Banks That Allow Assignment of Contract?

Question

Anyone have any success in a bank allowing you/your investor to assign a contract?  I have heard through the grapevine that Wachovia will allow it, but I don't know for sure.  A local Realtor associate told me today that it is against federal banking law, but again I don't know if this is true or not.  I have a current REO offer on the table with "and/or assigns" on it, but haven't gotten approval from bank yet.  Anyone have any experience with this?

Tony Person · Answer

Banks play the classic game of monolopy when it comes to assignment contracts pushed by investors, contractors, and/or wholesalers.  Yet these same banks will sell their mortgage notes and/or assign mortgage notes to third parties which is essentially the same thing.

I understand both sides of the equation nevertheless.

Michael Culler · Answer

If you are doing an assignment, your buyer should be cash or hard money only.  Conventional lenders will not allow it at all.  You can just forget doing an assignment at all, unless your buyer is using Hard Money or Cashola.

If you are doing a double closing, FHA will not work at all, as they require at least 90 if not 180 days title seasoning depending on a few factors.

if you are trying to pull off a double closing, the best bet is to get a cool title company, a transactional funding lender, and a Fannie Mae qualified buyer. FNMA loans have no seasoning requirement.

The cool title company has to be cool because you will probably be putting the property into trust to pull it off legally.  They have to produce a title commitment to the end buyer's lender.

Or they may be so cool that they produce a title commitment showing you as the seller to the underwriter, even before you own the property?  This is less likely though, as I simply think it's illegal and not worth it for an attorney or title company to be involved in.

Bottom line, use an assignment when you can sell to cash and hard money buyers.  Use a double closing when you can attract higher end buyers that have Fannie Mae loan approvals.  But dont even bother signing a contract with an FHA buyer for a double closing, because you will be wasting your time.

Scott Hubbard · Answer

I thought this thread was worth revisiting as several months have passed since the last post.

Account Closed · Answer

If the bank won't allow "and/or assigns" you can put it somewhere else in the verbiage of the contract and see if it gets thru...or, you can simply make up a fee agreement with the other parties involved outside of the two principle parties (buyer and seller)...most important - get it in writing!

J Scott · Answer

I'm finding most banks won't allow assignment of contracts these days, and while you can do a double close to get around this, if the other party (the ultimate buyer) is using any type of traditional financing, most banks won't finance through a double close because of the possible chain-of-title issues.

So, be careful trying to find a buyer if you're able to get the bank to allow you to assign...

Cris Bell · Answer

john-in-denver;

I like the thoughtfulness, that you have used to accomplish your end 
goal.  Im going to touch base with the company attorney on that, and
see what we can do.  Nice tip.

John Klahn · Answer

I have had good luck with getting properties U/C in the name of an LLC and then selling the interest in that LLC.  I buy an LLC for $50 on the Colorado Secretary of State website for each property that I wholesale.  I've not had a bank refuse any of my contracts.

If you go down this road it would be a great idea to have some professionally drafted documents for the sale of the LLC.

- john

Shi'Mere Andrus · Answer

Alt2008rei,

The bank was U.S. Bank.  I did have a inspection exit strategy in the contract to back out if needed.  It just so happened that my buyer got an appraisal and contract bids for the work and it was more than what was expected.  I asked the bank to come down on the price.  They were willing to take another $10,000 off of the price, but that would not have been enough.  So on to finding another home to put under contract.

Shane Wilson · Answer

Why not just do a double closing? A little more cost then just an assignment but it accomplishes the same thing.

You could also amend your contract with the bank to add add your buyer to the contract. Close the deal and then quitclaim your interest after you close. I've added partners to my contracts after the contracts were accepted and haven't had a problem with that. As long as everything matches up between whats on the contract and who closes it then there's no problems and no fraud.

Sign a contract with your investor to sell your half interest contigent upon you two buying it in the first place and after closing sell the other investor your interest for whatever the agreed assignment fee would be and quitclaim out of your interest.

If you have a cash buyer let them bring the cash and secure them with a security deed to close the deal. Afterwards deed your interest over to the investor for the assignment fee.

I wouldn't ever do an assignment or double closing unless I knew 99.99% that my buyer would close, however if your buyer fails then delay closing a few days and just make sure you have plan B in place to buy the property yourself. Make sure you close before the deadline so you have time to put your plan B in place before the contract expires.

Just make sure you have a good attorney or title company and document everything.

There's all kinds of ways to structure deals.

Jake Kucheck · Answer

Agreed...falling out of escrow happens for things like not being able to get a loan, home inspection revealing significant necessary repairs, etc.  It does not happen because "the bank was asking way too much and refused to come down".  That is, however, a reason why it wouldn't go into escrow in the first place.

Good luck closing that first deal bud.