Assignment of Contract / Exit Option?

Question

Hi!

My father and I have been pursing our first investment home - an off-market SFH in Rollinsford, NH. We went into it with a plan, but are considering pivoting our attention towards a property that falls into our "buy box" a little bit better.

About the Property:

4bd, 2ba on approx. 1 acre. Signed P&S with seller for $275k, appraisal came back in at $327k. That area is appreciating rapidly and it's a good market (public schools are phenomenal). The current owner inherited the home and has let the property become distressed. His mother had a reverse mortgage on the property, and he can't afford to pay it off. It's definitely the "eye-sore" of the neighborhood - there is a brand-new residential development of about 10 SFH behind it. It is currently in the final stages of probate, with my uncle (elder law lawyer) walking us through that.

About the situation:

We don't have 20% down for a conventional loan, so our goal was to utilize my fathers FHA and I would gift him part of the down-payment. He is a contractor and very skilled at it, so we began the process of getting it to FHA standard (covering exposed wires, fixing some siding that had fallen, sheet-rocked a ceiling with old water damage, cutting grass so inspector can see septic, etc... we're about $1,500 into it). It's going to need a few more things to be FHA approved, but they're relatively minor. All the big stuff is sound (roof, windows, furnace, etc). The plan was to use his 1yr residency there to do a $25k rehab and sell afterwards. ARV is +/- $425k.

THE QUESTION:

This could be a home-run investment, but an opportunity has arose that might be a better fit for us and we wouldn't be locked into holding it for a year. WOULD I BE ABLE TO do an assignment of contract and try to find a buyer for the home that will pay $300k, & we pocket the 25k difference? Like I said, this is our first investment and we're just playing with some options and trying to learn.

Thank you so much for your input, it's valued greatly!

John

Andrew Bosco · Answer

Def some assignment/Wholesale options. You need to find the right parties to connect this with though. An end buyer isn't in this realm of expertise imo. Happy to connect with the right people if you need marketing help

John Guy · Answer

Hey Chris, we can get the homeowner to sign a revised contract no problem, that's not an issue in the least bit. He just wants separation from the property & doesn't care how it happens or who ends up with the home. The reverse mortgage on the property is the only thing pressing us for time. The lender knows that progress is being made on the sale & probate is slowing things down, so they've been "at bay" but I'm sure they'll want their $$ soon

John Guy · Answer

Thanks for the response Wayne. With the reverse-mortgage, probate and assignment of contract I figured that a financed sale would be extremely difficult to work with and a cash buyer would be needed. Where we got the contract with about 50k immediate equity, we would still be selling it below market value with plenty of "meat on the bone" for an investor to make money on it.

Chris Seveney · Answer

Could you assign it? Does your contract allow you to assign the contract? If not it could be an issue at closing since you are not buying it and you have to show your fee on the HUD. Is there a buyer for the price you want and how much time do you have?

Wayne Brooks · Answer

@John Guy You would need a cash investor, assignments are very hard to do with a financed buyer, so it would need to make sense to an investor who is always looking to buy “below market”.