Assignment contract question

[kbird]

Brandon's right, traditional lenders don't like assignments or double closings. Your buyer has to have cash or use a lender doesn't have seasoning requirements. Most banks won't fund deals where the seller has been on title only a short time OR accept an assignment of contract, but there are some that will.

And, yes, in a double closing the title company uses the buyer's funds to pay the seller. You, as the wholesaler, shouldn't have to bring any cash to the table and the closing costs are typically less than 2 complete closings.

Hope that helps-

[fraudbuster]

Some lenders will not allow an assigned contract. Lenders are also cracking down on any form of payment shown on the HUD which goes to an unlicensed representative (bird dog).

[Melissa]

This is where it all gets complicated.  Some lenders want seasoning...FHA especially.  Some conventional loans won't require seasoning but unless the end buyer works with the same company doing the simul-close, then anything can happen up to the last moment.  I am concerned this aspect of REI (assignments) are going to become a thing of the past.  Leaving cash as the only option for investors doing simul-closes or flips.

[Brandon Lambert]

It isn't hard to find cash buyers, though.  Go to the foreclosure auction.  Everyone there is buying houses all cash.  If you are dealing with a newbie who has no cash, line them up with some hard money.  That is the only type of loan I will allow my buyers to use.  HML's don't care about assignment fees or seasoning.  That is what I love about America.  If there is a demand for something, somebody will supply it.
Brandon Lambert

[Melissa]

Well, your point is exacly mine....all cash or forget it.

[Brandon Lambert]

You are correct.  I should read more closely next time.  

[Melissa]

Brandon, I really didn't mean it that way...sorry.  I was just expressing my frustration over the way things have changed just in this last year as I  have been getting my feet on the ground.  Or should I say Trying to. More and more I come to the conclusion that to make serious money in this business you either have to have VERY knowledgable buyers or CASH.    And, having re-read your post, you are really offering a nice tid-bit of information there.  Going to the forclosure sales to network/start a Buyers list is a great idea.  

One thing I am learning in this business is Patience.  That is the one thing I did NOT count on...LOL!

[Brandon Lambert]

3:12 Therefore, as the elect of God, holy and dearly loved, clothe yourselves with a heart of mercy,9 kindness, humility, gentleness, and patience

[Melissa]

Brandon, words of wisdom indeed!  Thank you, too often I forget who is in charge of this whole thing.

[djmcgee]

Is the standard contract something I could get somewhere or do I have to make one up?  Thanks

If you want to keep your transaction private, you may want to not use a contract assignment form at all. When I wholesale property, I use a standard contract, one for buying and one for selling the property. I submit both to the title company and they do a double closing, using the buyers' cash to fund the purchase price to the seller and cutting me a check for the difference.

I'm sure there's more information elsewhere on this site about double closings, why they're favorable to contract assignments, and how they work.

[Brandon Lambert]

To answer your question about where to get a "standard contract" you can get one from your title c ompany.  They will also tell you how to fill it out.  While the double close method is great for hiding a big profit, if I am making 3-5K, I will assign it instead of double closing for two reasons.  1.  I don't have to pay closing costs when assigning.  I realize that closing costs are not much on a cash transaction, but I will usually have to pay for a title policy when selling the house on the second contract to my investor if I doublce close.  That can be 500-800 bucks.  I prefer to keep that.  2.  When you use a double close method, you have a different tax concern.  When you double close, you actually own the property, albeit for a few minuts.  But, that means I now have capital gains, which means more taxes.  If you assign a contract, it is considered ordinary income, so it is more favorable for taxes.  You definately don't want to take my word for it on taxes, though.  I barely passed accounting in college.  That is just what my CPA told me.
Hope that helps!

[djmcgee]

Thanks very much.  I will do that.  

[kbird]

I usually use the TREC contract here in Texas, the same one that real estate agents are required to use.

http://www.trec.state.tx.us/formslawscontracts/forms/forms-contracts.asp