Posted by Barbara_NY on December 03, 1999 at 16:25:32:
Good points all. First, technically the down payment I refer to is earnest money. However, in the New York City area earnest money, when asked for by a realtor, is minimal ($100 - $500) and provided along with the OFFER and held in escrow (usually not even cashed, just held by the realtor or the seller). If the offer is accepted it is applied to any contract price.
Being that the New York city area is a hugh seller’s market it is rare not to be expected to put down a down payment at the time the contract is signed. I’ve been working deals on a full time basis for nearly 9 months and two years prior on a part time basis. I consider myself very creative, but have never been successful at getting a seller’s attorney to allow a contract to be signed without receiving a down payment. I usually pay between $1,500 & $5,000; otherwise there are plenty of others behind me who will and get the deals. The investor market here is strong. Please also note that a deal cannot easily be closed without an attorney in New York so the attorneys have really set the rules.
I’ve done my deals as you have when the earnest money (or in my case the down payment) is paid by me and reimbursed by my end buyer. However, I’m finding more deals and getting more investor requests that I have funds to place down as a down payment. That’s why I’ve been seeking another solution so I don’t have to miss out on any opportunities. For example: I had a single investor ask for 26 properties by the end of the year. There is NO way I can front that kind of money and I don’t work with enough private investors who could front it to me either.
I do have strong and loyal relationships with several of the investors I work with and would feel comfortable doing the referenced assignment; however, I agree that placing their name (if the bond isn’t as strong or the unexpected happens) leaves me in a state. Got me to thinking… maybe an alternative would be to have the contract read: “John Smith, seller…” to “Barbara Karnes and assigns, buyer(s).”
The whole reason behind using their name instead of not addressing the matter at all or using the generic “and assigns” is to provide a binding reason for the end buyer to provide the down payment funds at the time the contract is signed. If I don’t identify the assignee the end buyer/investor may be trepedatious to give the money without anthing official to protect their position. I would. But… I guess the contract could read “and assigns” or nothing at all, and the Assignment agreement could be executed at the time of the contract anyway; thus affording the same protection to the end buyer. It just opens up the possibility that seller’s attorney will ask why they have a down payment check from someone who isn’t on the contract. Of course the downpayment could be put into my account and I could issue the check but now we’ve added at least a week to the process, as the banks around here won’t release the full amount of a check (even if it is certified) without a 5-7 day period to assure it has cleared.
Seems like things are easier in the burbs of Chicago. Thanks for the reply. Hope all is well.