Assigning an offer to purchase?

Question

Can I assign an offer to purchase contract?

When doing an "offer to purchase" do you have to give an earnest money deposit? or not until they accept and we do an actual agreement?

Thank you,

Later...Van  :D 
 :superman:

Account Closed · Answer

Ryan and I are in more agreement than it might seem.

Check the laws in your state and do not just take the advice of a Realtor. They generally do not know the laws.

Ryan's point about motivation is definitely a factor. The more motivated the seller the more likely they can be flexible on the earnest money. Just make sure that you still have a valid contract.

John Corey

Ryan Webber · Answer

I have to disagree with John on this one.  Why waste tying up your money when you don't have to and especially if you don't have it?

When I was starting out, $500 or $1000 was a lot of money to me.  My very first offer was on a HUD property and I used my entire savings up to that point to put up the $500.  The worst thing is that I chickened out and lost my $500.  It was another 2 months, when my tax return came in, that I put another offer in on a property.

Now I believe that earnest money is not required in any state to make a legally binding contract, BUT YOU NEED TO CHECK WITH A QUALIFIED ATTORNEY IN YOUR STATE.

I also disagree with the idea that because you don't put earnest money that a seller will consider your offer weak or will retain the right to take other offers.  Out of hundreds of deals with motivated sellers, I have only been ASKED twice about earnest money by the seller.  I explained to them that earnest money is not required to make the contract valid and moved on.  I have NEVER had a seller balk in any way because I didn't put any earnest money down.  The only time I even offer earnest money is when the property is listed with a realtor.

Most sellers don't even understand earnest money.  Earnest money in current contract law is used for a non-judicial remedy for breach of contract.  If you breach the contract, it specifies that the seller can take the earnest money instead of suing you.  The thing is that under most contracts they can elect to not take the earnest money and sue you anyway.  Earnest money is mostly a feel good provision, and in dealing with motivated sellers, my experience is that they don't think, care, or ask about it.

If they are worried about earnest money then they probably aren't motivated enough anyway.

Account Closed · Answer

Why mess around and maybe end up with a bad contract?

You can put up a note as your earnest money until the offer is accepted (note to be redeemed in X days after acceptance).

If you really lack the money to put up to hold a deal expect that most sellers will consider you offer extremely weak and look at other offers. Or they will retain the right to continue to take other offers.

If you need some cash to fund earnest money find a second job for a few weeks loading truck or something. Build up a bit of cash. Why miss out on deals just because you lack $100 or $1,000? Learn how the game is played and focus on finding good deals. Then when you have a good one you can sell it or or otherwise make a profit. Once you land one you will have more cash to work with.

I have never put up cash when I make an offer. I do sign a note and then I do redeem the note if they accept.

John Corey

Juan Castillo · Answer

I live in florida. Where can I find if I need to put an earnest deposit in my area? I have googled it and haven't found a clear answer.

Ryan Webber · Answer

Well our legal system is setup on case law and statutes, and at least I know for Texas, that the case law says that I don't have to put any earnest money to make the contract valid.

Should I still practice Covering Your Assets (CYA) even if the law is behind me?  Its always good to learn the federal and state laws for what you are doing and to trust and follow them.  I've taken the time to learn the laws and I choose to trust them, which means I don't need to worry about putting any earnest money.

Of course it would always be good to consult a qualified attorney in your state before making any legal decisions about your business practices.

On a technical note, if I were to tell a seller "to make this legal, we have to put down $1 earnest money" I would be lying to them.  Now I guess I could say "to make me feel better, I'm going to put down $1 earnest money" but the bottom line is that, legally, I don't have to put anything down as earnest money to make the contract valid and binding.

Brandon Ellis · Answer

Ryan,

Wouldn't you CYA a little better if you said to the seller "to make this legal, we have to put down $1 earnest money." Would that give you more ground to stand on than just promise to buy?

India Estes · Answer

First. Thank you for responding. No I'm talking about Offer to Purchase contract, it's basically a purchase contract but with all of the property description, terms, etc. but at the end of the contract it gives the seller the option to do a accept your offer, do a counter offer, or decline your offer. You can find an example on myfsbo.com.

So you dont have to have an earnest deposit for a contract to be binding? I always heard there are two things that you need to make a contract binding, 1 is a contract with the seller's and the buyer's name agreeing to the terms and 2 something of value, whether it's money, valuable jewelry, or something else.

So I could put a property under contract, then assign it without putting down an earnest deposit. Hmmm...interesting!...learn something new everyday! Thats great.

Thank you Ryan,

Later...Van
 :superman:

Ryan Webber · Answer

Technically speaking, you do have to put valuable consideration for a contract to be valid.  Now the courts have found that a "promise" to buy is valuable consideration in and of itself.

Ryan Webber · Answer

Do you mean a purchase contract?  I've heard someone else talking about an offer to purchase contract, and I'm not sure if they meant something different.  If you have a binding contract of any sort and it is specified that it is assignable then, yes, you can assign it.

If you are referring to an Letter Of Intent (LOI) or some variant of an LOI where you are just outlining a possible contract then, yes, you could assign it also but its not binding so its value is minimal.

Assignments are normally done when there is a binding contract to purchase a property.

Earnest money is not required for a contract to be valid, and I rarely give any earnest money when buying.  I only give earnest money if the property is listed with a realtor, and that's because a good realtor will require it.