Assigning contract - Posted by Redline


#1

Posted by Redline on October 30, 1998 at 20:56:20:

Hello Stacy,

Well I guess I was saying two things at the same time - that’s probably why you got confused!

  1. I was saying I could flip to a rehabber.
  2. I was saying I could flip retail.

You’re probably right - I would be better off flipping it to a rehabber and walking away. I thought retail because I figured maybe I’d find a handy homeowner who wouldn’t mind fixing the place up while he lived there - I could get more from him but it would take longer an dbe more difficult.

The place is totally live-able - it’s just REAL 60’s inside and needs updating and cleaning. They’re asking $149,900 and I figure it could go for $170,000-$180,000 fixed up nice.

Thanks again,
RL


#2

Assigning contract - Posted by Redline

Posted by Redline on October 29, 1998 at 14:54:01:

I am considering a house for rehab but am unsure I can get the financing together as I cannot make an all-cash offer ($120,000) and owner financing will not fly. I am now looking into private money.

Anyway, if I can’t buy and rehab I will consider getting it under contract and then assigning the contract to either a contractor or another buyer and make a few bucks.

If I decide to try and assign, how does this usually work? Once it’s under contract how long will I usually get to find a buyer? I know it’s negotiable but how long is reasonable?

And what exactly would I tell the new buyers when they see a realtors sign outside? I am also a realtor, do I have anything (besides that) to disclose?

How do I prevent people trying to “wait out” my contract period?

Once I get this all ironed out, I can proceed with a simultaneous close at my title company. I’m assuming I can explain what I’m doing and they will understand the title and closing ramifications.

Thanks in advance,
RL


#3

Re: Assigning contract - Posted by Stacy (AZ)

Posted by Stacy (AZ) on October 30, 1998 at 10:53:25:

My contract allows for 15 days for my inspection and approval of the property. This contingency allows me to cancel the contract by formally notifying the seller that I do not approve.

Further, my contract specifies a 30 day close, and limits damages of non-performance to only my earnest money, which is always $100. Additionally, I have a clause that allows me to show the property to inspectors, potential buyers, etc.

So, if I don’t find a buyer within 15 days, I could make a decision to either cancel the contract or continue another 15 days, risking my earnest money. But there are ethical dilemas involved (see below).

I have always found a buyer within the 15 days, normally a few days after my ad hits the paper. Competition is what keeps you safe from those waiting-out your contract. If you were an investor/rehabber and I came to you with a terrific deal, would you want to risk waiting when you know if you don’t want it, I’ll immediately shop it to many other buyer/investors who know a good deal when they see it?

Be careful, though. If you can’t find a buyer you should close on it yourself to avoid potential legal/ethical problems. There is still a chance the sellers could sue for specific performance, even though you have weasel clauses in your contract. Ethically, it’s wise to close on deals you make, if at all possible.

About the realtor’s sign…probably the best thing to do if you feel you must place a sign out front, is to be clear with them that in the case that your funding doesn’t come through, you will be selling to another party. I would opt for NOT placing a sign out front until I’ve quickly tried other methods, such as ads and calling rehabbers, etc.

Your title company should know how to handle a simultaneous close, if they do them. Some title companies don’t, so check ahead of time and find another who will if needed.

Stacy


#4

Re: Assigning contract - Posted by Redline

Posted by Redline on October 30, 1998 at 09:46:20:

I still need help with the above topic - if anyone can offer any advice I’d appreciate it. (must be a boring topic!)


#5

Re: Assigning contract - Posted by Redline

Posted by Redline on October 30, 1998 at 12:31:52:

Stacy - thanks!

Some issues:

  1. How can I schedule a 30-day close? A rehabber could probably meet this deadline but a regular purchaser could never close a mortgage within 30 days. I myself am tring to find private money because I do not have the $120,000 all cash to meet that deadline as well.

  2. The sign up at the property is not mine. It’s listed through another realty office and is an estate sale. So once my contract is on it and I begin showing it the sign will still be there but I guess it’s not a big deal, after all … it is for sale.

  3. Since I myself won’t “really” be the seller of the property and cannot dictate the terms I will sell at (i.e. low down, owner financing, etc) what would be the best way to attract a buyer FAST? There wouldn’t be enough room to sell with low down and a note and then discount the note.

Thanks in advance,
RL


#6

Re: Assigning contract - Posted by Stacy (AZ)

Posted by Stacy (AZ) on October 30, 1998 at 16:05:25:

Redline-

From your original post, I didn’t understand that you wanted to sell the property for retail. I assumed you were going to assign it to (or double close with) another investor that has the cash, at a wholesale price.

When you deal with retail purchasers, you typically need more time than 30 days, as you implied. As for your contracted closing date, the longer, the better, since who knows how long the retail buyer will need to find and complete financing. I’d try for 60 to 90 days.

Also, assigning a contract forces the buyer to honor the terms of the purchase contract. I’m not sure you really mean you want to “assign” the contract to a retail buyer. It seems you want to place the property under contract using a “Purchase Contract” for a low cash amount, and then find a retail buyer and tie the sale up with a separate “Sales Contract”, closing both simultaneously. This is a retail flip, but not an assignment.

Personally, I would opt for a quick wholesale flip to an investor. A rehabber will need to profit approx. $15K or more after fix-up before they’ll bite. You don’t mention FMV…is there room for a rehabber to make a profit this large? The wholesale flip will get you in and out fast, since the cash will be there.

Others on this newsgroup will need to help you with strategies for selling retail. I’m strictly dealing in wholesale flips, and wouldn’t be the best one to give advice. The one time I considered doing this, I lined-up the financing ahead of time with a lender who would buy the first note at closing, with 5% down, and I would keep the second note. Under these conditions, with a retail buyer that has C or D credit, you can sell for an amount on the high side of FMV. I ended-up not going with this option.

Good luck…keep us posted.

Stacy