How does closing with assignment work?

Bird Dogs, Wholesaling
1

Hello everyone, another newbie here (it must be getting tiring reading that, eh? :sleep)
The first paragraph is just a bio so feel free to skip it if you don’t care for pleasantries.

I currently reside in MI and have been working for the past 5 years as a freelance animator. However, carpal tunnel is setting in, and I’m tiring of being hunched over on my computer for 10 to 12 hours a day. :banghead I want to go outside and do something proactive!

For a while, I’ve been reading up on real estate investment and have decided I would like to pursue this as a viable lifestyle. Now considering that fact that my financial situation is currently lacking, I’ve decided to go with the wholesaling/assignment route to gain funding.

Here’s where the newbie part comes in:

  1. I have no idea the way closing works in regard to this. Does the seller and I have to sign the purchase agreement at closing? Does someone have to actually witness the signature being made by both parties or is it possible to sign the contract while in the middle of a McDonald’s eating a hamburger, and then close at a later date? Is this the same deal with an assignment contract with the end buyer?

My understanding is that I can get both the purchase agreement and assignment contract signed at any time (possibly even out of order, but that seems funky), and then hand the documents in for closing after the fact. Is this correct?

  1. Who must be present at closing? Surely all parties must be present in order to verify they actually signed the documents presented? Is it possible to keep the seller and buyer separate from each other in a single close? Or can that only be done with a double close?

…or does the closing on my end only involve the end buyer and myself, and then the buyer handles a second close with the seller?

  1. So how do you do an assignment for a purchase agreement in a single close? Please explain if any steps can be done outside of the closing table.

Thank you in advance for any answers regarding my silly newbie questions. :biggrin I intend to begin this new wholesaling life the beginning of next summer (due diligence is a pain in winter, i hear) in my spare time, and would like to have a plan laid out with what I can and cannot do.

If this all seems like I’m being finicky about the information, I apologize. I’m very OCD about knowing how things work, and my mind likes to present all sorts of situations and possibilities for how things are done. I’m just trying to find the way that it ACTUALLY is done.

Once again, THANK YOU!!! :biglaugh I really do appreciate any help you can offer.

Sincerely,
EricM (I’m such a newbie, but I’m determined to learn!)

2

Hi,

 If you go buy a property and create a contract that say's "John Doe and / or assigns" and you have contingencies, a purchase amount and a closing date, you now have a contract. In some state's you don't even need the "And / or assigns" as an assignment is automatically available by law.

You find the right property and make a contract, you open escrow with earnest money and contract, you can then assign the contract (You can not do it in reverse as you have nothing to assign without a contract), the assignment fee should not be more than about 7% of the face value of the contract as the assignment fee comes out of your buyers pocket and lenders will not allow the assignment fee to be added to the contract and financed into the loan, so in a sense your fee is much like an additional down payment or extra percentage of that down payment.

The assignment form does not require a Notary so it can be signed in McDonalds just like a contract!
Now if your contract required $1000 in earnest money, get at least $1000 down for the assignment! However you can actually get all the assignment fee in cash upfront, or any percentage as “Non Refundable”!

An assignment is just that, you submit the signed assignment form to your escrow officer and your assignee steps in and takes your literal position in the purchase, he pays for inspections and fulfils the contract just like it is you, he applies for a mortgage, supplies you a mortgage approval when he signs your assignment form and gets all of the contingencies removed as if he were you.

In most states once you take your assignment form into escrow and put escrow in touch with your assignee, it’s all in his (Your assignee’s) hands and you just have to monitor escrow and wait for your assignment balance (If Any) gets paid at close of escrow. The title company actually prepares all closing documents in your assignee’s name and there is nothing further for you to sign. (Unless your escrow company requires a signature to pick your balance check up after closing!)

Your not at closing as you put the assignee in position in escrow with your escrow officer already!

Your assignee takes your legal position so he becomes your name for purposes of fulfilling the contract, there is nothing else you need to do as it is no longer your purchase agreement!

An assignment is always single close!

Good luck,

             GR
3

Ok. Here are my responses to your questions, numbers accordingly:

 1.)  You and the Seller will sign the purchase agreement (before closing), before you assign the purchase agreement to the end buyer. If you feel comfortable getting all or any important paperwork notarized, that is up to you. You can sign contracts anywhere you want to - generally closing the deal within 30 days, so it is the same with the end buyer, except you are assigning your purchase agreement to the end buyer, so your document will be different with your buyer. I have 2 forms I use - 1 is the purchase contract, and the other is the assignment contract. So, you want to hand everything into the title company and start the title search on the property so the deal can close. 

 2.) Once you assign your contract to the buyer, it's in his ball court. It it recommended to have the seller meet the buyer, as being introduced as a business partner, who is helping you purchase this house. (or something like that) This way, there is no confusion on who is who at the closing table. The seller is getting a all cash offer on their home, which is better than traditional financing as it takes forever to do. 

 3.) The answers in questions 1 and 2, help to answer questions number 3 for you.


 Good luck with what your goals are, and let us know how we can help you. 

                             * Dallas
4

Here are a couple of ideas that I have found helpful:

Make sure to sign your name and/or assigns on every place you need to sign.

Have an addendum to the contract that reads “Contigent on partners approval” (this gives you an exit stratigy if you can’t find a buyer because …well your partner didn’t approve) and also have the “Right to Show” while in escrow. This way you can show the property to potential buyers as soon as the offer is accepted. Know how you are going to market and do so immediately. You can also ask for a longer escrow (45 days) to give you a longer period to find a buyer.

Always ask if a lower “good faith deposit” will be accepted. Different areas require different amounts. My last house I was able to offer them a $500 check.

One thing to remember is that you are assigning the contract “AS IS” to the buyer. If you say the offer is for cash, then the new buyer HAS to have cash to buy it. If you go in with a conventional loan, then the buyer has to be able to qualify for the same.

Do your best to prequalify your buyers. It would not be good to think you have a buyer and find out they really can’t follow through. You have the right to ask questions and know their history wihout being too invasive of their business.

Hope this was helpful. Best to you.

5

Thank you for all of the responses so far! This forum is an awesome source of information. I can’t believe it’s free! :shocked

Ok, it’s way more simple than I was making it out to be.

I suppose now that I know the process, I should contact my local RE Attorney and get a purchase agreement and assignment contract drafted up with these contingencies? Along with generating a buyer’s list and a marketing strategy of course.

In regard to earnest money deposits. If I back out for whatever reason, I don’t get that money back, correct? And does that money get tied up immediately upon entering escrow (I can’t use it)?

Gratefully,
EricM (I intend to ask as many “dur” questions as I can now, to minimize my ignorance later :biggrin)

6

We can send you a bill, Eric…

LOL

Keith

7

So in regard to earnest money, I keep hearing about being able to do this for as little as 10 dollars down. Is that true? And if so, do I hand that to the seller directly, or do I need to do something else with it?

Thank you again for any answers you can offer! :biggrin
-EricM

8

yes, it’s true you can actually tie up and seal the deal, 10 bucks is actually only for getting the paperwork done and having something to stand in court. If you never exchanged any funds, then you never had an agreement. so the answer to your question is yes you can use 10 bucks to tie the property up, later on flipping it/ wholesaling it to cash buyer later. :beer