ASSIGNMENT OF CONTRACT/ how does it work? Should there be a fee?

Question

Greetings BP,

I recently came across an off market property for sale located close to the Central Ward in Newark, NJ. The asking price was 150,000 and I offered them the full amount to purchase the property. Currently we have been unable to move forward because even though the owner wants to sell, he has tenants/family members who live in the property; they don't want to leave and they are making the process difficult.

As the seller and his company are trying to sort the situation out. I was offered the opportunity to do an assignment of contract. I was told that this means that I would be able to purchase the house and that they would stop marketing it to others. The only thing though is that they are charging me an additional $5,000 because the contract will be dependent on inspection. So if I'm not satisfied I can walk away after inspection considering that this may be the first time I get to see the property. They also said that I would pretty much have to use the title company that they work with.

My concerns are that I probably already offered too much since it doesn't seem like they have other offers on the table now. So I feel uncertain about paying an additional $5,000. I told them 150,000 is what I am willing to pay ...they said they will get back to me.

Nevertheless, the property is currently valued at about 190,000- 200,000. So there is a lot of equity there...

My goal is to live in the property , so it will become my primary residence. I may eventually rent it out in the future.

For those of you who have done deals in this manner, is this typical protocol, or are they being unreasonable? should I move forward and pay the additional fee?

Anne Williams · Answer

kwaku I just Pm you...

Kwaku Kutu · Answer

Do you have any kind of contract on the property right now? Who owns the property? You said, "a seller and his company". This is confusing because either he/she is the owner or the company is the owner. It sounds like you might be dealing with some sort "middle" person trying to assign a contract to you but I am not sure because I do not understand the second paragraph. Inspection contingencies are common in Real Estate and should not trigger a $5,000 increase in price. Lenders will typically not even fund without an inspection of some sort. Issues of family and tenants lead me to believe that whomever you are dealing with may not have full complete legal authority to sell, otherwise family and tenants would be irrelevant. You simply sell the property and that is that.

Having to use their title company is a bit odd too as generally, you (the buyer) have your own attorney representing your interests do the close (NJ requires attorneys close real estate transactions). I would absolutely not use their title company to close, I would use my own attorney. There is something going on here that is a bit unnerving. The price you are quoting is extremely good for the Central Ward (depending on how close it is to Rutgers, Court House etc) but there are some suspicions based on what you have said. I am not saying that it is not a good deal but there are some holes that seem bizarre.

An assignment generally means that you have an existing contract and then you "assign" that contract to someone else for a fee. Whomever you assign that contract to then has to perform in the exact manner stipulated in the contract. So if you have a contract on the property for $150,000 then assign that contract to me for $5,000 then I pay you 5K and take over the contract. You walk away with 5 grand in your pocket and no worries. This is what wholesalers do very often.

ASSIGNMENT OF CONTRACT/ how does it work? Should there be a fee?

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