Questions!! Working with an Agent on Assignments - Detailed Steps

Matt Larson said, hire an Assignment Atty at the clossing.

I live in the Atlanta area and trying to focus on assighnment deals.and thirsting for more knowledge on the subject,Let's hope the DG family will show up on all these Questions.Go DG FAMILY!

Great info!!!

But I'm writing to bump this back up on the site ----mainly because I realize I posted on a Saturday where there is low traffic on here, and I'm SOOOOO hoping to get some answers this week on a few of these!

If not, I'll break it down into a few forum posts as maybe this is too overwhelming to try to attack!

Irababao ---thank you for your add! I do have an attorney for assignments and double-closings. Right now, I just don't have the money to sit down to ask all these questions (at least until closing, which I hear from Matt, is a great time to ask questions to attorneys as if closing goes smoothly, you always tend to have extra minutes you are already being charged for in the "regular attorney time allotted for closing"....but I'm hoping to get some answers here before closing (since I haven't gotten there yet

Robert & Tony ----thanks for your encouraging words! Yes, I do hope to get some details cleared up! Hope you all had a good weekend.

Cheers to investing success!
Louisa

Did you ever think about getting prepaid legal service, they dont charge you by the hour, you might want to look up this service is alot cheaper then a regular lawyer hourly rate.....

you are the second person that has mentioned this, so it means I must look into this!! Thank you for the tip. I do have a resource that has come across my desk as of late, and I have been curious. I will look into it.

Thanks much!
Louisa

hey guys just want to say thank you for the post

GREAT QUESTIONS I TO AM HOPING TO GET SOME OF THE SAME ANSWERED PLEASE COME ON DG FAMILY IM NEW AS WELL AND YOU HAVE PUT ALL THESE OUT THERE MAYBE SOME COULD BE ANSWERED A FEW AT A TIME

AGAIN BLESSINGS FROM OUR LORD AND FATHER ABOVE

When you fill out the Offer to Purchase (Purchase agreement) you will have a closing date included (meaning on or before), so when the offer is accepted this is already set. If you are planning to assign, of course it is good to have buyers first. Then you know what properties you are looking for. Once you lock one up and sign the assignment contract you are out of the picture. I would collect the fee (or at least some of it) up-front. The whole agreement with the seller is now between the seller and your buyer. If your end buyer falls through, you should not have to take any penalty. Your walk-through contingecy sounds good. I would suggest when you do the walk-thru after acceptance, you take your end buyer (or 2) with you. My agent is fine with this. If you have a good one, she/he should have no problem with WHO is buying the property. (you don't have to tell her what you are making.
Hope that helps some.

Rina

I want to start by saying that I am in a very similar position to you. I have not completed any deals and I am trying to understand to process before I bite off more than I can chew. I have met with a real estate attorney that was recommended to me by another investor that I met at a real estate investment club that I joined. He explained to me the process of handling the purchase and sales agreement through an agent. He said that the agent who is representing the seller initiates the purchase and sales contract and when they give the contract to you to sign you take it to your attorney and they will include what ever clauses you wish at that time. You then give it back to the sellers agent for them to review and hopefully sign. Under most circumstances the seller is not going to go for some of the clauses that are mentioned by Matt in Dean's book according to this attorney. However, we are not dealing with regular seller's. Our sellers have to be motivated sellers that have not been able to sell there property for what ever reason. Under these circumstance I believe clauses can be put into the contract to protect us in case the end buyer falls through or you can't find an end buyer. I hope this helps.

Dave

i to am at thia point... i just signed my first contract on a foreclosure from fannie mae, with an agent wondering should i talk with her and let her know i want to bring in a buyer and wholesale this property so many questions NEWBIE NEEDING HELP

I'll tell you what I know, just let me caveat up front I haven't done an assignment yet. I'm just now "getting out of my own way," regarding getting started, but here's what I know for sure that will help you...

First, Matt Larson had an AWESOME thread on here about the most difficult questions regarding assignments. I don't remember the title of it, but I'm sure you can find it pretty quickly and easily on this site. Some of what I'm about to tell you comes from there, the rest from what I already know.

Second, you don't need an agent to find and lock up a property!
If: the property is listed through MLS or,
you're not sure of yourself when it comes to doing "due diligence" OR,
if you've already negotiated a lower commission rate with your agent or,
if you think the seller's agent is trying to push you around over the deal, it may be a good idea to use your agent, but the point is, you don't have to.

Third, if anyone balks at the "and/or assigns" clause, change it to "and/or financial partner." It works exactly the same, but it should shut up anyone who reads it. Many REI deals are made by multiple-person entities, and having a partner (your end buyer) waiting in the wings makes you look more like a serious investor and not like a time-wasting looky-loo or a feet-dragging middle man.

Fourth, if you find a title company who will do an assignment, that's great! Unfortunately, most "don't know a brick from a bike" when it comes to anything other than closings. Wanna make your job much easier when it comes to this? Use your attorney instead!! It makes much more sense because an assignment is a CONTRACT that just happens to involve money changing hands. A RE CLOSING is a transaction that involves a ton of forms and disclosures that legally bind you like contracts. The moral here is, "if you need something legal done, use your attorney."

Moreover, about your attorney, save all your questions, etc. for one appt. before the actual assignment takes place in his office. The assignment is very easy and straightforward, there really shouldn't be anything to ask. Simply have him look it over beforehand, and tell him what result you're looking for. Have him make sure what's written will create that result, and nothing more.

Fifth, regarding your assignment fee and your RE Agent's commission... You really need to let the math of the deal dictate both. Every deal has different numbers, and charging a minimum fee is the best way to approach it, but you MUST make sure the numbers justify both fees.

OH! BEFORE I FORGET! - Make sure your agreement with your end buyer has a "Non-Disclosure/Non-Circumvent" clause in it with as big a window on it as possible. This will keep any buyer you have from trying to get the property behind your back. This clause is a must, don't do an assignment without it! Okay, back to #5...

If your end buyer is already going to use your RE agent (you could make that a condition to do business with you), then she's gonna get paid. You might offer her a $500-1000 flat fee for helping you out, or include her in a future deal where she doesn't have to do much work, for a reduced commission. She'll already be making at least 3-6% from your buyer and seller at closing, she might not even want any money from you, since you're basically helping her a create a sale that she simply could not have on her own.

About your assignment fee, make sure you know all the numbers going in before deciding what to charge. If you can't make at least $5k on the deal, it may not be worth doing. However, if that $5k is more than what an agent would charge at 6% for doing the deal, your end buyer may balk. Running all the numbers past your end buyer will tell for sure, but if you tell them your fee on this deal is $5k, you can't ethically raise it after that, so check and double check all your math first is what I'm saying. I've seen MANY people on here who charged $10k for a fee, but the equity still left the buyer was so huge (over $100k or more), they really should have charged $20 or $30k. Will the end buyer be excited to work with you more if you undercharge them? Of course! Will the end buyer laugh in your face if you overcharge? Of course! But make sure you don't "charge a dime for a dollar's worth of work." Know what I mean? If your fee is "just right," your end buyer will still appreciate what you've done, and will want to work with you again.

Sixth, about earnest money and proof of funds... Couple ideas for you. Make it a clause of your purchase agreement (which locks up the property) that both earnest money and proof of funds "will be provided at closing." That is the easiest and most effective way to deal with those hurdles. If they want earnest money up front, ask them what they need. Remember to be legal, it has to be AT LEAST ONE DOLLAR, or anything (like a promissory note) that is worth AT LEAST ONE DOLLAR. If they want anything over $100, tell them firmly, "My company's policy is a maximum of $100," and then shut up. (The next person to talk "loses.") You should hear a very long pause, followed by "okay."

About proof of funds, especially using Coastal Funding, I've heard that using their POF letter obligates you to do business with them, even though I see nothing on their letter or website that can "wrangle" you into doing such a thing. If anyone reading this has done business with them, and knows for sure, now is a great time to jump into the conversation. If you're doing a double closing, you may or may not need them (there's other ways to deal with a POF hurdle). If you're doing an assignment, you don't need them at all.

Seventh, about your buyers, Rina is right. You really should have buyers lined up FIRST. That way you don't waste any time looking for one, and you don't run the risk of locking up a property your buyers don't want.

I'm sorry this is so long, and I know I didn't answer everything, but I hope this helped. I might post another response later, but I think I should let the experienced people (who have much shorter answers) reply for awhile. Take care...

Thank you all so much!! Very valuable info! Thank you for all your contributions!!

Rina ---great point on walk through...this is good about bringing the buyer through! In my first talks with my agent...she's wanting full disclosure on the amount I'm making on it, mainly so she can "build it into the deal" and make sure it is within my buyer's parameters. I understand because she wants to see through every aspect since this hasn't been done before (by me), but when I tell her my minimum of $5K or $8K, it is getting a little sticky as she is like "I'm making less than that on some of these properties and when you get into the low numbers, it will be a tough spread to make!" But an easy enough obstacle...at the end of the day I'm her client and I'd like to have control of that aspect. Right now, it is just a trust level as she is open to doing this and trying to make sure "we are covered" so that these things don't fall through. Sometimes you just have to LEAP to try, but I appreciate her due diligence too! Thanks for your input here.

And Dave Boyden ---thank you for the LONG post....I really got so much out of it, and thank you for spending the time to share your knowledge on it! I may update my steps above per your message (and Rina's too) when I get a chance....as there is lots of great input here!!

Thanks again DG family...you all are the best!
Louisa

Proof of Funds Letter Customer Responsibilities:

Thank you for your cooperation.

They have the right to not fund your Double Closing if they find out anyone is misusing THEIR POF Letter that they're are providing Customers (aka Investors) to use. It's a service! The intention of sending you a free pre-qualified POF letter is that you will use them for their service, which is "Transactional Funding" to do a Double Closing. They are doing you, the investor, a great favor which they wouldn't otherwise have to do. Don't think for a minute that Coastal Funding won't call to inquiry, why?, if you are generating several POF letters and not using them for their service. Don't abuse a privilege! They're not a free for all.

SOOOOO MUUUUCH INFO hard to get all the golden nuggetts out of that at one time

but GREAT!!!!!!!!!!!!!!!!!!!!

Thank you so very much!!! Thank you too Altcamel for alerting us to the site as well and their requirements in exchange for use. I understand where both of you are coming from and it all makes perfect sense.

Now to amend my steps to include all of your awesome information!!! May take a little time, but I'll do my best!

Thanks again!!
Louisa

We're all family here...sometimes "tone" can come across wrong in email and/or these posts, so I hope you guys are feeling warm and fuzzy I am (and in this very post too!)

Good points from both of you that I've learned:
---Use Coastal's letter if you're going to do business with them...it is respectful and more importantly ethical and the "right thing to do."
---And understand that by using their proof of funds letter, that it in no way obligates THEM to do business with YOU. (and other great points along these lines)

Thanks for all the detail in supporting your points.

You both rock! I appreciate the feedback!
Louisa

Dave this is surprising to me. It prompted me to read your profile which states you have been studying REI for years. Yet, you have never done an assignment contract. I also noted that you have been a member on this site since 2008. You are obviously very knowledgeable about REI. I know that most of us are probably afraid of doing that very first deal, but I think if I knew as much as you know nothing could stop me from moving forward. I'm wondering if I need to take more time to really learn this business before I jump in with both feet. I personally don't really want to move forward until I feel comfortable with my knowledge of doing a deal so I don't come off sounding like someone who doesn't know what they are doing. That can't be the case with you. What has been holding you back?

I hope I am not being rude because that is not my intention. I just wanted to know if moving forward too quickly could be more detrimental for us newbies than if we just took our time to learn the REI business better.

You are just full of so much knowledge and are so helpful to us. Thanks for all your help. I certainly enjoy reading your responses because I know I am going to learn something new each time.

I wish I could figure out how to use the PM function. You don't have a link for that and neither do I. Don't know why? (I digress)

Thanks,

newage8767