Protecting your position in assignment

General Real Estate Investing
1

So I’ve recently gotten involved with assigning contracts and although nothing has happened yet, I want to fix any cracks before the issue happens.

So, heres the thing. The way I understand it is, in an assignment, when you assign a contract - you lose your interest in that contract. So what happens if say

Your assignee (end buyer), doesn’t close on the contract, and causes your contract to expire? Now your seller is open to taking new offers, etc. Especially so from your end buyer, who can now cut you out.

Or what if they back out after you’ve already assigned the agreement, how can you close on it or re assign it, if you’ve lost interest in the contract by assigning it?

I’m terribly uneducated on assignments, Help!

2

Hi,

Yes, you are certainly lost?

If you assign a contract and you say ask for a $5,000 assignment fee and your paid that fee upfront you lose equitable position as you were already paid.

Normally when you do an assignment you write your assignment agreement (Fill in the assignment contract), request and receive an assignment down payment (Or full assignment price) and bring your buyer into title where you introduce your buyer (Assignee) to the escrow officer.

Now if you have not been paid in full upfront you still hold equitable position in the contract! IE: You will need to track and monitor and maybe orchestrate the various inspections, approvals, etc. Now if your contract says buyer will get a home inspection, termite inspection and pest inspection in the first 10 days then you need to ensure your buyer gets these inspections and you receive a copy of those inspections.

I always have my buyer use my home inspector, my termite inspector, my pest control inspector, my surveyor if required, my engineer if required, etc. Although the buyer is paying my team sends me a copy, and if required in a default will re-issue this inspection without charge to myself or a new assignee if required.

Now you should always receive a loan approval before agreeing to an assignment, but you have to monitor the approval by underwriting, if the underwriter approves your assignee and you have verified buyer funds for closing you can then allow removal of contingency and move to close.

If your buyer can not perform and you have a back up buyer to step in then you still have that equitable right to substitute buyers, however if you put up say $1,000 earnest money and your end buyer (Assignee) pays you $1,500 or $2,000 down payment and you don’t have another buyer to substitute you can walk away as you do not have liability for a contract assigned to a third party. (Your right to substitute is due to equitable right “Having a balance owed for assignment payment”)

Now in probable 95% of all contracts you will only have 30, 45 or 60 days to close so in some cases you just don’t have a substitute and provided your end buyer (Assignee) has been properly documented in escrow as responsible party for the contract your off the hook.

Just make sure your contract or state contract does not have a “Non - Assignment Clause” as you will need to cross it out, initial it and request your seller agree and initial.

If your end buyer owes you money at close of escrow if he or she can not perform and drops out, you can still substitute and control that contract by re-assigning a substitute or buying it yourself or just choosing to walk away!

Just make sure if you put $1,000 up for earnest deposit, your buyer put’s up $500 or $1,000 more to you for the down payment for the assignment, providing you a pay day you already received upfront!

                GR