Assignment of Contract - How to Make ...

Assignment of Contract - How to Make $10K Matching Buyers & Sellers

Posted in the Real Estate Forum

“I buy homes - Oahu & San Diego”

Since: Oct 10

Pottstown, PA

#1 Apr 6, 2011
Original article here: http://HawaiiHousingNews.com/assignment-of-co...

Would you like to make $10,000 by the end of April? Have you ever heard someone mention that they Ďassigned a contractí to a rehabber or investor here in Hawaii or anywhere on the mainland? Itís actually not that complicated. Whatís more, itís often an easy way for someone to make some quick cash. Hereís how it works:

You find a property that someone is looking to sell. Single family house, multi family house, condo, vacant land ó it doesnít matter. Only three things do matter:

1. You get it under contract. That means you have a written purchase contract signed by both you and the seller.

2. The terms of the contract will be attractive to another buyer.

3. You find that buyer!

Letís use a basic Ďfix and flipí as an example. Say you find a 3 bed / 2 bath single family house in Honolulu that is a good Ďdealí according to basic real estate investor criteria, meaning it provides substantial upfront equity after all rehab costs and fees are subtracted from the final selling price. This house in Honolulu is worth about $350,000 today and would need about $20,000 in rehab to bring up to excellent condition where it would fetch roughly $375,000 or so. However, the seller lost their job and owes a lot of back taxes but they do have $300,000 in equity in the property (owe $50,000 on the mortgage). They donít want to get in trouble with their local bank and have other immediate expenses, so they agree to sell it to you for $245,000 in 30 days. You then assign the contract to one of your local Hawaii real estate buyers for a $10,000 fee. The buyer can pay you then and there (preferable) or pay you at closing. Letís look at how each person wins in this situation:

The owner avoids getting a lien for the back taxes. They also net roughly $195,000 ($245,000 Ė$50,000) in CASH at closing and are free of their mortgage. They do not have to pay a 6% realtor fee and possibly wait months for it to sell. Instead, they get their problem solved right away!
You make a $10,000 assignment fee for solving the sellerís situation while providing a good investment deal for the buyer.

The buyer is happy because even after paying you the assignment fee, they are still going to make a nice profit if they rehab and flip the property, rent it out or even live in it, capturing a lot of upfront equity.

So basically, you are assigning the *terms* of the contract to another buyer who will actually close and take title of the property. Just be sure you analyze the property, its after repair value and the scope of work needed so that you know what price you need on the contract. Know your market and what similar units are selling for. And donít forget to include your assignment fee in there! If itís worth only $200,000 to and end buyer, then you need to get it for less than that if you donít want to work for free!

Here are some tips to help you make some great cash assigning properties to other buyers:

1. Always build your real estate buyers list (here's an example: http://hawaiipropertyinvestments.com ). If you have a great deal but no one to assign it to, then you wonít make much money. Have buyers ready to go and know what they want.

2. Understand your local market. Learn how to comp a property according to recent, similar, nearby sales. Are properties moving in your area? If not, then you really better get that price down so your buyer can be sure to sell it at discount when it's done.

3. Go for the close! Have a blank contract with you at all times as youíre driving around town. You just never know!

Buyers like myself will gladly pay $10,000 for a contract that still nets us a good profit at the end of the day. Go find those deals and make some $$!

http://BigRockInvestments.com
Lady J

Philadelphia, PA

#3 Feb 6, 2013
I just have two question? In regards to the "Assignment of Contract" form, is there a different form for the Buyer? and How does one assign the contract over to the real estate buyer?

“I buy homes - Oahu & San Diego”

Since: Oct 10

Pottstown, PA

#4 Feb 6, 2013
Hello, Lady J. You find simple Assignment of Contract forms online. A one page form should be more than sufficient and it's just the one form, to be signed by both you (the assignor) and the buyer. You may need seller approval, depending on your original purchase contract terms, in which case the seller would need to sign as well.

It's quite simple. As long as you've put together a winning deal and provided all the necessary data to your buyer, then you sign the form and file it with your title/escrow company or attorney that's handling the closing.

NOTE: You should get your assignment fee from your buyer at the actual time of assigning, not closing, though that will depend on the relationship with your buyer and any legalities presented by your escrow officer or attorney. But generally speaking, you are handing over your asset (the contract) at the time of assignment, so that's when you should get paid. You're selling the contract (i.e. the terms, rights, and responsibilities), not the actual house. It's up to the buyer, at that point, to finish performing.

For more great real estate investment tips, just visit:

http://masterycoachingmichael.com/blog

If you're in Hawaii, then visit us at:

http://bigrockinvestments.com
Taluula

United States

#5 Jul 23, 2013
Hello Michael

I am trying to find out if an "Assignment of Contract" is a legal practice if you aren't an REA here in Hawaii? I assume so as you seem to be doing them. A friend has just informed me that you need a license to be able to issue one. I'm now very confused! Can you help? Mahalo!

“I buy homes - Oahu & San Diego”

Since: Oct 10

Pottstown, PA

#6 Jul 24, 2013
Hello Taluula. Let me first say that I'm not an attorney and I can't give legal advice. That being said, it is my understanding that you do NOT need to be a licensed real estate agent to assign a contract. Here's the key issue: a licensed real estate agent represents the interests of another party -- a buyer or seller. That's the main reason they need to be licensed.

However -- if YOU have a property under contract with YOU as the buyer, then YOU can assign your interest to another party because YOU are not representing anyone else. You're representing YOURSELF and assigning something that YOU are in possession of: a contract with the rights to purchase a property.

You can assign the contract directly from yourself to your buyer, or you can handle it through your title and escrow company (if you've already opened escrow). I've done both right here in Hawaii.

I hope this clears it up. You should present this to your friend because they may not understand how an assignment of contract actually works.

Please keep me in mind for any properties you come across that might be good flip deals - I'm always looking and will reward you well :)

bigrockinvestments.com

Aloha,
Michael
Taluula

United States

#7 Jul 24, 2013
Hello Michael
Thanks for your response. I'm an investor. I have a few that I believe are great flip deals that I'm currently working on in Maui. I'll be in touch directly so we can discuss what you have in mind.
John

Metairie, LA

#8 Sep 18, 2013
So simple in theory yet such a different matter in actual practice

“I buy homes - Oahu & San Diego”

Since: Oct 10

Pottstown, PA

#9 Sep 19, 2013
Hi John. It's not easy - any form of real estate investing certainly takes work. You have to market and market for the deals that fit the criteria - again, these are people who are in foreclosure, may have inherited a house in probate that they don't want, need to sell because of a divorce or bankruptcy or relocation or other matter. Not everyone needs to sell their house or needs a cash buyer to step up right away.

Once you do find a person in one of these situations, you have to sign them to a purchase contract at an appropriate price. Then, you need to have a CASH buyer ready to go (like me) who can step in to buy the house and pay you your assignment fee. Knowing your buyer's criteria beforehand will help make sure you get the house at the right price.

So while it is work, it doesn't have to be complicated. You're finding a motivated seller and matching them up with a buyer like myself.

Instead of marketing, you might even know of someone NOW who needs help with their house. Half the work is then done. Find your buyer and his criteria and put the deal together and get paid.
Mat

Brockton, MA

#12 Apr 10, 2014
Mr. Borger -

Great article! One question with regard to the assignment fee. I have yet to find a contract that includes mention of the fee. Is there a traditional form used between the assignor and assignee that indicates the amount of the fee?

“I buy homes - Oahu & San Diego”

Since: Oct 10

Pottstown, PA

#13 Apr 10, 2014
Hi, Mat. Traditionally, your assignment contract is a separate item from the actual purchase contract between you and your seller. There's no need for the assignment terms to be on your purchase contract.

However, on the assignment contract itself between you and your buyer, then yes, you will need all the terms described, including the fee amount. But this is a separate document from your purchase contract with the seller. The assignment contract usually doesn't need to be more than a page. Just make sure the title company or attorney you're using will accept it.
Ang

Long Beach, CA

#14 Jun 8, 2014
But how would you find buyers unless you put it on the MLS in your area--and then it's a double sale that needs to close concurrently. In California, where I live, that has real estate tax consequences. Also, in an assignment, the seller may want part of that assignment fee.
Vince Davis

Gilbert, AZ

#16 Jun 29, 2014
Who are you using for title work? Old Republic told me hey won't do assignments.
mandy605

Chino Hills, CA

#17 Sep 24, 2014
Hello! Great information. I would like to know; what if you are doing this via only the internet? How can you contract deals in texas if you live in california? Easiest way to figure out comps for the home? Thanks

Amanda

“I buy homes - Oahu & San Diego”

Since: Oct 10

Pottstown, PA

#18 Oct 30, 2014
Sorry I missed the previous comments. I'll respond to each in turn here:

Ang: You find buyers by proactively building your Buyers List. There are many places to find people who flip houses -- Craigslist, Google, local REIA meetings, social media, etc. Build a relationship with these people ahead of time so that when you do get a property, it's not a matter of IF you can assign the contract -- it's a matter of WHO you will assign it to.

As far as the seller wanting part of the fee, no deal. It's up to you to control the conversation. Their price is their price, no matter whether you're the one closing on the property or your buyer. Remember -- we're helping someone through a difficult situation. You have a right to make a fair profit for providing a helpful service.

Vince -- You'll have to keep talking with other title /escrow companies. Try Title Guaranty or First American. It really shouldn't be an issue.

mandy605 - That's trickier but certainly possible. While I'm based in San Diego now, I still operating my company Oahu Home Buyers. I have a team of professionals there - contractors, escrow officers, realtors, etc. that can step into their roles as needed. If I was going to wholesale a property there, I'd get it under contract (try DocuSign), try Zillow or a local realtor friend for comps (or FlipComp), and a local title/escrow company. Of course, you'll also need to advertise for buyers. It's not easy, but many people do it.

By the way, there's a GREAT new way to drive leads and run your business online. I use it to run much of my business today. Check this new site out:

http://goo.gl/JegBVl

Hope this helps!!
Raeell Hunter

Los Angeles, CA

#19 Feb 23, 2015
Hello I was wondering will u be interested property here in San Francisco California

“I buy homes - Oahu & San Diego”

Since: Oct 10

Pottstown, PA

#20 Feb 24, 2015
Raeell Hunter wrote:
Hello I was wondering will u be interested property here in San Francisco California
Hello. Yes, I most certainly would. In fact, we have a renovation going on there right by General Hospital at this very moment.

Please send in your information at http://www.oahuhomebuyers.com/contact-us/
and I will be happy to review it.

Thank you,
Michael Borger

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