OfflineGood Morning Everyone:
Much has been written here over time, regarding whether flipping a contract is legal or not and much has been written in reply, alot of replies from people who themselves have never done it but wonder the same thing.
In a purchase offer, there is a line there, where the buyer puts his/her name. When you put your name in there as a buyer, your already doing it wrong.
For example, if I put Michael Laurita and/or assigns, I would be doing it wrong, not to mention opening up a can of worms I just would not want to deal with.
Now while it is not really illegal to do that, the chances of a realtor telling you it is greatly increases as well as a banks attorneys telling you the same thing.
What you need to do is put in a company name. You are entering into a purchase offer as your company or entity.
The Laurita Group for example is buying or desiring to buy, not Mike Laurita. Now, chances are there that your end buyer, especially if they are a very active buyer will always buy as a company or entity, not the individual investor, so they will write you their offer the same way.
Now when you assign the contract, your company is selling the property not assigning it and you will notify all parties, saying the following: My company has sold it's position in the transaction to and they have paid us $$$ for that contract. You are advising the seller, the sellers agent, and the title company.
Also, when you make an offer, you draft a letter of intent, not a purchase offer.
The difference is this. A LOI or Letter of Intent, is just that, a intent. You do not need a earnest money deposit or a proof of funds. This is only needed when the purchase contract is agreed upon and signed and deposited at the title company.
Now if you have done this right from the start, you will have assembled your buyers list and qualified them to having readily available cash to buy. A cash buyer who says they have to get a loan is not a cash buyer. A cash buyer is someone with cash and can provide you a POF letter or bank statement.
A earnest money deposit is for the purpose of protecting the seller in the event of default on your part in the purchase of this deal, essentially saying that in the event you cannot perform, meaning buy the property, your earnest money deposit becomes non refundable.
If you need to actually put up a earnest money deposit, always place a clause in your LOI/Offer that says you have fifteen or thirty days, your choice, to do your due diligence and this way, you never are at risk of losing your earnest money. Gals and Guys, if you can't find a cash buyer or qualified end buyer in fifteen or thirty days, then somewhere along the line, you made a error in the setting up of your business and it's business model.
Now since your really in the wholesale area of this business and your business model is really just finding deals, locking them up and flipping, if you have serious cash buyers and you better before ever looking for deals, you will never have to come up with a earnest money deposit or proof of funds, because you will be using your cash buyers pof and earnest money.
You always want to be a product of full disclosure. You always make it known that you are a intermediary. That is a nice name for a deal maker.
You always send to all parties a full package about yourself, called a Intermediary Media Package. This is once you have a deal.
In this, you include a short biography about yourself. Your experience, your companies experience, recent deals you have been involved with and the outcome, a letter of full disclosure. This is always emailed.
The letter of full disclosure says the following:
Date:
To:
RE: Letter of Disclosure
Dear :
My name is and I am the President and Chief Investment Officer for ( Your Company Name ). Our company is in the business of locating investments for the fully qualified members of our investment group.
Our investment group consists of (The number of cash buyers on your list that you can say with 1000% have the cash to buy) and each member is a currently active investor in properties that are in this asset class.
Every LOI is individual investment group member specific. When the purchase contract is drafted, a Proof of funds letter or statement will be provided as as well as earnest money funds and will come directly from the buyer.
For our services, which are 100% hands on in each investment opportunity our investors involve themselves with, we are paid a fee and for this particular transaction, that fee is $______________.
This fee is paid on or before closing by the investor to our firm, for the work we have done in this transaction.
Thank you in advance for all your efforts and on behalf of our firm and the investor, we look forward to working with you.
Sincerely and with best regards,
I hope this helps someone with their deals and to make some money.
Michael,
thank you so much for this info- it has clarified some issues I had with the assignment of contracts. Very helpful!
Valerie
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
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GREAT POST!!! Good knowledge!!
THANKS
Great post! Thanks alot, it really helped me think differently about assignments, but also clarified alot simultaneously. Great deal of knowledge you have there, keep it up!
"You deserve to be successful"
Gabriel Do Carmo
www.gdc.usapropertywholesale.com
info Michael. I'm considering turning my auction property over to an end buyer so I don't have as much risk as doing a HML, however, this end buyer requires a loan, so it would be an IEE and wants it before we offer it to other cash buyers. Do you recommend anything different for an IEE?
Also, the buyer keeps asking me what I'm paying for it. I plan to double close it. I plan on making $30K, but he will be getting the property $60K below market. I'm afraid that telling him I'm making $30K will drive him away. I'm taking a lot of risk buying the property at auction, putting up my own funds for EMD, etc. Should I just come out and tell him I'm making $30K?
Also, I want to point out to others on an IEE, the end buyer must get their loan complete before the final closing per the transactional funder.
That strategy sounds great when you make offers through a realtor with the intent to assign. Like you said when the realtor and seller see and/or assigns after the buyers name 90% of the time they won't accept. We avoid that issue all together when we offer through a realtor on a property we intend to "assign". We double close using our POF and transactional funds. The draw back to this is we do have to supply earnest money to get the property under contract, but we cover it with the buyers earnest check as soon as we get him/her under contract. Your strategy sounds interesting and will be checking with our attorney here in Colorado.
Now, when we offer directly with a distressed home owner we NEVER use a realtor!! We have our own contract that states with in the contract that this contract is assignable, period. We don't have to put and/or assigns because its clearly states in the contract that this contract is assignable. It is SO much easier to do an assignment when working directly with the home owner than on properties listed in the MLS and going through a realtor!
Remember people, pre foreclosures, tired landlords, expired listings, probates, divorce, re locating, death, sickness, absentee owners, down sizing, up sizing. Find these people through your marketing efforts, get them under contract using your own 1 page assignable contract with as little as $10 earnest money out of pocket! Assign your contract to one of your buyers and take the paperwork to the title company! Using this strategy you never even speak to a realtor!
Meanwhile use your realtors to find distressed REOs and homeowners listed in the MLS. Make multiple offers using POF and copies of earnest money checks. They don't "cash" the check until they have a signed contract. Double close instead of assign (can't assign an REO)
Use all these strategies and don't let "how can I assign" stop you from making offers. People do it every day!!
This is the strategy that first time, broke, bad credit investors should follow, in my opinion
Michael Mangham
MD Home Acquisitions LLC
Http://www.mdtfcam.com Transactional funds and unlimited POF letters
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
I would tell him that if the numbers work for him it does not matter what you make! If he will end up seeing what you are paying at closing then always practice full disclosure. You don't want it blowing up at the closing table. If the numbers are good you should be confident in presenting your buyer with this great deal that you have done the work, research and risk to acquire!
What would happen if you had to end up making $10,000 net profit? I hope you make the $30,000 but if you have to reduce your net to get the deal done that would not be bad. Volume! On to the next and another deal done! Worst case, like I said I hope you get the $30,000!
Michael Mangham
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
Just found this post and really was glad for the info. Have a question.
When you use the name of your company, does it need to be an LLC?
I do have a business name, but it is not an LLC yet, but hope to make it that soon.
Thanks again for this thread, it was very helpful as my intent is to have a place under contract by Saturday.
Sandi
I was told that you have to hire an attorney to create a LLC for you at a cost of $1500-2500.00. I'm stuck on finding a name for my business also. How do you know if the name you come up with is being used already somewhere? I really need an attorney to help me with all these questions! If anyone can advise me that would be greatly appreciated.
Annette Baker
Contact the Secretary of State and ask for the information you need to form your LLC. In Colorado it costs $50.00. It is not that difficult at all. A lot of investors create an LLC for every property they purchase. Don't get stuck on a NAME! Chose your name and submit it, if it comes back as already in use chose another!
One other thing, you don't have to have an LLC to do real estate deals!! Its a good idea after you start doing deals but don't let not being a LLC stop you from learning REI.
Good luck,
Michael Mangham
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
Annette,
They don't cost that much if you don't use an attorney. Legalzoom.com is a good site, but I went to my local bank and it was $160 to set it up. I have a friend who had a paralegal do it for $50. Which is good if you need to several for properties. Also, I put in some names on the internet and hit search, and found some companies that had similar names, which helped me come up with one. You can use just your first name, or initials and then something like enterprises, home or property investments. Have your friends come up with some ideas.
But on mlaurita, where he used the company name on the contract, does that have to be an LLC? Or can I use my business name?
Sandi
Thanks for all the great information. Michael very informative. I was also wondering about the LLC's. Glad I read through all the information!
sherri
Hello:
No you do not need a LLC for this. Just put your company name. I would not do a LLC for this because your making it harder.
Hi Mike,
Thanks that was a GREAT synopsis!
Rich
Thanks for the info. I know we learn so much on the Success Academy, and SFL.
But we start to forget some things, and it means a lot that several of us newbies can get some good advice.
My biggest regret....is that I didn't do this when I first left the medical field. I just found out that I could get on these posts a few months ago, and this knowledge and help from many of you, is priceless.
Thanks!!!
Sandi
It makes so much sense to do it that way. I learn something new every time I come on this DG site...
thanks for sharing,
Barbara
Some state websites offer a inexpensive way to form a LLC. Check out the Wisconsin website. This website even does a search to see if the name you want is available. It is quite simple and a lot less money than an attorney if you are strapped for cash.
Peggy
Thanks Michael and Sandi for the info. I will need a lot of LLCs because I have 3 rental properties that I've had for quite some time now. That's why I was wondering about the price of them. I would go broke at $1500-2500 each!
I'll have to start investigating now and see what I come up with. The company name is still looming over me... like a cloud....it's not really that important I know. Something will come to me, i'm sure! Thanks again!
Annette
Annette Baker
Hello Peggy,
I will check out the Texas website and see if I can find anything about LLC's. I'm glad I brought this up! I love all the information I'm getting! Have a good one!
Annette
Annette Baker