I’ve done plenty of rehabs and would like to wholesale some of my deals I get since we can only handle so much.But most of the contracts specify “no assignment” here lately.I’ve read here on selling the llc and land trust.Could someone explain how to do this since I’ll prob have to handle it this way.Thanks for all your help.
I just learned this trick from forum member ericmedem. What you do is… keep a few LLCs setup (ericmedem refers to them as ‘pocket llcs’). Then, when you fill out the contract/assinment, instead of signing Your Name and/or Assignees, you would simply sign as Pocket, LLC.
Then when it’s time to make the exchange with your investor, you sell them Pocket, LLC and they get ownership of the assignment.
All the best,
~Slim~
Slim is right. Check this out, I borrowed it from down below when I had a similar question.
Avoiding Assignment Fees and Double or Simultaneous Closings
The idea is to make an offer in the name of an LLC, one you intend to create, just for that deal. Do this ahead of time.
Example: Subject property is 123 main street, then its 123 main street LLC. (of course, check to make sure the name is not taken already before hand).
You then make the offer, and once accepted, complete the LLC procedure, which can be done in most states online, for under $150 total cost.
After that, when you find a buyer, they agree to purchase that LLC, which only owns the contract on the subject property, to the end buyer, for a fee.
The end buyer then shows up with their cash, closes the deal, and signs as the owner of the LLC.
The end buyer can keep the LLC, or deed the property, right after close (at the table really), to whatever entity or person they wish to hold title.
This is done to avoid double closes, or assignment fees, which some lenders selling REO’s won’t allow on HUD-1 statements.
A clean, fast, easy way to close, and frankly, saves money, as one closing cost set is assessed, rather than two.
Of course, the cost of the LLC, or whatever entity is in there.
Some states these are expensive to create, and if that’s the case, I’d just use a trust, and sell that, same idea, different entity…some lenders don’t like to see trusts making offers though…but, with your buyers proof of funds, and a letter stating this is the owner of the trust, here’s our cash…lenders will most likely allow it to close.
Herbster
Hmmm. I love it!
Thanks for sharing
I was listening to Preston Ely the other day and he had a guy on a audio replay that was Called the REO rockstar. This individual was beating the non-assignable contract by adding the buyers name to the contract he had with the bank, assigning the deal to his buyer and then doing a quit claim deed at the closing to take himself off the deed. When this is done, only your buyer is left on the deed, and your buyer is the one who owns the property.
Seems to me this strategy is one that could potentially beat the FHA seasoning requirement also.
Ive heard of that.
Make a letter stating that the “buyer” is like partner so it shows a chain of ownership and then create a deed and when the prop is sold quit claim it.
Thats probably the best way to defeat the no assignment clause.
Thanks for the input,I’ll use it soon.Just gotta talk to closing agents 2 make them understand whats gonna happen.Thanks again.
When doing a quit claim deed, what will you do if bank refuses to add your partner to contract or better yet, bank adds partner to contract and your end buyer backs out. Too many problems.
Or you can simply us an option to purchase :rolleyes.
Regarding the land trust method, the buyer on the contract will be the name of a land trust that you create on the spot. Name it after the property (ex 123 Main Street Land Trust) and indicate yourself or your entity as the trustee and the beneficiary. When you find the buyer simply assign the beneficial interest to him in exchange for the wholesale fee. He will also need to indicate a new trustee.
You’ll need the following documents:
- Trust Agreement (sometimes called Agreement and Declaration of Trust). This establishes the land trust.
- Assignment of Beneficial Interest in Trust. This is your assignment form. 1 page.
- Certificate of Resignation of Trustee.
- Certificate of Appointment of Successor Trustee
- Earnest Money Receipt Agreement
It sounds more complicated than it is. I’m doing my first one right now. But actually it’s simple, keeps everyone off public record, and best of all it’s free.
nsu1997,
The land trust approach sounds like a great way to get around the non-assign problem. Where can I find all the trust documents that you mentioned?
Thanks
I would use an option, depending on the type of seller and your buyer.
if the seller is a bank, go with the LLC approach mentioned earlier or use a double close. if the seller is a person, use the option and resell that right to purchase or just do a double close. either way make sure there is enough equity to cover all cost and ensure you and the buyer the profits desired.
if the buyer is a cash buyer, an option, double close or LC will suffice. If credit, an option is probably best bet
I got my forms from Ron Legrand’s materials, but I’m sure you could find them on Google as well.
Not sure why you’d use an option in any wholesaling scenario. You can get a purchase contract signed by a seller just as easy as an option. Besides, a purchase contract would need to be drawn up at some point anyway, why not get that done upfront?
An option IMO isn’t nearly as clearly enforceable as an ironclad contract. An option only says you “may” buy. For example, say you get a junker under option for $90K and you wanna wholesale it for $100K. Another wholesaler, whom you don’t even know, learns that you only have an option on the house…or maybe they don’t even know anything about your deal at all. What if that wholesaler goes to your seller and offers them $95K, and gets it under contract, effectively cutting you out the deal?
If you sue all you could produce in court is an option…the other guy produces a contract. The other guy could plead ignorance of your option, and the seller could say all you did was say you “may” buy their house, while the other guy signed a contract saying they “will” buy it. Which way would the court decide? I’m telling you right now you would lose that deal.
If the LLC choice is used, is it possible then to sell that LLC prior to closing to decrease your chances of the end buyer bailing on you?
Sure, if the end buyer is willing to do that…
Hmmmm… it would seem you would want to sell the LLC as quickly as possible and let the buyer close on their property. Of course the buyer is going to want to do nothing as long as possible in case they do want to back out, don’t get financing, or something else in the sale falls through… i can’t see it… in a normal transaction, you get your assignment fee at close, right? if there’s a way to accelerate that, i suspect everyone will try it… but if i were an end buyer, i wouldn’t pay an assignment fee before i purchased the property.
Right. As long as you get a non-refundable deposit from the end buyer you’re covered if they back out.