Assignment Contracts

Good morning, Shana Acquisto, broker at Acquisto Real Estate, and we are going to talk about assignment contracts, what what our assignment contracts.

Well, there’s something you need to look out for if you’re a listing agent. You may see as the buyer that it says Shonna a questo and slash or assigns, which means I might assign this to someone else, write an assignment. A contract is when someone enters into a written agreement to purchase. Right. So I would enter that agreement to purchase the property from the seller and then that person assigns their interest to someone else.

OK, so typically this is done when the purchaser is a wholesaler and we will call them the assigner, so a wholesaler is the assigner, they find a property, put it under contract, and then find someone else, which is the assigned E! They sell the contract for a fee.

So let’s talk about how this would work for a minute, so say I am going to go, I found this great deal on a property, I’m going to go purchase it. OK, so I’m going to go enter into a contract to purchase this contract, say, for two hundred fifty thousand. I have and or signs during that time, I am trying to find someone else to buy it for two hundred and seventy five thousand. And you think, what is that really a thing, can you do that? Yes, you can. So. Real estate contracts, it’s definitely perceived as sketchy, right? It’s not legal in all states, but it is legal in Texas.

So the contracts are assignable unless there is a specific clause within the contract that forbids this from happening. OK, so our contracts as written are contracts have the ability to be assigned. But what you want to be. Careful of is how you protect yourself. Right, right, so a couple of things here. If you see and and or signs, you should instantly instantly prompt you to ask them questions.

Whoa, what’s going on here? What do you plan to do here? And they may say, you know what, I may transfer this and it may close under an entity or a trust or. I may transfer this and actually my my brother may buy it. OK, so there’s a lot of different variations of how this could work. But typically, like I said, it is a wholesale situation, which means somebody is coming in to make a profit. And if you stay up late at night. And you watch TV, you may see that you can buy properties with zero down.

What yep, you can be a flipper, all you have to do is enter the contract, sell it off. You never have to spend one penny and you profit from that fee that you’re going to charge the person that you sell it to. So you’re the middleman, right? So you enter the contract, you find the buyer, you put them together, you walk away with a profit.

OK, so. Here’s where it gets a little sketchy. Anyone being paid in the transaction must be disclosed on the closing statement. So the seller can see there is another buyer paying more for the property. You can see where that would get a little you know, they’re not going to feel good about that. So we have to back up and make sure that we are disclosing everything to our sellers up front so they understand what could be happening here. Right.

And if you have a seller that, you know, they’re like, I just need to get out. I can’t do any repairs. This is how it is, then, you know, they’re probably going to understand that this is going to happen. And you can say, hey, sometimes there’s a fee and there’s a profit being made there, just so you know. Right.

But you’re happy with what you’re getting. So we’re going to just kind of overlook that. Right. But you have to be prepared. If they see that, then they’re going to come back to you and say, well, why couldn’t you have gotten that higher number for my home? So disclose, disclose, disclose. Just make sure that you’re transparent and you inform the seller of all these things that could take place. So before you even get to the cellar, you get this offer, you need to be asking these questions like what are you going to do? Right.

And if you find out this is exactly what they’re going to do, there would be flipping it. Then maybe we want to put some clauses in the contract to protect the seller. So a couple of things that I would do is, one, if there is an option fee, then. If you want it to be a hefty fee, and I would probably make it nonrefundable, makes sense, right? If you’re taking that risk, why are you going to credit that back, especially if they’re going to make a profit? So you can renegotiate the terms of the assignment to protect the seller, so if you have an assignment, let’s discuss it, let’s make sure we don’t miss anything.

OK, so another way that this could happen is think of it this way. Say you have a buyer. We’re in a hot market and you’re a buyer is going in sight unseen to find this home because they have to get a home, secure it so they can get their kids enrolled in school and they’re panicking. So they go in and they secure this home. Everything’s going great except, oh, my gosh, this house that I was under contract with before or that I put an offer in before and I didn’t get it is now available.

I love this home. What can I do? Well, maybe this is an option that could work in your favor. This is very tricky, so it’s something we will have to walk through, guys, but if you have that situation happen, you can think, well, there’s probably some other people that might be interested in this property. So maybe you could assign that to someone else and then go ahead and move forward on the home. That was the home of your dreams, right? So I think there are some benefits to this being assignable, but you have to be careful. The wholesalers have there’s a there’s a Texas law and I don’t know exactly what it is right now.

And it basically protects them from coming in and doing this on their own and acting as a real estate professional when they’re not right. We all know that that’s a huge, huge no no. So they do need a realtor to help them. So you guys, the realtor, need to make sure that they’re not preying on you and I’m going to find a new agent who I can get this done and they’re really clueless about what’s going on. So not our agents. We’re not going to be clueless.

We’re going to understand how this works and how we can protect ourselves and maybe how we could use this to our advantage as well. Right. So there’s lots of ins and outs, something we’re seeing right now. After doing a little research this past week on it, I found that the proxy bidding is a new trend of the wholesalers. So you can think of it as kind of like eBay, where you put a maximum bid that you’re willing to go and then, you know, you don’t have to worry about continuing to bid.

You just put that next bid in there and and they’ll automatically go up to that. So, you know, this is something that we’re seeing and we saw it a lot when we had a lot of foreclosures back in 08 and 09. We saw this happening a lot. Wholesalers were coming in and flipping Benham and to somebody else and, you know, being that middleman and, you know, but since then, I haven’t seen them quite so often. But I’ve seen a few come up this past week and we thought we would talk about it and make sure that we’re aware.

So if you have any questions on that, we can hop on a call. We can talk about it. If you get a contract as a listing agent as is and or a sign that is a trigger to you to ask more questions. Let’s talk through it. All right.

Episode Links

Shana Acquisto, Acquisto Real Estate

Episode Recorded Live on YouTube 7.26.21

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