Do all investors use “and or assign” in purchase contracts?

22 Replies

Do all investors use the “and or assign” in their purchasing contracts?

As an investor I think having this clause in the purchasing agreement gives you the extra strategy to assign your rights of buying to another investor. Using and or assign doesn’t mean that mean that your whole plan is to wholesale. I want to hear others option in this topic, since I feel like their is stereotype about “oh if you use and or assign in your agreement must be because your plan is to specifically wholesale”

Thanks for all your comments in advance, I just want to make sure that I am on the right track!

I do it on every contract even if it is buy and hold. It cost nothing to add it in and gives you tons of flexibility. You may just want to assign it to one of your LLC's and this makes it easy.

@María Salas

Many people won't touch an assignable contract. Think about from a sellers point of view. You have 2 offers, both asking price, same EMD terms are close (or even way off from the other). I accept your offer because you come in with a solid POF, history and I have no doubts you can close. Then you assign the contract to Joe Snuffy for 5K who couldn't close a jar of pickles. As a seller I am left standing here with a seller who can't perform. I threw out another good offer to take yours and now I am left with nothing.

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Originally posted by @Mike Cumbie :

@María Salas

Many people won't touch an assignable contract. Think about from a sellers point of view. You have 2 offers, both asking price, same EMD terms are close (or even way off from the other). I accept your offer because you come in with a solid POF, history and I have no doubts you can close. Then you assign the contract to Joe Snuffy for 5K who couldn't close a jar of pickles. As a seller I am left standing here with a seller who can't perform. I threw out another good offer to take yours and now I am left with nothing.

 I have never encountered this.

I believe if you encounter this you are doing something wrong.

See it this way. It is a benefit to the seller to have the contract assignable. It is all a matter of how you pitch it.

We simply say that BECAUSE the contract is assignable you have more chances the offer will close because if something happens and we can't buy it anymore the deal will still go through.

Once they understand that 10 out of 10 people appreciate assignable contracts from our experience. I would say change your pitch  and explain it in such a way that they see and feel it is indeed a benefit to them.

@Jerryll Noorden

I fully disagree. When accepting an offer (or recommending a client does) I believe that "Proof Of Funds" is an extremely important part of any offer. Assigning removes that piece. If you were selling an asset, then I showed up with an assignable contract from Tiger Woods for 90% of the price and a bank account statement showing 90 Quadzillion dollars. You may very well throw out the offer from your neighbor who works at Best Buy for full asking. If after accepting Tiger decides to assign it over to Otis the town drunk for $5K and walk away, you may second guess your decision. 

Originally posted by @Mike Cumbie :

@Jerryll Noorden

I fully disagree. When accepting an offer (or recommending a client does) I believe that "Proof Of Funds" is an extremely important part of any offer. Assigning removes that piece. If you were selling an asset, then I showed up with an assignable contract from Tiger Woods for 90% of the price and a bank account statement showing 90 Quadzillion dollars. You may very well throw out the offer from your neighbor who works at Best Buy for full asking. If after accepting Tiger decides to assign it over to Otis the town drunk for $5K and walk away, you may second guess your decision. 

 Not even once has anyone asked us for proof of funds. And I am starting to understand why it is like that with us. I am sn expert at marketing. Both SEO and credibility. Both are a skill. We have incredible credibility ( see what I did there? :) ). No one questions us. We have a ton of reviews, a NASA scientist and our site is just beyond great. When we do the walkthroughs people want to feed us get to know us we get invited for wine, dinners cookies family events.

I am now convinced that is the discrepancy here. We don't need proof of funds because people feel like they can trust us. They have never not even once asked us for pof

Originally posted by @María Salas :

Do all investors use the “and or assign” in their purchasing contracts?

As an investor I think having this clause in the purchasing agreement gives you the extra strategy to assign your rights of buying to another investor. Using and or assign doesn’t mean that mean that your whole plan is to wholesale. I want to hear others option in this topic, since I feel like their is stereotype about “oh if you use and or assign in your agreement must be because your plan is to specifically wholesale”

Thanks for all your comments in advance, I just want to make sure that I am on the right track!

 I buy all my properties "off market" using "and or assigns" and I've had a total of two people ask what that means. They were just curious and it had no bearing on the deal as far as they were concerned.

Originally posted by @María Salas :

Do all investors use the “and or assign” in their purchasing contracts?

 No. We have never used such language in our contracts. We only make offers on RE we can close on and want to own.

@María Salas

In my direct with seller contract you bet I try to have that. IMHO any option I can secure, no matter how low the probability that I might use it would be I want every nugget of flexibility I can scrounge up in the deal.

You just never know when you might want or need that flexibility.

@María Salas most of my personal offers are not assignable. It’s a small term that makes the offer a bit more comforting. When it’s assignable the sellers tend to fear they are making a bad deal and leaving money on the table. I don’t do wholesale however. If that’s your goal, you kind of have to. I’m in South Florida where competition is fierce so every little thing matters here.

I ALWAYS make my contracts assignable. That gives me the option of putting it in my LLC, my S corp, or my name. I don't use this phrase to "wholesale" properties though.

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Whether or not a buyer wants to include "and or assigns" in a contract is a personal choice. However, if the choice is made to have those words in the heading of the contract, it is highly recommended that additional language is added to clarify its meaning.

In order to effectuate an actual assignment, the seller will be asked to execute a formal assignment that transfers the contract to the assignee. If the seller refuses or pushes back on executing the assignment agreement the parties will have a contract dispute on their hands. 

Adding language in the body of the contract clarifying assignment that states something like: "The has the right to assign this contract without the consent of the seller" is the strongest clarifier the buyer can have. If the seller balks at the buyer's right to assign without the seller's consent, the next best clarifier is something like this: "The buyer has the right to assign this contract subject to the seller's written consent which shall not be unreasonably withheld".

Personal experience has taught me that leaving the contract silent on the intent and methodology of how assignment is executed is a bad idea. If the seller is going to have issues with assignment, its highly advised to make sure the assignment will actually happen rather than hope that its meaning is fully understood by all parties to the contract...including the assignee.

Vagary works in both directions. If the seller refuses to execute an assignment agreement, the seller has the buyer over a barrel. If the seller agrees to assign subject to its "reasonable" agreement and fails to do so, the buyer has the seller over a barrel which leaves the buyer claiming the seller to be unreasonable.

It is much better to get all of this sorted out up front by writing a contract that fully spells out the parties intent and understanding if "and or assigns" is included in the contract.

Many times sellers won’t let us do an assignable deal, but we can usually put in language stating “assignable to related entity or entity to be formed, but not assignable to 3rd parties” or something like that.

Originally posted by @Syed H. :

Many times sellers won’t let us do an assignable deal, but we can usually put in language stating “assignable to related entity or entity to be formed, but not assignable to 3rd parties” or something like that.

 This is truly interesting. I appreciate your input on here. Can a related entity be another buyer with whom I have a noncompete agreement? he/she would basically be my venture partner. 

Thanks a lot for all your input. I truly appreciate everyone’s opinion on this topic. The seller’s lawyer is being very skeptical about the and or assign portion of the agreement. According to escrow in Washington state a contract cannot be assigned to a different buyer without an assignment contract signed by all parties. That being said if I want to I assigned the contract the seller would still have to sign even though the original contract says “and or assign” but without the “end or a signed” on the purchase contract is not assignable. 

@María Salas I use it on my deals to keep options open. Not necessarily to wholesale (I never have, having the option seems nice, though), just to decide if I want it in my rental LLC or my flip LLC.

Some sellers- mostly investors who may have been burned- have aversion to it. They do seem to be scared to death that the Buyer is a wholesaler and will leave them high and dry.

The pending sale of my duplex is/was an off market transaction.   In the terms I gave to potential buyers I explicitly forbade "and/or assigns" - reason being all the developer buyers claimed to be saving me the standard RE commission,  in reality most of the parties approaching me were in fact brokers hired by developers to find leads on properties.  In those situations while the ultimate buyer may have been paying the commission,  it still resulted in a proportionally lower offering price.    I found one or two parties who were the principals and not brokers,  and they were the only ones who did not try to add that language in the contract,  and coincidentially their offers were also the best ones.

I can see the value in using it when forming an LLC, but otherwise from a buyer perspective I agree with the sentiment that it adds a lot risk without any additional upside to the transaction.

and or assigns on a purchase contract or a seperate document called the assignment contract which you can draft up with an attorney that you can find at your local title company

It depends on where the property is coming from I guess.

If you're direct with the seller, they likely won't even know what that means, so I doubt they'll care

If you're offering through a listing agent, 90% of them also don't know what the term means, so you still may be ok. A savvy agent though should know what it means and do a little more digging.

Although if you have a proof of funds as well then you should be ok.