Hey there, I’m Mike Acquisto, that’s Shana, a local real estate celebrity sitting next to me. I get to do this every day and we’re going to talk about assignment contracts in real estate in particular. We’re going to talk about what are they? Are they valid? How can you avoid getting burned? And don’t want that, do you know? All right, well, let’s talk about them.
Go ahead. All right. So assignment contracts, first question that I’ve been hearing. Are they legal? Are they allowed? Yes. So what that means is when you put a real estate contract together and offer, it could have and will use myself as an example, Shana Acquisto and or assigns, which means at some point during this contract, I have the right I’m going to assign it to someone else.
OK, a lot of times we see these in what we consider wholesale deals. So you’ll have, you know, an investor purchase this and then try to kind of flip it. You can use it. I think that’s a good example to think of flipping it and selling it before it closes.
So they’re going to purchase it, but they have the right to kind of find another buyer and have them close on it. So a couple of things that you want to make sure of is, you know, does this really I mean, it’s fine, really. I wouldn’t be afraid of assignment contracts at all. As long as you understand and you ask more questions. One thing you don’t want to do is anything different than what you’re doing with the typical buyer.
So option periods. I heard of one that, hey, this guy’s coming. He’s paying, you know, fifty thousand above and he is. But it’s an assignment. So is that OK? We really want to take this offer. Sure. Take the offer. But let’s look through that. Whoa. He has an option period of 14 days. No, why would you do that? And so this buyer is saying, but this is a really strong offer.
Why wouldn’t you allow us 14 days? Well, we all know the answer to that because they can terminate the contract and then we’ve tied up our property for 14 days. So just make sure the terms are still the same as you would accept from any any other buyer. Right.
So, yeah. And, you know, there’s so if I was to delve in just a little bit deeper into it and give you a negative association. OK, so if it is Shana and or signs and let’s say that Sean is going to be purchasing the property and she’s only going to be putting a certain amount of earnest money down, and then she says she’s going to put additional earnest money down in the future. OK, and there’s whatever this timeline is, Shana has obligations on this contract. But when she has the opportunity to assign it to somebody else or some other entity, this entity could be positive or negative to whatever is going on.
OK, so imagine a scenario in which Shana has an obligation as a buyer and something happens and doesn’t go exactly like she wants it to. She’s supposed to put down another fifty thousand dollars tomorrow. OK, and it’s not going to happen, the house, there’s something going on right now, Shana assigns the contract to new entity, right.
And she forms this company called Bad Real Estate Deals that Shana did, comma LLC, number one. And she labels it number one, OK. And so now this she assigns said contract to that LLC. Right now, they own it. This contract, and they have the rights and the responsibilities, the positive and the negative. So now all of a sudden this is the responsible entity for that contract. Shana assigned it. It’s gone. She’s out of it. She sold you. Can you sell that ability To Know?
So now it’s in there. So now you have to go after Shana real bad real estate transactions. No. One come at LLC. And inside there, it’s a living, breathing entity. And all of a sudden Shana goes to the state of Texas and shuts that company down the next day. So she pays three hundred dollars to establish it and then she closes the first place. We just talked about that.
Oh, interesting. Right. Super weird how this all happens, so you just need to know about the assignment and what is possible because there are positives and there are negatives, and you could have these wholesalers out there, like Shana just discussed that are putting in this awesome offer. Right. And now they effectively control that property for whatever amount they put down. And then they’re going to turn around and be like, hey, anyone want this? And they effectively have this property
And they can sell it for a different price. Their terms are completely separate from your contract so they can negotiate their own contract. Right. So it gets a little tricky.
So super complex. Yeah. I might say, like, if you are considering accepting an assignment contract or you have a buyer that wants to us to put in a contract with an assignment, we need to talk through it because there are a lot more things that we need to ask and put in place to protect our seller and. You actually, as the agent, I might say that there could be a separate document that you say at closing, this can be assigned with seller’s approval, yet we want you to get approved. Right. And then we will assign it at that time.
Might require some documentation to, you know.
Yeah. So I would tend to go through it, especially for a residential real estate. And we’re looking at a typical transaction. You might want to swim in a lane that you know what’s going on and stay with something you’re comfortable with because it’s a big ocean of what could potentially happen, in my estimation. More questions to be Asked to swim in that lane. OK. All right. Ready? Good. Hey, we’re going to skip this segment, let’s go to real estate, where do they shot? Show me your listing from.