less.

And sellers are not likely to pay the full marketing fee out side of closing because they will be responsible for the taxes on the full amount of profit on the property listed on the HUD.

So in short… there is way to much risk that you are not going to get paid on the deal once it gets to closing for you to put in any amount of time and energy using this type of creative financing.

[usamts]

This program has been around for a while.

Unfortunately it is frowned upon by the authorities.

(Word to the wise).

Mike