I want to assign contracts in Texas. Are there title companies that allow assignment contracts? Does anybody know what the guidelines are in Texas? Is it even possible? I have a property ready to be tied up, but I don't want to mess it up. I have several buyers lined up, but I want to control my profit margin by negotiating the price, both with the seller and end buyer/investor. If I can't do assignments this way, can I do assignment fees with investors in Texas?
Why would the buyer have to come out of pocket for the assignment fee? That will probably kill the deal.
You negotiate a purchase price with the seller and get it under contract. You, then, mark it up and pull in a buyer for the total price - purchase price plus markup. Then, you assign your purchase price, and it's done. The buyer needs to get financed for the price he is buying the property at, UNLESS he chooses to pay part out of his pocket.
To be honest, most deals these days are cash anyway. And a title company should take an assignment contract on a cash deal. However, if they won't, you can always get a purchase contract signed between the seller and buyer, for the entire amount. And then attach a lien invoice to the contract, equivalent to your assignment fee. Send both pieces of paper to the title company, and keep tabs on the closing. The title company will pay you your fee (lien) upon closing.
So long as you stipulate in your purchase contract that the contract is assignable and the seller agrees to it, you can.
Your end buyer will most likely have to come out of pocket for the assignment fee as his/her lender will only loan on the purchase amount on the contract and not include the assignment fee.
Why would the buyer have to come out of pocket for the assignment fee? That will probably kill the deal.
You negotiate a purchase price with the seller and get it under contract. You, then, mark it up and pull in a buyer for the total price - purchase price plus markup. Then, you assign your purchase price, and it's done. The buyer needs to get financed for the price he is buying the property at, UNLESS he chooses to pay part out of his pocket.
To be honest, most deals these days are cash anyway. And a title company should take an assignment contract on a cash deal. However, if they won't, you can always get a purchase contract signed between the seller and buyer, for the entire amount. And then attach a lien invoice to the contract, equivalent to your assignment fee. Send both pieces of paper to the title company, and keep tabs on the closing. The title company will pay you your fee (lien) upon closing.
I understand the strategies. I am concerned with the legalities of assignment contracts in Texas. The Texas Real Estate Commission says that you have to be a real estate agent or broker to perform transactions. Also, when I called they told me I could not receive more than $50 for giving information or locating properties for other people. To me, that means assignment fees are not an option either. I see you are from Florida. Do you know Texas guidelines for investing/wholesaling?
How do you work with this situation? If I work an arrangement with the end buyer, how do I protect my agreement with this end buyer and collect my compensation. If I receive money from the end-buyer/investor, it will be documented and that is when the trouble begins.
Why would the buyer have to come out of pocket for the assignment fee? That will probably kill the deal.
You negotiate a purchase price with the seller and get it under contract. You, then, mark it up and pull in a buyer for the total price - purchase price plus markup. Then, you assign your purchase price, and it's done. The buyer needs to get financed for the price he is buying the property at, UNLESS he chooses to pay part out of his pocket.
To be honest, most deals these days are cash anyway. And a title company should take an assignment contract on a cash deal. However, if they won't, you can always get a purchase contract signed between the seller and buyer, for the entire amount. And then attach a lien invoice to the contract, equivalent to your assignment fee. Send both pieces of paper to the title company, and keep tabs on the closing. The title company will pay you your fee (lien) upon closing.
If you bought correctly, it would not "kill the deal". As far as assignemnt contracts with title companies are concerned, it is not titlle that is an issue, it is the bank. I am referencing bank REO's and not private sellers. Banks will rarely allow an assignment of contract (notice I said rarely).
In theory, your explanation/instructions seem to be fine, but in reality, you still have two contracts and the end buyer's lender will only recognize the first one without the price increase. In addition, when delaing with reo properties, how can you get this done Andrew?
I'm strictly speaking of deals with private sellers, and not banks. You cannot assign a contract that is in place with a lender. You will have to double-close.
However, when dealing with private sellers, you can absolutely assign a contract in Texas. I currently have multiple students in TX, and I instruct them exactly as my FL students - assign when possible, and double-close if necessary. They've done this successfully many times.
Most likely, Randall, when they say you can't make more than $50 for locating property, they mean bird dogging. That's just passing a lead to someone else. If you contract on a property, legally you have the right to purcahse it while the contract is valid. And, if your contract states that it is assignable, then you can assign it.
If your assignment fee is large, like $30k or more, I would suggest double-closing. If it's under, I would just assign. Just make sure the title company accepts assignment contracts, which shouldn't be a problem if your buyer is paying with cash. And, as I state earlier, you can always drop a fictitious lien on the property, and collect your fee that way, too.
Andrew,
When you refer to double closings, you are speaking about coming to the table with your own money to close your transaction, and then your buyer does the same, correct?
Thats my point Andrew. You do need your own money in some cases. Using funds from C to close deal with A and B keeping the difference is not always possible. I do know you can still do it in many states, so long as you have a title company willing and able to do so and who understands the process.
We just did one in Columbus, OH. Not sure about every state. We just sent the contracts to the title company, and they did the rest. They did not ask for POF's or any earnest money. It was a seamless transaction...
If they would've required any cash, I would've had a company that I'm familiar with wire the cash to the title company the day of the closing. They do this for 2% of the profit. That is, unless I had the cash on hand...
A company that provides the funds for the "A" to "B" transaction for a fixed rate. Costal Funding is a company that provides this service for 2 points and a processing fee. I would post a link but I think it will be removed anyway
Aj,
Send me a pm with the link.
I have my own cash to close the A-B, but can not do too many at once obviously. The other problem is, my buyer "C" is purchasing with FHA financing in this case and I am buying at an extra discount due to the fast all cash transaction. My buyer can not close on same day, so I am actually taking title with my own cash, then selling to my buyer with a 30-45 day contract.
Main thing I wanted to clear up is that when buying REO's, you can not do a double close in CA without funding the A-B transaction with your own funds. Funds from C, can not close the A.
In CA anyways. I understand it still happens in TX, and as Andrew points out, in OH.
No seasoning with FHA until June 1, 2009, unless they continue. - UPDATE: FHA does require 90 day seasoning unless the transfer of title comes directly from a federally insured banking institution to buyer. This info comes direct from my lender last week.
Of course, the home must qualify for FHA (full rehabs do not) and the buyer must qualify, good credit score/history, etc.
Thanks for the PM.
In your PSA, when you fill out the buyer info, you put your name or company name + "and/or assigns"
YOu may also write it in in the special provisions area stating that the contract is assignable.
STep two is find a willing buyer to buy the PSA for your fee.
Bottom line, if you fail to disclose any known information (like you are going to make a $30,000 assignment fee) to the seller, when that seller finds out that you made that money (and he will), he can very easily come back and sue you and the title company for fraud. His claim to you is that you knew that the property was worth substantially more and you failed to tell him. Your argument is that it is a free enterprise system and you offered him a fair price that he willingly accepted without you twisting his arm. The problem is that the judge will more likely than not, find in his favor (because you are the pro and he is the innocent victim) and open a door for everyone else that you closed with to sue you as well.
It never fails to surprise me that every year some of these guys go into hiding, or worse, and then more just pop right up. All I can say is, you need to move your transactions to a state that will allow these types of transactions just to be safe.
--- and my thought was, huh? Jeez, now I have to retrain myself on Assignments as they seemed so seamless until now.