How to Assign a contract

Question

I am doing an assignment of contract and have couple of questions.

Should I ask my cash buyer for Earnest Money or POF?

After I Assign the Contract, should I also handover the Purchase contract to the buyer?

Do I also have to be at the closing?

Thanks in advance for your help

Bill Gulley · Answer

Bimal, the answer to your questions could all be yes, asking for POF depends, do you know them or is there no clue as to their ability?

Wholesaling is usually to your "list" of buyers. I don't think I ever assigned a contract to a complete stranger. This could be touchy from a marketing or sales side as really, you aren't selling the property requiring an ability to perform in a major financial transaction, you may be compensated in full upon the assignment so I can see a buyer saying it's none of your business. On the other hand, you're on the hook to perform with the seller being responsible to see to it that the transaction closes, so there is a justification. I'd say it depends on who your buyer is, if asking would tick them off I might not ask, if I could go there without issues, it would be a good idea. Saying, I never asked for POF.

Earnest money? No, there is an assignment fee, again you aren't selling the property so you don't really get earnest money credited to a purchase contract. Now, your assignment fee could be used as your earnest money if the timing of that deposit was such that you could contract, then assign, then deposit earnest money. The fee can replace your funds too.

When you assign a contract and the consideration is paid the grantee or buyer is entitled to the contract, so yes, they get the buyer's copy and original with the assignment. Lenders usually require the original and your buyer has the right to finance the property so they will need it. The contract is what you are selling.

I have attended closings and I've not attended settlement. If my buyer isn't represented by a Realtor or an attorney and they are not experienced in RE, some guidance and handholding are usually in order. While you don't represent them you can walk them through the process if they desire. If they have experience I usually don't attend settlement especially if I have my money. When proceeds from settlement go to you or originate from settlement you might attend to ensure things go smoothly.....as if your funds do originate out of settlement you have a more complex transaction, so being there is a good idea if anything needs to be addressed from your standpoint. If the settlement is the first one with that closing agent it's also a good idea to attend regardless of how you get your fee, if they don't understand it they may not close it. :)

Todd Plambeck · Answer

You need to get a non-refundable deposit from them that needs to go to the title company or closing attorney.  That will shake out all the posers who can't really preform.  If they can't come up with a couple grand as a earnest money deposit what makes you think they will be able to close on the deal at all?  If it's actually a good deal and they have looked at the property they should have no problem giving you the deposit.  If they don't have any skin in the game where is there motivation, short of the threat of legal action, to perform on the contract?

Joshuam R. · Answer

Curious @Bimal Doshi how did this story end?

Gerardo Otero · Answer

Can you give me more info how to get to wholesaling and how it works? I'm totally new to the concept. Thanks

Bill Gulley · Answer

Bimal, you need to get your fee when you assign, money down, then assign and you should be done.

Never advise a seller to just get an attorney, never! She doesn't really need one unless it is required as the title company and closing agent takes care of closings. She isn't totally inexperienced, she owns the house so she's done this before as a buyer.

A seller will call her estate attorney or some divorce attorney and they will want to earn their keep by screwing with something simply to show they can. I mentioned this in another thread, tell them if they do seek advice from an attorney that they need to be a real estate attorney, otherwise they will basically put their deal at risk as I don't deal with ambulance chasers in real estate matters. (No offense to any attorney, LOL) I'd back track on that if possible telling her she can see a RE attorney but the closing agent will explain the transaction.

edited, just saw your last post; get your fee, give him a receipt for the assignment, this is an amount paid out of closing to be shown on the buyer's side of the HUD-1 or accounting settlement. It's up to him to inform to inform the title/settlement agent . Since he is an investor, let him select the closing/title company. They should also prepare the tax filings in this and send you yours. When he sets settlement have him inform you so you can get a copy of the buyer's HUD with his consent, this is to cover you tax wise for your records.

Sounds like you're fine otherwise. Good luck :)

Bimal Doshi · Answer

Thanks Todd,

My cash buyer is going to call me now and I will at that ask him for a deposit.

Since this is my first deal, I do not have a title company or an attorney, so should the deposit money go to his title company and attorney.

What paper work needs to be signed to make it non-refundable deposit, since it will go to his attorney or title company.

Any input will help.?

Bimal Doshi · Answer

Hi Bill,

Thank You for a detailed explanation.

This is my first ever deal, I am new to this business.

The cash buyer attends the same RE club as I do, but only interacted once during the meetups. 
I have another buyer who also wants this deal , so I asked him to wait if this deals fails with the current cash buyer.

Today I will be assigning the contract, and alongwith I will also hand over the original Purchase contract. Does that mean I will get full amount of my assignmnet fee.

If they do not pay the fee today what happens if the cash buyer backs out or does not agree to the terms and condition of the Purchase contract. The closing is scheduled for June 7th, 
Is it true the assignment fee is paid at the closing not at the time of Assigning the contract.

Little confused.

The seller is totally inexperienced, I suggested her to have an attorney at the closing.
I also strongly suggested to her that she get the contract reviewed. We are past the attorney review stage ,since her attorney is out of town, so she will have it reviewed at that time. But by that time I would have already assigned the contract and what happens if the attorney puts conditions.

Thanks

How to Assign a contract

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