Contract assignment to FHA buyer?

2 Replies

Has anyone ever assigned a contract to an FHA retail buyer? Does FHA allow it and will they be able to close on the property or will the escrow be lost since its a cash offer?

Although there is a $5k markup on the purchase price, I'm really just doing it as a favor for a friend. Specifically, I have a friend who wants to buy this home as a primary residence, however the seller is not interested in FHA buyers and won't even consider offers contingent on FHA financing. I plan to make a cash offer with my POF for just $5k below asking and assign the contract to my friend for the $5k. (I'd do it for free but hey an extra $5k won't hurt.)

However, I am not familiar with FHA guidelines and I don't know if they will accept that purchase agreement under my company name with an assignment of contract from my company to the FHA end buyer. I don't want her to lose the escrow deposit I will be making with my offer simply because she can't get financing and the agreement is clearly not contingent.

Anyone on here have experience with this type of situation? Any suggestions or advice would be appreciated...

I'm sure you're just trying to help your friend out, but here's two potential issues I see with this plan:

1) You plan to make a cash offer and enter into a contract with the seller based on it being a cash offer but then assign the contract to a buyer using financing. Sounds like just a sneaky way to get the seller to sell to a FHA buyer, which they already stated they weren't interested in doing.

2) A lender isn't going to finance your $5k markup (assignment fee) on top of the purchase price. For example, if the seller is asking $100k but you get it under contract for $95k and then assign it to your friend for $100k hoping to pocket the $5k difference, the lender will use the purchase price of $95k (which it is). Is your friend prepared/able to pay the $5k assignment fee out of pocket? Usually buyers use FHA to get into a property with a low down payment. He may not have an extra $5k to pay to you. Something to ask him anyway.

Yes since you put it that way it does seem like bad business practices. Yes she has the extra $5k but as I mentioned I'd do it for free. I guess the right way to do it would be to just flip it to her. However if thats the case then I'd have to make something since I'd have my money tied up for a few months. I was just trying to avoid that.

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