OfflineDear DG’ers,
First, thank you to all for sharing your input and resourcefulness in helping others get started; this is truly a great forum because of all of you wonderful and sharp people out there!
I am starting out as an investor aiming to do my first assignments and/or double closings SOON and am spreading the news to friends and family. Among the nay-sayers, the concern arose that I will be legally obligated to buy the property with my own money if the end buyer (C) backs out and does not close. So I have the following questions for the experienced investors here at DG:
1. Assignment: If the end buyer (C) for whichever reason bails and does not close, how do I legally protect myself from having to buy the property myself after having signed the purchase agreement with the seller (A) and the assignment contract with the end buyer (C)?
If I am not legally obligated to buy the property myself if end buyer C bails, is there a penalty in the form of a certain percentage of the agreed purchase price?
My own answers are:
a. I am protected by the assignment contract in which the end buyer (C) assumes all the obligations of the Buyer (B=me) in the purchase agreement.
b. As Carol Stinson does, I can enter a clause in the purchase agreement stating that “Buyer intends to assign this contract and resell this property. If Buyer does not find a third party buyer for this property, Buyer has the right to cancel this contract.”
2. Double closing: If the end buyer (C) for whichever reason bails and does not close, how do I protect myself from having to buy the property myself after having signed the purchase agreement with the seller (A) and closed the deal with the seller (A) at the title office? In other words, I am sitting at the title office having closed with A using transactional funding and C does not show up for the second closing – what happens then? What are the repercussions for me?
My own answers are:
a. I am protected by the purchase agreement between myself (B) and the end buyer (C) which has been signed prior to the closing.
b. When using transactional funding, the AB closing is contingent on the BC closing. If BC does not close, any transactional funds would be returned to the transactional funding company at no cost to me.
Are these answers sufficient? I cannot shake this little nagging feeling that they are not quite “enough” to protect me from having to buy the properties or getting stuck with penalties…?
Please correct any misperceptions on my part. I would be very grateful for your valuable insights in this matter.
Thanks so much and Happy New Year to everyone!
Charlotte.
I'm not seeing anything wrong with your answers to your questions, just so long as everyone is clear about who's doing what and that there's no traps added to void the stipualtion. Have you talked with any real estate attorneys who work with investors?
Less Talking, More Doing
I always put in every contract that subject to my partners approval and a lot of times get grief from the agent but I insist !
That way I always have a way out..
Get A Cash Offer Now on your deal's any state any condition within 24 hours.
When I assign a contract, I require the end buyer to pay my non refundable assignment fee plus the EMD (in the form of cash or a cashier's ck) at the time of stepping into my position by signing the Assignment Contract. Once a buyer has that much skin in the game he is much less likely to back out. If he does, all you will lose is your EMD, which is really now HIS EMD because he has already paid you back.
In a double closing, the money for the closings is required to be wired to escrow, usually 24 hrs before the closing actually takes place. That way you are assured that you will not get stuck.
Feel better?
Karen
"You're never too old to be what you were meant to be!"
www.deangraziosi.com/real-estate-forums/investing-journals/59128/day-for...
"Shining Like a Star & Dancing on Sunshine"
"Shoot for the moon! Even if you fall short, you'll still land among the stars!"
Do you do this stuff for a living or what! You always have good answers!
I would add a couple of things.
1. On the double close I also collect a non refundable earnest money check.
2. My contracts with my buyer are NEVER assignable.
3. No inspection period. All due diligence must be done before contracts are signed. No contingencies.
For example: If someone puts "subject to my partners approval" I hand them the phone and tell them to get the approval before they sign.
These three rules insure I have a REAL cash buyer. They never back out once they sign my contract. My requirements have stopped a lot of big talkers and BSers from getting my properties under contract and then not performing!
This is how I qualify my cash buyers. I have a real deal and they have the opportunity to buy it! No script will ever guarantee a cash buyer. They can have the greatest POF and bank statements and say they buy 100 properties a month. That does not mean they will actually buy!!
Michael Mangham
Mentoring/Team Building Nationwide
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
I work very hard at it and am always trying to learn something more, mastering one technique fully before moving on to the next.
I totally agree with the points you have put here also!
Karen
"You're never too old to be what you were meant to be!"
www.deangraziosi.com/real-estate-forums/investing-journals/59128/day-for...
"Shining Like a Star & Dancing on Sunshine"
"Shoot for the moon! Even if you fall short, you'll still land among the stars!"
Thanks for the information. I'm used to asking for POF not knowing they could have the greatest proof of funds and still not buy it.
I'm glad to get all this information and this will help me so much screening my cash buyers and weed out the tirekickers
Thanks you guys.
TC
Miami Florida
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Great answers! And, I do feel better now. Less concerned and fearful!
Thank you for all the information.
Jason
Thank you soooooo much Karen and Michael, you made me felt better to go out and do deals without worrying that i might have to deal with the fake cash buyer.
Your three rules sound fascinating~!
How do you get them done before contracts are signed?
If your contracts are never assignable, then what type of documents do you use for your contracts?
Do you get your buyer to sign on your contract before you close with the property seller?
When do you have to do the double closing instead of assignment?