Easy Question for the heavies. - Posted by Redline

Posted by Doris - Va. on January 08, 1999 at 16:43:35:

Hi Redline - Just finished reading all the messages
on ? for the heavies that you told me about. Now I
remember reading some of them before but some new
ones have been added.

I think I would like a contract that does not have
anything in it about being non-assignable and would
make sure it did say “and assigns” and that if it
is assigned the Seller releases the assignor from
all liability etc.

However I disagree with the time frame. I think
the major points in convincing the owner to give
you the contract are the facts that you can pay
cash and that you can close quickly. This is what
most motivated sellers are looking for.

That is why I called some “I Buy Houses” ads to
find an investor who would be ready and waiting
with fast cash and a fast close. Luckily I found
one and will work with him until I think I need a
few more.

So my advice is have the investor ready to go
BEFORE you find that first house. Make some calls
because I only made three calls and found the one I
needed.

Hope to do my first deal very soon. Good luck on
your deal. Thanks - Dori

Easy Question for the heavies. - Posted by Redline

Posted by Redline on January 05, 1999 at 19:09:06:

I’m planning on submitting an offer tomorrow on a property I think has a lot of promise to be wholesale flipped. I’m a realtor in the area so I know its possible future value and I know what my offer range should be. I figure I can make around $10,000 if my offer flies.

I’m in the process of writing the contract and am using the area standard realtor contract (the property is listeed).

I am going to add the following addendum’s to the contract:

  1. This contract is assignable
  2. Seller agrees to hold me harmless should I assign this
    contract.

Does anyone have any good sample contract wording for these?

Also, I was planning on a 30-day close with 2 weeks for “inspections, etc” … which is when I will be finding my buyer. Getting access to the property should be easy since it’s vacant and there’s an MLS lockbox on it (of course, I have a key). Once the contract is accepted I will call a friend at a local title company and run a title search to show the new buyer.

Am I missing anything?

Thanks,
RL

A Few Points of Clarification… - Posted by JPiper

Posted by JPiper on January 06, 1999 at 17:59:04:

Here?s a few points of clarification about assignments.

First, you cannot assign ANY contract in ANY state if it says nothing about assignments. This is contrary to what some of you evidently believe. To make it simpler, you cannot assign ANY contract. Let me give you an example. A contract that contains owner finance in some states cannot be assigned without prior approval of the seller unless the contract specifically permits the assignment. (I say ?some? states because I don?t know if this is true in all states, although I believe it should be if it isn?t).

What?s the big deal?? You put ?and/or assigns? in your contract. Or, check the law out in your state. Just make sure you?re speaking with an attorney who knows, because all of them don?t.

Next point. Assigning a contract does not relieve you of the responsibility of performing under the contract. If you assign a contract containing owner finance, and the assignee defaults somewhere down the road, guess what?? You could be held secondarily liable under the contract unless the owner gave you a release of liability.

If you assign ANY contract and the assignee does not perform by closing, you may be held liable under the contract. In other words, if you assign any contract to a new buyer, and he fails to close, the seller could come after you.

Here are the steps I take to cope with these issues. One, I write all contracts in the name of my corporation and/or assignee. Why?? First, it gives me the right to assign. Second, any contract liability is a corporate liability rather than a personal liability.

Two, in ANY contract containing some form of owner finance or a lease/option contract I insert a clause that 1) specifically permits me to assign and 2) gives me a release of liability if the owner approves the assignee.

I keep being asked about this step. Do you need to get a specific release of liability from the owner?? Could we simply insert a clause in the original contract that says if the contract is assigned that the owner releases the buyer from all liability?? My answer is to ask your attorney. I?m not comfortable with the concept that I get an owner to pre-release my liability under a contract which I intend to assign to an unknown party. I?m not comfortable with the idea that in a court of law I will not be held liable when the seller says I tricked him, and that he didn?t know this new buyer. Call me cautious. I get a separate release of liability indicating approval of the new buyer from the seller when I assign any contract that contains owner finance or is a lease/option.

In any contract I limit my liability to the earnest money consideration. Why?? Because that?s all I can lose.

So here?s how it stacks up. My contract reads buyer is ?corp and/or assignee?. The corporation will have to be sued if there is to be a lawsuit. The liability is limited to the amount of earnest money. I get a specific release of liability if there is ANY form of ongoing liability under the contract (like owner finance). If you take these steps you will have minimized your contract liability significantly.

JPiper

in my opinion - Posted by David S

Posted by David S on January 06, 1999 at 15:48:58:

I have always added “and/or assigns” when I put my name or company name on a contract.
You are flipping a contract, not the property.
With the “and/or assigns”, all liability of performance is “assigned” to the assignee.
and don’t forget to disclose that you are a lic re agent acting as principal.

David S

Re: Easy Question for the heavies. - Posted by rudy-austin

Posted by rudy-austin on January 06, 1999 at 12:48:38:

At Wm Bronchick’s Seminar “how to be your own R.E.Atorney” he stated that an agreement to purchase must state that the contract can not be assigned or it can be assigned without the sellers consent.However in order to be relieved of liability you must get a sellers release…rudy-austin

Re: Easy Question for the heavies. - Posted by SCook85

Posted by SCook85 on January 05, 1999 at 22:17:35:

Redline,

Sounds like you have most of your bases covered.
One thing to keep in mind, if a contract does not state clearly that it is non-assignable then you can assign it. You don’t need a clause that gives you permission to assign it.
Also, 30 days is not a long time when you need to market a property. Get more if you can. If not start marketing it before your offer is even presented. Get your buyers lined up. You will find that buyers will tell you that they want 30 days and if you tell them there is only 2 weeks left it better be a REALLY good deal. If it is marginal they will pass.

Also you state that based on the future value this is a good deal. You should never buy based on future value. Other investors are not going to you shouldn’t either. You have no idea what the future holds and you could get yourself into trouble.

SCook85

Re: Easy Question for the heavies. - Posted by Stacy (AZ)

Posted by Stacy (AZ) on January 05, 1999 at 19:34:17:

Redline, sounds like you’ve got a good one there. A couple of things I would add to the contract, since I doubt the standard realtor contract has them…

  1. This contract is fully assignable by either party at any time.

  2. Someone else should answer, don’t know your state laws.

  3. In the event Buyer(s) does not perform as agreed under this contract, Seller(s) agrees to accept Earnest Money Deposit as full liquidated damages and this contract shall then be null and void.

  4. Don’t forget to specify that within your 2 weeks you can reject the property (after inspection) and the contract becomes null and void and Earnest Money shall be returned to Buyer.

Are you planning a double close with separate contracts, or just an assignment of the purchase contract? If separate sales contract, I add a few different clauses to it as well.

Good Luck-

Stacy

PS. I’m not a lawyer, and I don’t know your state’s laws.

Thanks for the wisdom and experience - Posted by John Behle

Posted by John Behle on January 07, 1999 at 13:28:10:

I appreciate your well written, practical, experienced responses. Thank you for your time and contribution you make. It’s nice to have your experience around here. I hope people appreciate and recognize it.

Re: A Few Points of Clarification… - Posted by Redline

Posted by Redline on January 06, 1999 at 21:19:47:

Jpiper - thanks for this.

Basically, I’ve got most of this covered (except I do not have a corporation so I am working it myself).

I’ve filled out the contract as me and/or assigns
I’ve got a clause that states the contract is assignable
I’ve got a clause that states the earnest money is the only remedy
I’ve disclosed that I am a licensed realtor

If the contract flies, and I successfully assign it (I’ve already got a rehabber lined up) I will get the sellers to sign a release.

What kind of earnest money do you put up? I’ve heard as little as $10 on this board? Does that really work?

Thanks,
RL

PS - Contacting realtor tomorrow to present this offer.

Re: in my opinion - Posted by Redline

Posted by Redline on January 06, 1999 at 16:25:08:

Got it - Thanks David.

RL

Re: Easy Question for the heavies. - Posted by Redline

Posted by Redline on January 06, 1999 at 14:16:48:

Now, I’ve heard people say that they specifically get the seller to sign a document stating they accept the new buyer and hold you harmless.

And I’ve heard others state they just put an addendum in the contract stating that the contract is assumable and IF it’s assumed basically you are held harmless from then on.

I don’t know that one covers better than the other … does anyone know for sure?

RL

Re: Easy Question for the heavies. - Posted by Redline

Posted by Redline on January 06, 1999 at 14:13:34:

Thanks for all the follup and advice.

What I meant about future value was: what the property could sell for fully repaired. (this of course, barring any catastrophic market collapse).

And yes, my standard RE contract states: CANNOT BE ASSIGNED … so I must strike that out and say it’s OK to assign.

As for time … do you do these types of wholesale flips and if so … how much time do you give your new buyer? I thought 2 weeks would be OK but now maybe I’ll try for a 45 day close (from the time of acceptance).

Thanks again and keep the comments coming,
RL

Re: Legal Question - Posted by Stacy (AZ)

Posted by Stacy (AZ) on January 06, 1999 at 10:16:44:

Steve-

Do you know if a contract can be assigned (unless prohibited in the contract) in every state? I, too, thought this was basic contract law throughout the U.S., but I include it for safety and to be sure there is no issue if the seller objects to a new buyer stepping in. Maybe one of the lawyers on the news group can step-in and answer for sure, if you don’t know.

Stacy

Re: Easy Question for the heavies. - Posted by Matt B

Posted by Matt B on January 05, 1999 at 19:53:59:

What other clauses would you add to a deal with a separate sales contract? I plan on doing simultaneous closings instead of assignments. What should I add?

Re: Easy Question for the heavies - Posted by Doris - Va.

Posted by Doris - Va. on January 08, 1999 at 16:44:44:

Hi Redline - Just finished reading all the messages
on ? for the heavies that you told me about. Now I
remember reading some of them before but some new
ones have been added.

I think I would like a contract that does not have
anything in it about being non-assignable and would
make sure it did say “and assigns” and that if it
is assigned the Seller releases the assignor from
all liability etc.

However I disagree with the time frame. I think
the major points in convincing the owner to give
you the contract are the facts that you can pay
cash and that you can close quickly. This is what
most motivated sellers are looking for.

That is why I called some “I Buy Houses” ads to
find an investor who would be ready and waiting
with fast cash and a fast close. Luckily I found
one and will work with him until I think I need a
few more.

So my advice is have the investor ready to go
BEFORE you find that first house. Make some calls
because I only made three calls and found the one I
needed.

Hope to do my first deal very soon. Good luck on
your deal. Thanks - Doris