Professional · Los Angeles, CA · Member since 2015 · 80 posts · 6 votes
Hello,
I recently went to a RE meeting where they said that assignments and double closes are illegal in California (Los angeles), but I sort of don't believe it. Do you need to buy the property first, and then sell it? Or are assignments and double closes legal? I have my RE agent license, but it is not hung on any broker's wall. Also, when you buy from MLS or from a seller with a broker, how does wholesaling work?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
11y
Assigning contracts is not illegal in CA. I would like to know which meeting you went to and who told you such a thing. In fact, it would be good for all reading to know who told you that incorrect information as to help prevent others from taking bad and incorrect advice from this person or this meeting you referenced.
Good wholesalers are typically finding off market deals through a number of resources (direct marketing, driving for dollars, referrals, word of mouth, internet presence, signs, ads, etc) and when dealing direct with a motivated seller, their contracts stipulate that the contract may be assigned. The ONLY time you can not assign a contract in CA is IF the contract specifically states you can not. In most cases of REO and short sales, the banks addendums stipulate the the buyer may NOT assign it.
To draft a contract, simply speak with your RE attorney, he or she can handle that for you. You can also simply use the CAR forms and in the purchase and sales agreement, stipulate in writing under the additional provisions the following: "Buyer hereby reserves the right to assign this contract to another party".
As far as your question regarding restrictions on double closings, in some cases, the end buyer's lender may have stipulations that you as the buyer must be on title for 30 days before entering into a sales and escrow agreement. If your end buyer is all cash, that you do not have such issues.
I highly recommend that any licensed agent looking to wholesale read this: ****If shopping on the MLS, you must make lots of offers and be aggressive to get the right numbers, have buyers criteria already in hand so you know what you are shopping for, and since you hold a license, rather than "wholesale" simply generate each offer with you as agent representing the buyer (the selling agent). No need for contract clauses, assignments, or anything else, simply collect the selling agent commission. This will also allow you to not have to mark up the price and make it much more possible to find a deal that makes sense for your buyers.****
Rental Property Investor · Beverly Hills, CA · Member since 2014 · 472 posts · 272 votes
11y
@Account Closed
@Jason L
From justanswer.com (a legal advice QA forum):
If you are buying from the MLS, in my opinion, you are not buying a wholesale deal.
Some "wholesalers" attempt to wholesale deals from the MLS (i.e. "wholetaling") by getting it under contract and then selling it to you investor for a profit. However, more often than not (especially California), if it made it to the MLS, all margin that would have made the deal a solid wholesale deal are gone.
Professional · Los Angeles, CA · Member since 2015 · 80 posts · 6 votes
11y
Thank you guys so much for all your help!
@Joshua McGinnisThis was very helpful. I'm grateful for people like yourself that take time to help a new investor out.
@Ewa RezaThank you for the insight. Do you have to buy REO's and then sell them? Is there like a restriction to most where you can't sell it for a specific amount of time. I feel like i've heard that somewhere? Thanks.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
11y
There's nothing illegal about assigning a contract anywhere in CA (laws are state specific, not by county).
The challenge is drafting an agreement that can be effectively assigned to another buyer. If that is your intention.
Alternatively, you could partner-up with an investor type who has his/her own documents drafted to their specs and feed them deals as a lead generator (aka bird dog).
Some operators, like myself, insist on having complete control of the documentation process from direct contact with principal thru doc drafting, signing and closing. This is primarily because I do not wish to reveal my proprietary (and expensive) documents to others, whether new or experienced.
It's all about having systems in place for each and every aspect of your business.
Professional · Los Angeles, CA · Member since 2015 · 80 posts · 6 votes
11y
@Rick H.Thank you Rick for the valuable input. Do you mind sharing any tips on drafting contracts and how to get started? Real estate is a dangerous aspect of business if you don't do it right, and any pointers would help me tremendously in getting started. Thanks in advance.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
11y
Assigning contracts is not illegal in CA. I would like to know which meeting you went to and who told you such a thing. In fact, it would be good for all reading to know who told you that incorrect information as to help prevent others from taking bad and incorrect advice from this person or this meeting you referenced.
Good wholesalers are typically finding off market deals through a number of resources (direct marketing, driving for dollars, referrals, word of mouth, internet presence, signs, ads, etc) and when dealing direct with a motivated seller, their contracts stipulate that the contract may be assigned. The ONLY time you can not assign a contract in CA is IF the contract specifically states you can not. In most cases of REO and short sales, the banks addendums stipulate the the buyer may NOT assign it.
To draft a contract, simply speak with your RE attorney, he or she can handle that for you. You can also simply use the CAR forms and in the purchase and sales agreement, stipulate in writing under the additional provisions the following: "Buyer hereby reserves the right to assign this contract to another party".
As far as your question regarding restrictions on double closings, in some cases, the end buyer's lender may have stipulations that you as the buyer must be on title for 30 days before entering into a sales and escrow agreement. If your end buyer is all cash, that you do not have such issues.
I highly recommend that any licensed agent looking to wholesale read this: ****If shopping on the MLS, you must make lots of offers and be aggressive to get the right numbers, have buyers criteria already in hand so you know what you are shopping for, and since you hold a license, rather than "wholesale" simply generate each offer with you as agent representing the buyer (the selling agent). No need for contract clauses, assignments, or anything else, simply collect the selling agent commission. This will also allow you to not have to mark up the price and make it much more possible to find a deal that makes sense for your buyers.****