OfflineBy now most of us have figured out how we can get around the Non-assign-ability clause using simultaneous closings, but what about Deed Restrictions? I recently found the below article online that I thought would completely get around both and in in the process of putting it to the test on two deals I have under contract. If all works out could be make alot of Fannie Mae and Freddie Mac properties possible that were not before!
How it works:
1. Find the property, work the #’s, and determine the numbers work.
2. Make your offer by the name of an LLC named after the property (i.e.- 123 Oak st LLC).
3. Offer is accepted by bank.
4. Go out and get the paper work to set up the LLC 123 Oak St LLC, but don't file it yet.
5. Now, go out and find a buyer for the property.
6. Once you have a buyer, instead of assigning the contract over to them… draw up a fee agreement stating that they will pay you for finding the deal and give them the contract and LLC docs to file in their own name. That way you don't even have to sell the LLC. Your buyer can either pay you the fee ahead of time, or usually at settlement.
Wow! Amazing what a bit of critical thinking will produce.
Using the above strategy completely avoids the non-assignability clause because there is never any assignment of the contract, and since the end buyer is the Business owner from the beginning the Deed restriction isn't an issue.
Don't let Big Brother get you down:)
I will let you know how it goes, but I would love to hear any thoughts?
__________________
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
I have had discussions with a few of the other coaches here about the general strategy of LLC offer creation and specifically the strategy you have proposed as well.
Here's a few of the potential issues:
1. Signing a contract as an LLC that has not been created is unenforcable. A non-existent entity does not have the right to be a party to a contract. It will probably not be an issue but if a Seller wants to void your contract and they learn the entity was created after you signed a document in its name they will be able to cancel the transaction.
2. If you sign a contract using an entity that has not yet been created if the Seller finds that out they could find you personally responsible if they chose to. This means the corporate shield and asset protection of the LLC may be bypassed if the entity was not valid and established at the time of the execution of the contract. Just like issue #1 this issue will most likely never be a problem.
3. Negotiating with the Buyer on who pays the fees associated with the cost of creating the LLC may be an issue as well.
I am not an attorney. The legal issues are simple issues regarding who can be a party to a contract. Maybe if there is an attorney on the board they can clarify the concerns on whether an LLC that doesn't technically exist since it has not yet been created has the ability or right to be a party to a contract. My understanding is it does not. Potential legal issues should be considered when evaluating the risks of proceeding with any deal.
what homes typically have this non-assignability clause?
REO properties which are properties owned by banks that have already gone through the foreclosure process are almost always not assignable.
The strategy suggested above applies to HUD, Fannie Mae and Freddie Mac properties as well as some B of A properties and some of the larger national banks that are placing deed restrictions on properties.
Thanks!