Can I make an offer? And assign?

22 Replies

Originally posted by Jeff G.:
I recently came across a house that was foreclosed on. Freddie Mac owns it. Can I send Freddie Mac an offer and assign it?

The bank will have an addendum, and that addendum will most likely prohibit any assignments of the contract.

First step is to offer an amount that is low enough to be a good deal. Run your numbers, check your comps.

If you get an accepted offer, you will will then need to figure out what to do with it. You likely won't be able to assign it. If you ran your numbers right, you'll figure out a way. I would double close, but many say you can purchase with LLC and then sell the LLC.

Can you make an offer, and then assign it? Sure you can, but the offer won't be accepted as made, there will be a counter offer! If you can't swing an REO through closing, don't make offers on REOs. Good luck....

Quick reality check:

1. As for sending an offer to Freddie Mac, where exactly do you plan to send it? Sounds like an obnoxious questions, but I'm completely serious. It's tremendously unlikely that you'd be able to find the one guy at FMAC (the asset manager) who is responsible for that property, and even if you did, it's even more unlikely that he'd be willing (or had the authority) to sell it to you off-market. Perhaps if you had $5M and wanted a bulk purchase, but not a single property. Your best bet is to wait for it to come onto the market with a real estate listing agent, wait until the owner occupant period is up and then make an offer.

2. Now, if you do get it under contract, you will not be allowed to assign the contract. The addendum you sign will forbid it. Since it's FMAC, you'll likely a deed restriction on resale for 90 days, so your best resale options are to purchase with a trust or business entity and sell/assign your interest in that trust or entity.

Re: @ Jscott

I certainly don't appreciate my question being called obnoxious. I was asking because I am new at this and don't know a whole lot. It's people like you who make people like me scared to ask questions. However, I appreciate your answer about assigning the llc. Could've done without the criticism for a simple question.

Jeff, I am sure u have misunderstood Jason's comment. He was calling his own question back to u obnoxious, not yours! There is no such thing as a dumb question here.

Freddie Mac deals are not easy. You will need to submit the offer with a buyers agent to the list agent, or have the list broker provide you a buyer agent from that office. Secondly, u can not "assign the contract", therefore you must circumvent that by doing one of several options. Jason pointed out one by using the entity and selling it for your fee. Others are to close with cash, or borrowed funds,nthen in a second escrow, close with your buyer. You can also use a trust which is my favorite option to complete such a transaction.

Originally posted by Jeff G.:
Re: @ Jscott

I certainly don't appreciate my question being called obnoxious.

As Will pointed out above (thanks Will!), I wasn't calling your question obnoxious (it's a very common question here)..."obnoxious" was referring to the fact that my question back to you may have sounded obnoxious, though that wasn't the intent.

Please reread my response:

"As for sending an offer to Freddie Mac, where exactly do you plan to send it? Sounds like an obnoxious questions [referring to my previous sentence/question], but I'm completely serious."

That may be true Steve, but in this case, not necessary, it was just a misunderstanding. The important thing here is that Jeff and others understand that they should never be shy about "asking" questions here. Most of us are happy to help with answers.

There are, on occasion, a few who simply prefer to argue or raise blood pressure, but, that is the case anywhere. Those who engage this community in an effort to learn and/or do deals will reap the benefits.

Have never purchased a Freddie Mac property, but Fannie Mae does prohibit conveying the property for specific sales price (usually 20% higher than the purchase price) for 3 months. Interestingly, Fannie Mae also prohibits encumbering the property with a lien (e.g., HELOC) for 3 months as well (if you paid cash for the property).

@jscott

I apologize for the misunderstanding. Thank you everyone for your response. There is an agent in charge of this house. I am just trying to figure out how to get this property because it was foreclosed on for 70000 and the arv is well over 150000. I know it is a money maker. Just don't know how to do it without the cash.

Originally posted by Jeff G.:
There is an agent in charge of this house.

Once the bank assigns a listing agent to the property, pretty much all you can do is wait until the property is listed and then make an offer through them. FreddieMac is sometimes weird with listings -- they don't always make it to the MLS, at least in my area. But, you can see all FreddieMac properties that are listed at www.homesteps.com.

Unfortunately, you won't be able to assign the property (as mentioned above), and here are a couple other issues you'll run into:

1. FMAC will require a proof of funds in the name of the purchaser;

2. The contract will likely require 10% of the purchase price put down as earnest money within 3 days of contract;

3. If they think you're going to try to sell the deal, they will likely not consider your offer.

Now, to make you feel a little bit better, just because the property was foreclosed upon at $70K doesn't mean that's what it will get listed at. FMAC may decide to list much closer to retail value, especially if the property is in good condition. It really depends on what the BPO comes in at, the condition of the property, and what the asset manager is feeling like that day.

So, it may not be as good a deal as you would expect if it's listed much higher than $70K.

Thanks Jscott

Yeah I am starting to see that will more than likely be the case. I read a few books lately that tell you to find a buyer and just send a check for 50% of what the listed price is. Supposedly the bank will accept the offer 9 out of ten times. I am certainly becoming more and more confused at this whole thing! I am not discouraged by any means. I really have no idea what I am doing but at the same time am trying to jump in head first. It is bridging the gap that is hard. One book says you can make a lot of money doing real estate. The next one says not to count on becoming financially free from real estate because its like hitting the lottery. I choose to listen to the more optimistic books, however it is clear that there is so much to learn here and I am just scratching the surface. AHHHHH! I feel like I have a basic understanding of this stuff. But a few things i am not sure of..... How to find the deals? How to get to the deals before everyone else does? How to value a property?
I am sure all these questions seem elementary but I am lost in certain areas. I want to begin this journey but am not sure how to I guess.

Anyhow thank you for the info guys! Every little thing I read he;ps me understand just a little bit more. I am grateful for that!

Originally posted by J Scott:
Originally posted by Jeff G.:
There is an agent in charge of this house.

Once the bank assigns a listing agent to the property, pretty much all you can do is wait until the property is listed and then make an offer through them. FreddieMac is sometimes weird with listings -- they don't always make it to the MLS, at least in my area. But, you can see all FreddieMac properties that are listed at www.homesteps.com.

...

That's probably because the listing agent has a number of investor buyers who will take the property. Once you see it on homesteps, get the info for the listing agent and contact that agent to become one of those buyers.

Implicit in all of these responses is the most accurate and simple answer to your question of "Can I assign?"

The default rule is that contracts ARE assignable, but the actual terms of a contract always trump the default rule.

So, the answer is: What does the contract say?

As all these guys have astutely pointed out, Freddie is going to require you and only you to be the one that performs on the contract... via "the addendum" (part of the agreement/contract).

Originally posted by Andrew Isaacs:

The default rule is that contracts ARE assignable, but the actual terms of a contract always trump the default rule.

Some state contracts specifically indicate that the contract is NOT assignable, unless agreed upon in writing by both parties...in other words, the default is that the contract is not assignable for those contracts...

Originally posted by Jeff G.:
I read a few books lately that tell you to find a buyer and just send a check for 50% of what the listed price is.

Not necessarily. In my market, properties are consistently going above list price these days, and 50% earnest money is not going to help if your offer isn't among the highest.

As an example, there was a property I put in an offer in on last week -- it was listed at $50K. I offered $70K with $20K in earnest money, no contingencies, quick close and even offered the listing agent my commission with $1000 bonus (yeah, I really wanted the property).

I didn't get it. I'm I'm quite certain more earnest money wouldn't have helped... :(

Good call @jscott (does anyone else have issues @-ing someone?). Great point. Contract law is subject to varying default rules depending on the body of law that governs the contract. Real estate is a special type of contract and is governed by the laws of the state in which the property is situated.

I was speaking to "contracts in the most general sense." Good job clarifying that.

Originally posted by Andrew Isaacs:
Good call @jscott (does anyone else have issues @-ing someone?). ...

That "mention" feature is not supported on all browsers, so it's possible your browser is one of those unsupported ones. Also, you cannot @mention somebody who has not participated on a thread unless you are already colleagues on BP. If you can do the @mention for some people, but having difficulty with JScott, here is the trick: you need to type two characters of the user's name as it appears in the post heading; in JScott's case the second character is a space! Once you have two characters, then a few choices will appear below the textbox where you are typing the post on your browser - select the proper choice.