Posted by KL on August 01, 2003 at 13:42:48:
The affidavit will contain buyer & sellers names, and will refer to the purchase agreement which you of course already have a copy with the sellers signature. You should check out Bronchick’s book, flipping properties. It has a samples in the back of the book.
flipping through assigning contracts - Posted by Lara
Posted by Lara on July 31, 2003 at 14:05:39:
Hi everyone! Just had a question…I have had people interested in purchasing a flip property from me, but then when I try to assign the contract to them, they bail out, contact the seller and make a deal with the seller after my contract expired. I know people are having luck with assigning contracts, but I’m not having any luck. I was hoping someone would let me know what I am doing wrong. For example, I had a property under contract for $12,000. I found a guy that wanted it for $15,000. However, when we started discussing my contract, he thought he should only pay me $500 for a finders fee (instead of the $3,000 difference), and then my contract for $12,000 would be his. How do you go about assigning the contract? Please help!
Re: flipping through assigning contracts - Posted by Todd_OH
Posted by Todd_OH on August 01, 2003 at 19:21:45:
Lara:
Unfortunately, I don’t think there is a 100% safe answer to your question. Ordinarily I would say don’t worry about assigning the contract, just set up a double closing. In a double closing, you close each transaction (your buying, and your selling) within 30 minutes or one hour of each other, ideally closing with your BUYER first (since they are bringing the cash). I say 30-60 minutes because that prevents your buyer and seller from ever meeting each other.
The double closing could also be done as a “simultaneous close” in which you do the same thing, but the buyer is in one closing room, and the seller is in another, while you and the title agent do your paperwork in both rooms. Or you have the seller wait outside in the reception area, while the buyer is in with you, etc.
Hopefully, you can find a title company that will STILL do double / simultaneous closings in your area…
Having said that, the day has come (in my area) that I NEVER thought I would see… Even the most creative (but legitimate) title companies are “just saying no” to double closings. Therefore I am now forced to do assignments.
Without opening a can of worms (I’m sure there is plenty of discussion on this board regarding this), suffice it to say that all the BOGUS HYPE about so-called “illegal property flipping” (better known as loan fraud), has title companies so petrified (per the FBI investigating their files and sending people to jail), that many title company underwriters are requiring SEASONING ON ALL CASH DEALS! (I can’t even believe I just typed that…)
Back to your question… The problem with assignments is, as you are finding out:
Some posters addressed your issue by mentioning the “memorandum of contract”. However, you clearly stated item #4 above, that they are going behind your back AFTER your contract has expired. If that is the case, then the enforceability of your memorandum would also be expired, so no advantage other than temporary legal molasses that could wind up backfiring on you (i.e. they could say you were fraudulently clouding their title after your contract expired).
The best way to have “confidence” that your deal won’t fall apart is to:
Have a deal so HOT (i.e. under market) that you have many people begging to take it off your hands. That way even if 3 out of 4 of your potential buyers are possessed by the greed factor, hopefully one of them will have high ethical standards and not go behind your back.
Relates to number one: cultivate a supply of ETHICAL buyers for your wholesale deal.
Be prepared to take a smaller profit than you intended if you can’t find any buyers that hate to see someone else make a legit profit. Even if you only took a relatively small finders fee ($500 - $1,000), if you have a system for finding and tying up the deals that doesn’t take a lot of your time, it is still a viable way to generate some cash. One deal a month at $1,000 a pop is as much as some people make all year on a part time (1000 hours) or full time(2000 hours) job.
Be financially prepared to close if you cannot find a cash buyer. If you are strapped for cash, consider hard money lenders (several advertise on this site), home equity line of credit, or even credit cards if you have large credit lines. As soon as you come up with cash, remember, you are financially at risk, so I repeat: make sure you’re buying 40% or more below market, so that you can at least refinance and/or recoup your money no matter what happens.
Hope this helps…
Todd_OH
Re: flipping through assigning contracts - Posted by Brent_IL
Posted by Brent_IL on July 31, 2003 at 14:53:09:
One of the major benefits to using a purchase contract with contingencies instead of an option contract is that you are the one in control of the deal. Options expire solely with the passing of time. Contracts to purchase “expire” only if some action is taken. If the seller wants to renege, make him pay for the privilege.
Re: flipping through assigning contracts - Posted by KL
Posted by KL on July 31, 2003 at 17:51:36:
File a “memorandum of agreement” in the county land records, which is basically an affidavit stating the contract between buyer and you. Once recorded this affidavit becomes a cloud on the seller’s title, which can make the title difficult to insure if they try to go around you.
Re: flipping through assigning contracts - Posted by Kristine-CA
Posted by Kristine-CA on July 31, 2003 at 21:06:10:
KL: did you mean an affidavit stating the contract between you and the seller? The only way the memo of affidavit would cloud title would be if the grantor/grantee index showed something in the seller’s name, not the buyer’s
Just wondering if I am missing something here…Sincerely, Kristine