Contract Ranch 2014-2019 Form
yo what's up everyone might kill the host I'm excited here and what I want to talk about in today's video is doing assignment deals so I'm gonna start with a very brief review of what an assignment is then I want to show you when it's appropriate to do an assignment versus say a double closing as many of you know one of the disadvantages to using an assignment contract is that your end buyer gets to see your fee right off the bat so they know exactly how much you're making I'm going to show you one option where you can actually do an assignment and not disclose that to the end buyer next thing I'm going to do is make the case that not all assignment contracts are created equally I'm gonna show you the contract that I was using when I first got started it's actually probably the most common one if you go to Google and just search assignment contract it's probably the first one that'll pop up it's probably the one that a lot of you are using at home and I want to show you why it's probably not the best option then I want to show you the one that I'm currently using in my business kind of walk you through it explain to you why I think it's a much better option show you how to fill it out and then give you an option to download it so you can use it in your own business so that said I'm gonna start with a quick review of what is an assignment deal how does it work right so the first thing you gotta understand cuz I get questions about this still so there's only one purchase agreement in this type of transaction so the purchase agreement you have between you and the seller and then you get a great deal when you go to an end buyer and you say listen I've got this great deal in this house I will assign my rights to this contract to you for a fee right and so that's your assignment fee so just to give you an example let's say have a house it's worth a hundred thousand dollars you get it under contract for $50,000 you go to the end buyer you say hey I've got this great house I got the contract for fifty thousand dollars I'll sell it to you for ten thousand dollars so you're just flipping the paper and then they say yes so they're all in for 60 you take the ten is your feed they close on that first contract for fifty thousand dollars so there's only one purchase agreement that's different from say a double closing which you guys probably hardly talked about or maybe you're familiar with where there's an A to B contract and a B to C contract there is no assignment contract with a double closing there are two separate purchase agreements so I with the seller I will purchase and actually own the property even if it's only for five minutes that's typically done with transactional funding and then I will have a separate purchase groom with my end buyer where I'm now the seller and they're buying the property that I now own from me in a separate transaction so when should you do an assignment well first of all you have to make sure that your contract is assignable so back in the day you would write under the buyer name you'd write your name so it's a Mike Hill and or a science I do not recommend doing that anymore I think it's a huge red flag typically the way you want to do it is just on your contract using the proper contract and again I do recommend using the Board of Realtors state approved contracts there should be a little checkbox that will indicate if the contract is assignable or not now one thing just to keep in mind is that anytime there is an addendum it will always override which in your original contract so as an example if I am making an offer on an REO a bank owned property and I check the Box assignable and I send that to the listing agent they will send it back with an addendum within the addendum it will say this contract is not assignable that will supersede what I've already written in there so first off you gotta make sure your contracts assignable next I have a very general rule which says if you're making $10,000 or more you want to do a double closing and that's because the fee is not disclosed now in a perfect world in an ideal world the buyer has agreed to the deal they say hey I feel like I'm getting a good deal I don't care how much you make now I've had buyers say that to me and I've learned it the hard way it's happened to me it's happened to my students and it's having to all other wholesalers I know the buyer says hey I don't care how much you make I like this deal then they see how much you're making and then all of a sudden it's a big problem and they want to negotiate your fee down it happens say you're there buying property for a hundred thousand you're making twenty thousand you're saying hey you're not doing any of the work and I take any risk you're taking a fifth no way and if you don't have a backup buyer and maybe you're running out of inspection days or something like that then a lot of times you don't have that negotiating power and then you have to lower your feet now again that number $10,000 again that just a general rule it really does vary you know if you're in Alabama and you're flipping $5,000 houses it's gonna be very different if you're you know like one of my students in California is working on a deal for six hundred thousand dollars so again the fee is gonna be relative to the property also it depends on the buyer do you have rapport with them do you have backup buyer stuff like that but in general if you're making significant amount of money you don't want the buyer to know then you typically will do the double closed but I'm gonna show you a little trick in just a minute where you cannot disclose the amount that you're making on your even when doing an assignment but we'll get to that in just a second also if you're doing the double closing and some of you might be saying well with double closing they're more fees associated and yes that can be true because there are two separate transactions so you're gonna pay closing costs on the A to B and then you're going to pay a percentage of your transactional funding so a lot of cases that might work out to something like four thousand dollars or something like that now if you're thinking I don't have that money don't worry cuz you don't have to come up with that upfront that comes out of your profit on the back end so let's say just look at it this way look in the example from before if you're gonna make twenty thousand dollars a buyer season it says no way I'll pay you ten you just lost ten thousand dollars in an assignment situation if it's a double closed and you're gonna make twenty thousand dollars and they don't know about it it's worth paying the for and then you just make the sixteen and you know it just makes more sense that way so next that's kind of the general rules there I want to look at these contracts right so the first one that I've got pulled up here is the most basic now this is the one that I got when I first got into wholesaling and all it says basically is that hey I've got this contract and we're signing all my rights to you so basically now you're getting the contract so pretty simple stuff here you pop the date in year between a signer that's gonna be you the assignee is gonna be your end buyer so you just put the name or the name of the business right there and then it just says here the assignor is assigning all interest to the contract and then you put the terms in this little blank area here so I would say I'm assigning the contract to John Smith for $10,000 and then all it's saying here you know without reading through all this is like said basically the end buyers taking over the contract now when I don't like about this contract is it can be very vague and there's some things that are ambiguous so for example let's say you have a contract and your contract has a seven day inspection period on it it's pretty typical and then on day two you take it to your end buyer and you say hey take you can imma sign this contract you well now they technically you know own that contract so now they have five days remaining in their inspection period this hasn't happened to me but hypothetically that buyer could legally make the case that okay they still have those five days of inspection period and now they want to cancel that contract and then they'll go ahead and sign a new contract with the seller they can go right around you cancel your contract and start a new one it's a kind of shady of course are there sharks in the real-estate business of course so again this is one of the reasons I don't like this contract some things are just too vague too ambiguous and I'd like a little bit more protection for myself so if you see this one I'm gonna advise that you stay away and let's look at the next one another common one better still not best when I show you some of the differences here so first off again you put the subject property and description a signer is you a sign is your end buyer and says you're in the purchase and sales agreement out here you'll see here the assignor a signing will pay a signer a non-refundable assignment fee of right here is where you just put in the number so it's a little bit easier to just you know pop that thing in there and then it does specify that it's non-refundable you know anything one thing I always always tell my students is no matter what you talk about no matter what you say you know what matter what's agreed on verbally everything has to be in writing and you want it as specific as possible so it's very good here that this does say that this is non-refundable the next thing that hypothetical I talked about earlier with the inspection period this second clause here just kills that right off the bat the inspection period expires upon execution of this assignment all right third and the assignee just acknowledges that they have legible copies of the original contract I mean that's good because then the Empire can't say hey I didn't know XYZ you or this wasn't disclosed to me again it's a little sketch because then they can see things like you know they insist on seeing the contract before signing they can see things like when does your inspection period end and in some cases they might choose to try and wait it out maybe go around you again so that's just something else that a little iffy on this contract right and then this here also specifies that this assignment contract is not assignable something that the first one does not say and something that's important because let's say you have someone this basically reduces the chance that the end buyer doesn't close because if they're trying to flip it again there's a good chance you just increase the for the likelihood that they might not close on the deal and then you get screwed and then the seller gets screwed and just everyone kind of loses so again this is a little bit better again it's a very simple one-page document but not best so next we're gonna jump into and spend the bulk of our time here in this third option so again this is the assignment that I am currently using and very quickly you know up here is this everything very standard again between the buyer and seller now here's what's pretty cool here the assignment fees in the way this is just a matter of the verbiage that's used here it's essentially saying the same thing but if you notice it says the assignor is gonna you know assign this to and then you put your buyer name in here for a total purchase price of so you put the total purchase price so let's say you know in our example from earlier today you had the contract for fifty thousand and the buyer you told them hey I got it for 50 I'll sell it to you for ten this you would just fill out for a total purchase price of $60,000 so at the time of the signing of this very very binding you'll see why the language is a little bit stronger in this contract the buyer is agreeing to pay sixty thousand dollars total they don't know if you have the contract for 30 and you're making 30 or if you have 50 and you're making 10 now yes they will see that right before the closing they'll see it on the HUD state so they will know your feet but typically they won't know that right up until the closing so that's how you can it's not total non-disclosure of your feet but you can really delay it to the very end and that really reduces how much the seller I'm sorry the buyer is really gonna balk or kind of fight back also you'll see that this contracts a lot tighter in terms of binding so even if they do see the feel a little bit later they're already gonna be locked into this contract so right off the bat just the way that this is phrased I like that a lot better okay so next you're gonna put in right here you're gonna close on the property before and then put the closing date next you have here a signer at their sole discretion so this is you at your sole discretion you have the option to terminate if the buyer doesn't provide proof of funds to your satisfaction so this contract is specifying that you do have the option to verify their proof of funds you know if you know it's a good buy or something like that you don't have to you don't need to require but it does give you the option and say that you can terminate so again this contract is geared to make to towards protecting your interest and make sure that everything's in your best interest right next the agreements not binding until a signer has received your earnest money deposit then you put that number on there typically it's gonna be $10,000 and then you put whoever's her holding your earnest money right here so this is my preferred title company independence title if you guys are closing in the state of Florida do close anywhere here I got a million amazing good things to say about these guys great testimonials great company always want to work with a reputable not only than just a reputable title company but a title company who's very investor friendly and I'm gonna do a whole video about that and I might do that in the future but these are good guys they do closings anywhere in the state alright so next we have again that it says that their money is not refundable now again some of the things as we run through this will be a little bit repetitive and you'll see things that should be kind of understood or assumed or it seems like it's repeating but this is only for your protection you see that banks do it any of the standard addendums that you see in REO our Fanny made they will repeat things just so it's crystal clear you don't want any subjectivity anything that can be argued anything open to interpretation so you want everything just you know ironclad really really tight so that's why some of this if it seems a little bit repetitive it's only for your protection so again we're specifying here that this earnest money is not refundable you know so there's a lot of Bermuda getting a little bit lost so let's just go through this here the only sorry okay so sorry let's just go back just a little bit if the buyer does not close due to no fault with the seller and or a signer and clear marketable titles in place all the deposits will be considered liquidated damages and non-refundable to the buyer slash assignee and will be released to the assignor immediately now here's the important part the buyer assignee agrees that no additional release of deposit or cancellation of contract will be required by signing this document the buyer agrees that if they default for any reason these provisions will be followed and the deposit will be considered liquidated damages and immediately released to the signer upon request so here's why this is important typically the earnest money even though it's held in an escrow account and you guys have your agreement about performance a lot of title companies and again this is why I have to work with a good investor friendly title company they still require written consent to release funds so by putting this in the contract it basically says that this is the written consent so if there's any type of anything could go wrong in the deal you know and the buyer could say hey I'm not signing that release and then you can have to litigate and go to court and all this different stuff to get the money that's entitled to you because the title company can't release it otherwise they can be in trouble so again that just kind of knocks that out and so it's just one less thing but you have to worry about basically the buyer doesn't close that money is yours so you know that once it's in the account unless something's wrong with the title you're gonna get paid whether the buyer closes or not and then it actually goes into a little bit more detail artist money's not refundable for any other reason the assignor may retain all of the earnest money and then another thing here specified in the event the agreements place in the hands of an attorney for enforcement the prevailing party shall be entitled to recover court costs and attorney fees from the losing party just something again to protect you a little bit more that's not in the other assignment contracts that we looked at next is similar to the other one it does specify that this property I'm sorry this assignment contract cannot be flipped by another buyer not only does it say that but it says you can assign your buyer cannot advertise or promote the property prior to closing and will be deemed in default if they found to do so now again this is just giving you the option if it turns out they do advertising I have buyers who they basically buy from me and then they kind of advertise it it's where they advertise it as they're doing the repair so if I sell it to them for 150 they'll immediately start advertising 160 if they have someone that I buy from them they'll do it if not they'll start to rehab and then maybe they'll put it on the market for you know 190 halfway through the rehab if they're doing basically just paint and then if no one buys it then they'll do the full rehab and put on the market for 200 so it's not necessarily if they advertise you have to call them on it and have them default on the contract but you have the option in case you want to okay next thing here it says the buyer assignee waves write to record a notice of interest in the public record so what this is doing is basically if you sign this agreement it's executed and there for some reason let's say the buyer doesn't close and maybe you get their earnest money and then you go to sell it to somebody else if they go and file a notice in the court in the public record saying look I have rights to this property I've equitable interest I have this contract then essentially that could cloud the title when you go to sell it to someone else and then you have to pay them some money to release the lien or something like that so this is is basically saying they cannot do that so if they don't cold or they mess up they can't tie you up and into in this agreement you can't sell it to someone else so again there's just another important protection this one's not very common it's not likely to pop up but it couldn't so you want to kind of protect yourself against all possible scenarios which is why it's so important to just have all these different provisions in this contract next again just in your interest the assignor reserves the right to continue to offer the property for sale until its offer has been formally accepted in writing so that's pretty cool next the property is being sold in as is condition that's important another another thing you know it is about just repeating certain clauses like yeah you might sign and as is contract but it's worth saying hey I've never been there I don't know anything I just have the contract just to reduce any type of liability you just want to make these things crystal clear and again it's just worth repeating sometimes so again it's basically saying here that you are held harmless by the way I usually have a disclaimer I'm not an attorney or giving any type of legal advice this is always my interpretation nothing is legal advice here you not understanding things I always advise that you consult an attorney it's my interpretation and showing you how I do business and why I personally do it this way all right this next part is very very important here so what this is saying is that this is talking about permanence a signing agrees that property is being purchased with any I'll open expired permits and shall not be required to be closed by a signer seller prior to nor after the closing date a signer or seller shall not be liable for any open expired permits either prior to or post closing of the property I've learned the hard way that permits can be a huge pain in the ass and they can really screw your deal now one thing with permits is not all buyers and sometimes even buyers who are somewhat experienced who have done even a couple of properties they might not fully understand and also it depends on the type of purchase contract you're using if you use one of these three page like wholesale contracts then I don't recommend you use as your purchase agreement they might not talk about permits at all if you use a contract that's drafted by an attorney it might not talk about permits depending on your state the the legality who's responsible for permits may differ in Florida I believe the standard far bar contract puts the responsibility of taking care of those permits on the seller now I don't use those contracts I use the as his contract and as his contract the responsibilities of yes the seller are supposed to disclose it but the responsibility falls on the buyer not all buyers are knowledgeable about that also there are times where these things can pop up if you're depending on your title company they may not find permits they might not do the search so that's where you gotta again have a reputable title company some people think that because it says that you're gonna get clean title clear marketable title that that covers permits that does not sometimes the seller will you know close on the property and they'll find out about a permit and then they say you know I wasn't told and they might try to come after you or try to sue you or it might just damage your reputation yeah I remember I had a situation a long time ago where we were doing the deal and the seller was like hey you said your the permits came up hey you said you were purchasing as is and then the buyer is like we never talked about any permits I'm not taking it with any open permits and I'm there in the middle like oh I don't know what to do I thought that the buyer was buying it as is and that can even damage your reputation because then it's a hole so it looks like I'm trying to pull a fast one on the buyer and then everyone's kind of you know in this weird place and I think this is like coming years ago but I believe I ended up kind of uh taking a hit on my feet just to get the deal done or I might have split it with the buyer or something like that but again this is just making it so there's no subjectivity so it's just crystal clear it's right there the buyer wants to say hey I didn't know about these permits you just point to the contract kay you know this is what we agreed on we both agreed on it it's in writing our signatures on both of this is really nothing that you can say so that's just another protection that you have and sometimes you know people try to stall with these different things and so it just reduces a lot of liability and it's in your best interest right so next we talked about this before assignee shall have zero business days after the executed assignment date to do inspections so that goes back to that hypothetical hypothetical we talked about in the first case the inspection period here is done right let's see what else I know we get some other cool stuff in here let's talk about H aways and stuff like that it also says someone here I know we talked about it is saying the assignor holds equitable interest in the property so that's basically just telling them again it's not even saying that hey they've seen the purchase agreement but it is telling them that hey it's a contingencies understood if you're signing this debt I or you know the wholesaler you has equitable interest in the property it's also making very clear that you not doing anything illegal you're not acting as a broker you're not advertising a property the way a real estate agent would if you're not a licensed person you're saying I have equitable interest because I have their purchase the purchase agreement so that's another thing just to kind of protect you talk about HOA stuff which again isn't covered in the other assignment contracts and then again the only contingency to this contract is clear and marketable title next is very cool at the assignor discretion the assignee agrees to extend the closing date for up to 90 days if for any reason the closing agent needs more time to close the transaction so I can tell you there have been so many things that have popped up I couldn't even tell you all of them for different reasons you don't want your buyer to have like a way out you know if you just have a specific closing date and then maybe they had a backup offer on some other property and then they say hey you you're not closing by the date so I'm gonna cancel and then they get to walk away and get their earnest money you know we're funded because you didn't perform so now you're saying hey we got up to 90 days to take care of anything that needs to be taken care of so again they're locked and you can see how much more binding this contract is how much better it is so that's your benefit if you need time and then then we get the magic however once the closing agent is ready and it's clear and marketable title the assignee agrees to step in and close within 48 hours of being notified so sometimes I've had buyers I don't know if they were trying to get their funding together or if they're just slow or dragging their feet especially if you're first getting started and you're just waiting for that first or second deal and you need that money like you need water and they're just taking their sweet-ass time and you're just like damn man how long am I gonna wait and you're worried this is something I said hey 48 hours you close on this or you know not to be a jerk but we both agree to this I got that earnest money deposit so let's close this deal also a sign he agrees to send all funds required to close via wire transferred to the closing agent at least 12 hours prior to the closing date again I encourage you to work with your buyers if there are legitimate reasons these are not things that you have to enforce you don't have to be a jerk and be like well it's been 49 hours so I'm taking that earnest money deposit but it's more just for your protection if for some reason the buyers really dragon or do not return your calls you can leave this message hey pursuant to the contract we agreed on this so I really really need to hear from you otherwise you know we're gonna have to just you know do what we got to do but you know I do you know don't look at people you're not remember you're not trying to do one deal with the buyers trying to do as many as you can so you really want it to be a pleasurable experience for all parties involved but you gotta have your boundaries your standards and just again you guys are both agreeing on this from the jump so nothing is a surprise there's no reason for a buyer to get upset with you or go tell anyone you tried something to shade you and you pressure them or anything like that alright next again we are all closing costs to be paid by the buyer what else is in here this is another good one and again it's good that it's all here in writing it's no subjectivity no you know what if kind of situation so and this is something that happens to me quite often you guys hear me talk about this a sign are made anytime before closing renegotiate the purchase price in the contract with the seller a signer that's you is entitled to the entire difference between the contract purchase price and this Simon the difference if any will be paid as an additional assignment fee at closing to the assignor a signers negotiation of the purchase price will not affect the total dealer closing from the assignee that's important so let's say in our example from before the contract is $50,000 you tell the end buyer hey I got this property for you for $60,000 so now they sign it they're entitled to the contract right so without this clause if you went back to the seller and you said hey you know there's something wrong with the roof and we need this for $40,000 and the seller says ok they gave you that $10,000 price reduction without that clause the end buyer can make the argument they might be entitled to that money to that $10,000 and so you'd still be getting your regular assignment fee would say that first contract that we talked about so you wouldn't have that option to renegotiate or you would be doing it just on the behalf of your end buyer with this this makes sure that you can you know make a little bit of extra profit for yourself when it makes sense so if you went back and got that $10,000 price reduction that would go straight into your pocket both parties agreed the closing agent releases s escrow deposit and that the assignee assignor have no claim against the escrow agent so that protects your title company so they're comfortable releasing funds to you knowing that nobody could you know come after them right so just to review again the check marks here it's pretty easy pretty obvious that's where your buyers gonna sign they're the assignee so they're gonna initial here you're the assign or you initial here the buyer which was here same thing on this page Wow and and that's pretty much it and then I always like to attach the wire instructions to the bottom of this letter here so it's just everything is just much easier smoothing for the buyer now there's no what-ifs you know and everything's very much crystal clear and nobody can say well you said or you did or you know everything's right there so this is the assignment contract that I use in my business now I highly highly recommend that you adopt it and do the same I will put a link below this video or somewhere on this page where you can this will be available for download on my website and of course I will take off the you know specific things like my title company in case you are using a different title company or somewhere else so you can modify it to your own needs so I hope that is helpful if you guys have any questions please do put them in the comments section please do like comment subscribe helps the channel out a great deal as always thank you for watching I hope you enjoyed and I hope this helps you in your wholesaling business if it does please you know go ahead and leave me a note as well comments are welcome as much as questions so with that said thank you so much for watching for tuning in and I will see you guys on the next video peace
