How To Assign a GA RE Contract

Question

Hey guys,

I'll be putting my first few properties under contract this week and was hoping someone could lend a helping hand.

I have a bunch of courses (just like most of us) and they all give me their very simple contracts. However, I plan on flipping properties from the MLS and don't even want to bother Realtors with any other contract than the official GA contract.

On page 6, section 19C under Other Provisions it says and I quote:

"This Agreement constitutes the sole and entire agreement between the parties and shall be binding upon the parties and their successors, heirs, and permitted assigns. No representation, promise, or inducement not included in this Agreement shall be binding upon any party hereto. This Agreement may not be amended, modified or waived except by the written agreement of Buyer and Seller. This Agreement may not be assigned by Buyer except with the written agreement of Seller. Any assignee shall fulfill all the terms and conditions of this Agreement."

I have two ways to do this transaction, either assignment or double close. I have transactional funding from the course I got so a double close may not be such a bad idea. But what if I wanted to assign it? Could I?

By the way, my buyer already knows that the properties are on the MLS. He doesn't care. He told me that if I gave him the MLS number he would only give me a birddog fee, something like $500. But if I do all the work and the negotiating and bring him to the closing table, I can make as much as I want as long as it comes in lower than his number.

I chose number 2 because I want more money. But I also want to learn this. Not only that, but I will earn this man's respect by bringing him 6 or 7 properties packaged and ready to go in a matter of days.

Once I do it and get to the finish line, I can ramp it up as much as I want. The seller wants prequal letters or POF with offers. I don't have much money for earnest money so I'll probably do 10 or 20 bucks a property. It's a total of about 6 or 7 properties.

Any feedback would be greatly appreciated.

P.S. I think I'm supposed to open title once the offers are agreed upon and I don't know how to do that just yet but I don't want to get ahead of myself. I'll ask that question on Wednesday or Thursday after I have all the contracts in hand.

Thanks in advance for all the help.

J Scott · Answer

Towards the back of the contract, there is a place to add additional Stipulations.  Add something like the following:

"All parties agree that Buyer has the right to assign this contract at any time prior to property closing."

Aaron McGinnis · Answer

If your seller is a bank, Joel is correct... you will not be able to assign your contract, and you will look like an inexperienced fool to your end buyer.

Assuming your seller isn't a bank, Realtor Form F122 when you assign the contract.

Be VERY VERY careful when writing in a special stipulation. If your intent is to NOT CLOSE if you cannot find an assignee, you need to state that in your contract.

For example, if you simply put a line there that says, "Buyer reserves the right to assign this contract", and you enter into the contract with no other back-out clauses (Or get beyond your diligence period), YOU ARE STILL OBLIGATED TO CLOSE.

Legally, the seller could - at the very least - keep your earnest money. At worst, they could sue you for Specific performance... and the longer you keep the property tied up, the more upset the seller will be.

So if you're going to do this, and you're using the GAR form, you need to specify like -

1) Seller agrees to allow buyer to assign contract to another qualified buyer prior to closing.
2) Contract is contingent upon buyer's ability to assign contract to another qualified buyer prior to closing. All parties agree that the buyer may terminate the contract at any time if buyer is unable to assign contract prior to closing.

Even with this, after your diligence period your EM is effectively nonrefundable if you're writing a cash offer. If you want to make the EM refundable if you can't find a assignee, you need to write a stip that looks like this -

3) All parties agree that buyer's Earnest Money is refundable until closing.

Note: If I were a seller and I saw all of these weasel clauses, I'd tell you to get stuffed. But... that's just me. =)

Final word here - $20 worth of earnest money isn't much. In fact, most serious listing agents are going to laugh at you and tell you to come back when you've got some real money. Locally, $500 is about the least amount of EM I see before the agent is going to be saying, "This is clearly not a serious offer. Stop wasting my time."

Also, most REO sellers are going to want to see $1000 minimum from an investor... some require 10% minimum for cash offers. ALL will require a proof of funds, lest they file it under "F"... for "Forget it".

I'm not saying don't try with the $20 EM trick, I'm just saying it may not work as advertised in the course you took.

Oh, and PS - I hope you've seen a proof of funds from your end buyer in the form of a bank statement, and that you've verified it to the best of your ability. As the saying goes, "Buyers are liars"... don't go sticking your neck (And your $50) out for someone until they've proven that they can close. And by "Proven" I mean "Shown you a bank statement with more than what they're going to pay for the property"
(I've seen so many wannabie-wholesalers get burned by lying liars and the lies they lying tell it's stupid.)

Joel Owens · Answer

Allen (J Scott) is being nice.

I assume the properties you are bidding on are owned by banks.In the standard GAR purchase and sale agreement it has the paragraph you mentioned.

Based on that paragraph you cannot assign without the sellers consent.Even if you put in special stips the sentence J Scott said it most likely will not matter.

The banks almost always add addendums you sign as well.In the addendums and conditions it will say property cannot be assigned.

It will also say if anything in this addendum conflicts with the purchase and sale agreement the addendum shall control.

So if the purchase and sale says you can't and then special stips says you can then the addendum saying you can't will rule.You can always cross out the cannot assign in the bank addendum and see if they catch it or not but most time they will not agree to it.

For the asset manager they want to get the file off of the desk.If you say you will assign the asset manager doesn't know who the end buyer is or their ability to close.

If the contract falls out they get a crappy 50 bucks in earnest money and another price reduction selling at a lower value when it comes back on the declining market.

If I were the asset manager I would require you to have more down as non-refundable earnest money.This forces you to vet the end buyer hard because if they don't come through you stand to lose a lot.

Donovan Stephens · Answer

Any updates on the outcomes? I am curious as to if the asset manager allowed you to assign the contract.

Arroyo Aaron · Answer

Allen what was the outcome of this?

Mike Jakobczak · Answer

Another thing you can put a clause in your contract that states you will be closing with a different LLC and will let them know by end of Due Diligence period.  Sometimes they will allow this and sometimes they wont.  Depends on the bank,property,etc.

Allen Gregory · Answer

Thank you so much for all the help guys. I'm not upset in the least. I'm busting my hump trying to make the dream real like all you guys have done. All of you serve as great references for what is possible and I applaud each of you for trying to help me.

I am particularly interested in what Joel had to say. It's funny you mentioned calling banks and trying to put together a bulk portfolio sale. I have a list of troubled banks and I went and Googled all 150 or so and got phone numbers.

I even have a buyer who wants to buy REO in California and Chicago but he is only willing to deal with someone who is direct to the bank and can get stuff done in days instead of weeks.

I've been told by a gentleman on another forum that he was scared to death to pick up the phone and make the calls until he made his first few and found out that these asset managers were desperate to sell.

Can any of you give me an idea of what to say/expect when I start making these calls? What kind of credentials are these guys gonna be looking for? I know the lingo and can talk the talk so that probably won't be such a big deal. But if these guys ask for POF, resumes, and EINs I'm gonna be up the creek without a paddle.

Any feedback is greatly appreciated.

Joel Owens · Answer

Sure not a problem.I assumed by MLS most of those properties are bank owned.

A large percentage in our MLS's at low price points are pre-foreclosure or bank owned.

He would almost be better calling banks and trying to put together a bulk portfolio sale.

The reason these asset managers put in these types of requirements with earnest money and non-assignment clauses is they have been burned many times before.

An investor buying some course is trying to purchase their first property where as some banks sell tens of thousands of properties a year.They know statistically the type of deal you are trying has a low closing ratio.So they put high earnest money controls and other items in there to weed out these types of purchasers who aren't really purchasers and are just trying to collect a fee.

Now don't get me wrong I am not putting down someone trying to do this.On this board if anyone offers advice from experience
and people are trying these long shot strategies and you tell them the reality they get upset.

It's easier for these guru's to sell you a course and tell you how EASY it is and collect a check then to go out and do the HARD strategy they are selling.

Most people don't have 10,000 or 20,000 to buy a first property but have 500 to 1,000 to buy a course and then maybe another 1,000 laying around.The guru's know this and price accordingly.The hardest part is getting the initial money but once you have that you can start compounding fast.

J Scott · Answer

Joel - Thank you for bringing that up.  I assumed that he wasn't talking about an REO purchase, but certainly, if it is REO, there are no contract stipulations that are going to allow you to assign the property given the addendum you'll have to sign.

How To Assign a GA RE Contract

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