We have a house under contract for $76K. End buyer wants to buy it for $96K. It appraises for $135K. End buyer is going to put $5K into rehab and intends to owner occupy. His credit score is 750. He was using a mortgage broker who KNEW that it was an assignment. Two days before closing, broker says that Aurora will not allow assignments. Referrals for a lender who WILL do the loan? House is in Georgia.
This question has been coming up everywhere I go and most people don't have an answer.
The answer is that 99.999999% of lenders now don't accept any type of contract or earnest agreement that is assigned. The secondary market took a beating from these types of deals in '04-'05 and are tightening up their criteria. Assignments helped to drive real estate prices into artificially high values, forclosures are on the rise because of adjustable rate mortgages, and the bank is stuck with a property that isn't actually worth as much as they lent on it.
I havn't been able to find any lenders that will take an assignment anymore. They did it all of the time last summer, but in the last 5 months the game has changed.
Also, any lender that you find that may take an assigment will charge outrageous rates, which isn't fair to the 750 credit score buyer.
The best thing to do is to settle outside of closing so the lender doesn't know about it. Have a contract between you and the seller that they will pay you out of closing $20k. If they don't take it, they aren't too motivated. They will still get their $76k price...same as before. Or, you can get a new contract for the same $76k but between the new buyer and the seller. You then place a lien on the property that says that at this point in time, or as soon as the property is sold or refinanced you get your $20k. Of course you will not get your money as quick, but better than not getting it at all.
The new market has forced us to get a little creative. We are actually lending on this exact same scenario right now. Just have to work it out away from closing and the lenders don't mind.
We do lend in most states, so if you need help, let me know.
Hello Trevor and Peachstate.. you are correct, Conventional lenders will not do assignments,
Your end- buyers need to have a hard money lender to do these deals. most of them will allow the assignments.. you also need a title company that is familiar with these type of deals.. you need to be screening your buyer(investors) if they do not intend on closing with cash(Hard money) its not worth it! and your wasting your time..
hard money is private money, its not the same federal money(conventional) hence the restrictions are not the same..
I do business with several investors that will use hard money for the initial purchase and then quickly refinance with conventional financing. The restriction at that point is if the lender has a seasoning requirement for refi's, which some do but many do not.