Contract Assignment illegal in California?

[Anthony B.]

I've contacted a number of Title Companies who claim not to know what this is, and once explained what it is, claim that they don't do them.

So my question is: are contract assignments illegal in California?

I've heard somewhere that double closings are, and if this is true - that's a true shame.

[Don Konipol]

Not illegal per se, but title companies won't do them because they can lead to all sorts of lawsuits involving disclosures and diligence.

[Helen Cote]

@Anthony, so have you found any title company in the Bay Area, CA who is willing to do Assignment of Contracts?

[Will Barnard]

There is nothing illegal about contract assignments. In fact, in CA, any contract is legally assignable UNLESS the contract specificlly states otherwise. Title companies telling you they won't do them is ridiculous and perhaps you are not explaining it properly or the person you are speaking to simly just does not understand.

There are no title insurnace or other issues with an assigned contract. The buyer taking over the contract is responsible for all that is in the original contract. It is nothing more than changing the buyer on the contract, only you get a fee for the "assignment" which can be done on the Hud1 statement.

[Will Barnard]

There are also lots of other ways to wholesale a deal without actually "assigning the contract" and they have all been explained in great detail here on BP.

[Jason L.]

As Will said you are simply changing the name of the buyer on the contract.

I've used Lawyer's Title for several transactions. Just tell the escrow officer that you want to take title in a different name and they will add an addendum to the escrow instructions that are sent to the seller.

My assignment fees have been paid outside of escrow.

[Seth Williams]

Anthony B. - unfortunately, I have to deal with the same level of ignorance at a lot of title companies here in Michigan. It's not illegal here - but there is a serious lack of understanding about the process, and what people can and can't do.

A lot of banks and title companies will prohibit double-closings and assignments because they know exactly what is going on - you're getting a HUGE pay day from the process and they don't like it.

In my experience, assigning a contract becomes more difficult once banks get involved, because banks don't want to finance your assignment fee (and they generally don't want their borrower to be paying your assignment fee either).

When it's a cash transaction, the process is much easier. This is part of why having a list of cash buyers is so valuable... because it de-clutters the process and allows you to assign contracts MUCH easier.

[Michael Quarles]

IMHO this issue is about the investors professionalism. If I walked into an escrow company and asked if they do concurrent closes in most cases the immediate answer will be no.

If instead I walk in and interviewed them for the job of closing my transactions using asumptive closes and the understanding of real estate terms they would probably be much more accommodating.

I've often told people to build relationships before they needed them and escrow isn't any different.

Heck I've closed without funds in escrow to support my purchase many times. It's all about relationships.

[Will Barnard]

Originally posted by Michael Quarles:
Heck I've closed without funds in escrow to support my purchase many times. It's all about relationships.

All about relationships! Nail on Head!!!!

[Nadia Lewis]

BEST ANSWER, Contact a real estate attorney in the state of California, or find a good Local Realtor that is experienced in contract law.

[Will Barnard]

Originally posted by Nadia Lewis:
BEST ANSWER, Contact a real estate attorney in the state of California

Not the best answer. In fact, no attorney or agent is necessary. This question has already been answered as assigning a contract in CA is NOT illegal. It is only not allowed if the contract stipulates it is not allowed.

[Jean T.]

So, if it is NOT Illegal to assign a contract, is it required that Seller agree to assignment, or can Buyer assign, close escrow without Seller approval? In assigning contract, is it legal, for Buyer assigning contract, to change anything else in the contract? (Loan terms specified by previous Buyer, closing dates....). If Seller does NOT agree to assignment, (if agreement is required), causing deal to fall through, is Seller then liable, not entitled to liquidated damages?

[Wayne Brooks]

Jean Tolliver I think the answers to your questions are pretty much self evident.
The contract will say if it's Not assignable.
One side can not change the terms of a contract, unless the other side agrees.
If you need my agreement to do something, and I don't agree, too bad.

[Michael Quarles]

Wayne

Real estate isn't run on "Too Bad" situations.

It's run on an agreement between two parties and if those two parties have difficulty agreeing then negotiation begins.

At no time during a successful agreement are the words "Too Bad" used.

It's belittling to the buyer, the seller, and our profession.

IMHO

[Wayne Brooks]

Mike, I agree. But I don't think the question was about negotiating, it was about an obligation or not.

[Michael Quarles]

I learned a long long time ago that legal comes in third. Behind ethics and morality.

Because I can doesn't mean I should. It's not an abundance quality. IMHO.

[Wayne Brooks]

Mike, again I agree. Maybe I shouldn't have said "My agreement" as in me specifically. Just wanted him to know that if the buyer needs the sellers permission to assign, and the seller refuses, the buyer is still on the hook as per the contract. It's not an "out" for the buyer. Maybe because of a contracting background, I'm used to the guy paying me only doing what he legally has to, not what is right, or fair.

[John Hamilton]

Hi @Wayne Brooks 

I think is that if the seller sees the contract and you point out the stipulation you are assigning to your buyer, and he agrees, your buyer will be there with you if the deal is good. Of course, you have a non-circumvent contract with them. 

First thing is make the seller understand where you fit in. Most don't see it as an issue as you are bringing in a buyer for them. Pretty much what a buyer's realtor does. They get paid, too, don't they?

Like @Michael Quarles  said, it's all about building that relationship...it's on trust and common goals.

By the way, if this isn't discussed and agreed to right up front, it ain't gonna happen at closing. And no one party can change a signed contract and are bound to the contract, unless all parties agree to change and resign the changed contract in an addendum to the original. Keep everything in writing and up-front, so no one feels you took advantage of their ignorance.

Double closing in CA is NOT illegal, just not widely known or performed by banks, realtors, title companies or lawyers. Why? Like @Seth Williams said, they want the money and why would they give you a cut since you're not even investing or risking anything, let alone buying anything. We know better though, right?

John

[Ray Eason]

Originally posted by @Michael Quarles:

I learned a long long time ago that legal comes in third. Behind ethics and morality.

Because I can doesn't mean I should. It's not an abundance quality. IMHO.

 @Michael Q.

I am also in Bakersfield and have just started doing Investing.

You seemed knowledgeable of Wholesaling and Assigning contracts which is where I am focusing myself right now.

I am looking for a real estate attorney for some document review. Is there someone you recommend in town for this?

I've heard you can use title companies for doing closings but I am not sure if they will review documents.

Look forward to hearing from you.

Ray

[Javier Osuna]

Hello fellow B.P. members! Would anyone happen to have (or point me in the right direction) on where I could obtain a sample assignment contract that would work in the State of California? I am currently attending a real estate academy but the cost they are charging to attend their "core courses" is pretty steep (its actually in the thousands), so at this point I'm entertaining other alternatives on ways to accomplish the same task with less money (the task being: finding and closing my first wholesale deal). I have done a lot of self-education and have most of the steps I need to do in place, however different states have different laws and I just want to be sure I am using the right paperwork. Any help would be much appreciated guys... Thank you and much success.

[Mike Gallagher]

its all about relationships. very true statement about real estate investing.

[Paul Roberts]

Here is a response I found from someone in California by the name of Jared K.

Jared K. wrote:

I just closed on a wholesale deal grossing $65k! I put $1,000 into the deal and spent 10 hours of time on it. This post is not to brag, but to share some key tips that I take for granted but for those of you starting out and want to try wholesale deals, you NEED to know about these.

FACTS: SFR in Los Angeles. Off Market, FSBO. The lead came to me from another attorney friend of mine that specializes in Probates. I tied the deal up quickly with 2 very critical amendments to my P&S Agreement (will discuss below). I originally sought to flip it myself, however, relying upon hard money lenders made the profit margins very thin. It soon became apparent during escrow that the better strategy was to flip it in escrow - assignment or double escrow it (and there is a difference between the two).

I always attach to my offer (and have the seller sign) a customized Addendum to my P&S Agreement. The first line of my addendum reads: "This Addendum incorporates by reference the P&S Agreement between the Seller and Buyer dated ___, and should any inconsistency exist between this addendum and the P&S Agreement, this addendum shall control."

2 Critical Terms to My Addendum:

1) In California, the standard P&S Agreements / Offers Forms contains language that an assignment can only be made if you get the express written consent of the seller. Well I don't like that term because it gives the seller control. Also, what happens if I have removed contingencies and then find my end buyer that I want to assign it to and the seller objects and won't give consent? I'm screwed. The fist thing we are taught is on the offer to write "Your Name and/or Assigns" - however, this doesn't matter as the language allowing the seller to void your assignment controls irrespective of whether you write "and/or assigns." So my addendum states: "Buyer shall have the ability to assign his rights to this contract WITHOUT THE EXPRESS WRITTEN CONSENT OF THE SELLER, AT BUYERS UNFETTERED DISCRETION." What did I do here? I changed control of the deal - to me!

2) When possible, attempt to negotiate and get the Seller to agree to allowing you to have keys (or a lock box) on the property BEFORE closing escrow (obviously only works if the property is vacant and is a FSBO). In this current situation that I just closed, the seller lived out of State and was going to have a friend meet me at the property to grant me access to the house each time I needed it. I told the seller I plan to have plumbers, electricians, mold inspectors, termite inspectors, A/C guys, roofer, painters, floor guys,

[Paul Roberts]

A gentlemen by the name of Jared K. in Southern California handles assignments like this:

Jared K. wrote:

I just closed on a wholesale deal grossing $65k! I put $1,000 into the deal and spent 10 hours of time on it. This post is not to brag, but to share some key tips that I take for granted but for those of you starting out and want to try wholesale deals, you NEED to know about these.

FACTS: SFR in Los Angeles. Off Market, FSBO. The lead came to me from another attorney friend of mine that specializes in Probates. I tied the deal up quickly with 2 very critical amendments to my P&S Agreement (will discuss below). I originally sought to flip it myself, however, relying upon hard money lenders made the profit margins very thin. It soon became apparent during escrow that the better strategy was to flip it in escrow - assignment or double escrow it (and there is a difference between the two).

I always attach to my offer (and have the seller sign) a customized Addendum to my P&S Agreement. The first line of my addendum reads: "This Addendum incorporates by reference the P&S Agreement between the Seller and Buyer dated ___, and should any inconsistency exist between this addendum and the P&S Agreement, this addendum shall control."

2 Critical Terms to My Addendum:

1) In California, the standard P&S Agreements / Offers Forms contains language that an assignment can only be made if you get the express written consent of the seller. Well I don't like that term because it gives the seller control. Also, what happens if I have removed contingencies and then find my end buyer that I want to assign it to and the seller objects and won't give consent? I'm screwed. The fist thing we are taught is on the offer to write "Your Name and/or Assigns" - however, this doesn't matter as the language allowing the seller to void your assignment controls irrespective of whether you write "and/or assigns." So my addendum states: "Buyer shall have the ability to assign his rights to this contract WITHOUT THE EXPRESS WRITTEN CONSENT OF THE SELLER, AT BUYERS UNFETTERED DISCRETION." What did I do here? I changed control of the deal - to me!

2) When possible, attempt to negotiate and get the Seller to agree to allowing you to have keys (or a lock box) on the property BEFORE closing escrow (obviously only works if the property is vacant and is a FSBO). In this current situation that I just closed, the seller lived out of State and was going to have a friend meet me at the property to grant me access to the house each time I needed it. I told the seller I plan to have plumbers, electricians, mold inspectors, termite inspectors, A/C guys, roofer, painters, floor guys, etc.... all give me bids on the rehab and that I would be needing access often times at the last minute and during work hours (when his friend was unable to give me access). So in exchange for releasing him of any liability should any of my vendors hurt themselves while on his property prior to the close of escrow, the Seller handed over keys. The key here (no pun intended) was that not only was I able to get a real solid number on what it was going to take to rehab this house and get a solid ARV number, I was able to shop it to my end buyers - my rehabbers!

[Doug Alberts]

Are the assignment fees paid by the seller as part the agreed sales price or does the end-buyer cover the assignment fee at and above the agreed purchase price? I need to write our purchase agreements to reflect this correctly, as it is most often done when wholesaling. Thank you in advance for any help provided.

[Doug Alberts]

From another reply it is the end buyer which will be paying the assignment fee :)