Assignment Deals/Here we go again!!

Hello and welcome to real estate investing. Transactional funding is deal funding, not deal financing. The difference is that deal funding is where a wealthy individual or entity provides the funds for you to purchase and close your deal. This means that they will provide not only the amount of monies needed to buy the property but all the purchase costs as well.

Deal financing is exactly what it says and means. This is a loan for you to buy and depending upon the terms of the deal and how the deal is structured, could include rehab costs. In some cases, some of the closing costs can either be rolled into the loan or covered to some extent by the seller. This is now becoming a rarity. I use to see it more often than I do of late.

One of the distinct differences between deal funding and deal financing is in that with transactional funding, it is not a loan. There are no credit standards used because they are providing you funds for one to one and a half days for a established fee for use.

Their funds are secure because you as the person doing the deal as the buyer and the seller so to speak never has access to the funds in hand and if the deal does not close, those funds go back to the transactional funder. They lose nothing and gain something in terms of a fee for use of their money.

Transactional funders for the most part rely on a double closing system. That is how it has been structured for as long as I have been doing it.

The double close is exactly what it says and means. You have the A/B closing with the seller first. This is what the transactional funder is providing the funds for. This is always a stand alone transaction. You then have the second part of the double close which is your end buyer which is the B/C. This is where either a lender is funding the end buyer or they have the capital in hand, well in the escrow agents hands, to fund this part of the transaction.

When the double close is completed, the transactional funder receives back the original monies provided for your deal plus his/her fee for services. That is how they make their money or profit on a transaction.

PM me if you have questions.

Just wanted to say hello. Ok let me try, transactional funding is where a funding company will fund 100% of the A to B closing and B to C but your C(end-buyer) needs to obtain their own financing. This occurs at the same time and with the same title company. Now jimmybtx has explained this in detail in his other post and if you type in transactional funding in the search box somebody has exlained this alot better than I could ever. Sorry I hope this will help some

Rich

What points do you charge for same day transactional funding?
Also, please do more research before you post. There are many false statements presented as fact.

Has anyone out there actually used Jimmy's service? PM me with details. Purchase price, amount loaned, Points and interest charged. Heck if I get a bunch of positive references I might use him!

Michael Mangham
MD Home Acquisitions LLC

First to answer your question about points. We refer to it in this instance as fees. Here is the breakdown: $100,000 and under- flat fee of $2200.00, $100,001 to $1,000,000.00- 2.00%, $1,000,001 to $3,000,000.00-2.25%, $3,000,001 and up- To be discussed. Docs needed: A/B HUD and Sales Agreement, B/C HUD and Sales Agreement, if a short sale, copy of shoret sale acceptance letter, Escrow receipt from end buyer to show funds in escrow or letter of approval to show funds will be in escrow at closing.

We also do Extended Transactional funding, where our team likes to be out of the deal by day 40. Longer terms are available but need to be discussed.

Extended Trans fees are: 02-06 days-3.50%, 06-11 days-3.75%, 12-16 days-4.00%,
17-21 days-4.25%, 22-26 days-4.50%, 27-31 days-4.75%, 32-40 days-5.00%.

Docs needed: A/B and B/C HUD and Sales Agreement, if short sale, approval letter from bank, verification of end buyers financing with all contingencies removed except appraisal, title report, appraisale, insurance binder naming funds provider additional insured/endorsed, earnest money deposit must=down payment requirement by lender, executed assignment of earnest money letter, signed fee schedule acknowledgement.

Additional info: Nationwide title/escrow company must be used, and escrow officer must be familiar with A-B-C Transactions. If closing in LLC, Corp or other entity they must provide documentation verifying company is legal to do business in the state the property is being purchased.

Next line of business. I fail to see where anything I stated on Transactional funding is not accurate. Also, if anyone wants to report back to you about deals we discussed, thats fine. I can tell you that those who inquired about HM loans, were informed of it's being costly and they decided to forego using it.

Discussions on transactional funding ended up in not being what those who inquired wanted. As I said, DG'ers are not my only clients and as a matter of fact very few if any are.

I would love to have more DG'ers because they understand real estate investing and really are out there making things happen.

Lets cut to the chase Michael. Many here are great at locating deals. They just do not have the funds or access to funds readily and they are open to anything.

You have private funders who do your deals, thus putting you in a different position.

I am here because I like to learn about things I don't know. I make my services available to those here after I read their posts and determine that they could use my services. I invite them to send me a PM and I make every attempt to make contact. I have missed a few here and there and thats my fault, for being one man and being busy.

I am not getting rich here and thats probably because I refuse to take advantage of anyone. I am beginning to shy away from hard money because some funders take advantage of peoples need for funding by charging fees that are out of reach of most people. The charge commitment fees in commercial deals, some don't some do. Many do not want to pay huge fees, huge points.

There is no sense in offering something that is out of the reach of many or will never meet their needs. With transactional funding, I am certain that it meets the needs of many people.

One thing I am confused about and that is this. You basically paint a picture or try to for others to demonstrate that I don't know what I am doing with lending, but then you say you may use me. If you have access to private funds to do your deals, why do you need to use me? Drop me a PM if you want to discuss that privately.

No need for a PM. I don't always use private money (only have 2 times actually)
I like doing assignments directly with home owners($250 earnest) and when doing REOs or short sales I use (believe it of not)Transactional funding and double close! There was a little sarcastic intent on using your funding. I knew not one person would PM me! I never said you don't know what you are doing and I know you will get better. Just don't state things as fact, maybe say I heard this is true, what do you think (to our DG family!) and get answers and learn.

Good Luck,
Michael Mangham
MD Home Acquisitions LLC

Go to this website. It has a wealth of information, and will clear the air on assignments and flipping.

http://reiclub.com/articles/illegal-flipping-lender-seasoning

YIKES!!

JimmyB wrote....
"You are required by law to hold a legal ownership interest in the subject property in order to consumate such a transaction"."

Could you please ask the gentleman what specific law he was referring to so that we may all know?

To those of you who are saying an assignment contract is illegal, could anyone, just one person, cite a law or code which addresses this? Not hear say from an attorney, not a title officer, not a real estate agent, not a loan officer....just the plain factual law that all these people are claiming it violates. Any takers? I think many are confused.....to wit

"As more and more banks were burned by assignees who bought positions in their sales contracts but did not perform, they decided it was time to start to control the selling process and force the original buyer on a contract to purchase the property. Thus, they started inserting a “Non-assignability Clause” in their contracts, which goes something like this:

"This Contract may not be assigned without the written consent of Buyer and Seller. If Buyer and Seller agree in writing to an assignment of this Contract, the original parties to this Contract remain obligated hereunder until settlement.”

http://reiclub.com/articles/non-assignability-clause

......In an A>B>C transaction, banks selling REO's now are requiring each part of the transaction to stand on it's own with it's own funds. As far as I know, this is not based on legality, but it is based on newly instituted bank procedures.

Kelly's original question was about assignments, not transactional funding. Yes, assignments are legal, and as MANY have pointed out in this thread now, it is NOT AT ALL the same as acting as a RE agent. YOU ARE SELLING THE CONTRACT, PERIOD!!

Every one of Dean's top students have done (and are doing) assignments, WITH RE attorneys involved in the process. I would just encourage EVERYONE, if this is a strategy you want to try, look for an RE attorney in your area that DOES understand it and WILL work with you. More than likely they will also know a title company that is familiar with assignments, so you kill two birds with one stone. And above all, IGNORE THE NAYSAYERS and go for it. I liked KimmyJ's post. We let our minds tell us if we will succeed or not, and WE have control over our minds, do we not?? Let your passion and your "WHY" override your fear. Let the facts settle those butterflies and JUST DO IT!!

Wishing everyone the very best!! Good luck Kelly!

Rina

P.S. Thanks to everyone who contributed supportive info. And yes, double-closings are legal as well.

William Bronchik, National Real Estate Attorney, as well as a property investor whop specializes in Flipping. Has also written several books on the subject.

Thank you, Rina, for coming and bringing some sanity back to this discussion!

Vincent

Sorry I went off track in some of the postings above!
I was just trying to protect my fellow DGers from false info on assignments.

Happy Investing,
Michael Mangham
MD home Acquisitions LLC

That's fine...this post is loaded with he said/she saids.....but what does THE LAW say? If I say according to HUD a manufactured home is categorized as a mobile home, I can prove that by ..... "HUD interprets "mobile home" to include a manufactured home, as defined in the National Manufactured Housing Construction and Safety Standards Act of 1974. (42 U.S.C. 5402(6).)" I just want ONE of these individuals who has said an assignment is illegal to cite the law or code an assignment violates. Anyone? Anyone? Bueller?

Here's a great (and funny, AND informative) old thread by Anita on assignments. At the time I was struggling to do my first one. I can totally relate to what the newbies are going through. Very frustrating. You just gotta push through it. (EVERYONE I spoke with here in WI, including my own realtor and title company said it was illegal! This was August, 2008)
Well, I had to seek out a new attorney and title company willing to try it, and now we ended up paving the way locally for it to be commonly understood (I give all the credit to those here on DG who pushed me. )

http://www.deangraziosi.com/node/8713

Happy reading! And let's go make some money!!

Rina

P.S. Here's another one by Matt Larson (the king of assignments. well, I guess just the REI king period. )
http://www.deangraziosi.com/real-estate-forums/everything-else/32490/ass...

and another good one:
http://www.deangraziosi.com/real-estate-forums/contracts/21624/how-do-i-...

I do assignments all the time and they are not illegal. Here is an interesting piece created by a RE attorney explaining the different facets of a contract. If you scroll down to #14 he gives a good explanation of how it is done. Assigning has been going on for hundreds of years. Read this and scroll down to #14...........Missouri Attorney

http://www.mobar.org/data/esq09/nov6/Dagenais%20-%20Real%20Estate%20Cont...

As far as contracts go,I found that anything on contracts can be negotiated and agreed upon or they can be entirely refused. Purchase price,riders, addendums, assignments, earnest moneys, closing dates, repairs, they are just more clauses in the contract, whether or not either party accepts them is their decision. Who said that there can't be anything negotiated in a real estate contract, either from the bank or personal party. Did you forget what legalities the banks, mortgage companies, R E agents, appraisers followed when they created this housing mess?
You add "and/or assigns" to your contract, the bank accepts or declines. Real simple. Is the Assignment Police coming to my house to arrest me?

jimmybtx, whether doing assignments or trans.funding, you have options. If the bank says the property is not assignable, then you use trans. funding. What's so hard to understand?

Still waiting for someone/anyone to cite the law or code regarding the legality of an assignment. The bottom line is, if you structure your purchase and sale agreement properly, an assignment is not illegal.

I really want to do assignments of contracts. I had an agent tell me that it's not illegal, she did one years ago. Of course had another guy tell me I better have a license because I can't be compensated in any real estate deal if I'm representing the seller or buyer. I think I would be representing myself? But now I'm told that banks these days do not want to do these kind of closings because the buyer might back out at the last minute. Do all of you out there have buyers that don't need financing then, they have the cash for the purchase of the home so financing is not needed?
Thanks,
Peggy

are assignable unless it states in the contract that it can't be assigned.

I WENT THROUGH THE SAME THING. REAL ESTATE AGENTS SAY IF YOU GET YOUR LICENSE THEN YOU CAN THEN YOU CAN DO THE LEASE THING. MAYBE ASK DEAN ABOUT A BACK TO BACK CLOSING.

to put it simply, some states are legal, some arent. ask a lawyer tho, not a bank

RJB
www.****
Free Real Estate Lead Generator

This is what I have been reading the last few days. The way I understand it, transactional funding is a bridge loan allowing you to actually purchase the property, turn around and sell it as the owner of record. Instead of a simultaneous close, it is a double close (2 separate closings).

Jimmy, Can you tell me if I'm close? Aslo, do you have any info that might help me in New York?

Thanks for sharing!
Denis

A purchase contract with an assignment clause or addendum is a legal sales activity where the purchaser of a property sells their rights and obligations to another buyer with the sellers consent.

The final buyer assumes all of the original buyer's duties and obligations under the original purchase contract. This includes provisions for deposits, included items and final sales date. Upon completion of closing and when legal transfer of Title has occurred, the final buyer is granted Title to the property.

See: Assignment to purchase contract calculator

How Does A Purchase Contract Assignment Work?

Let's examine how an assignment deal might work. You find a property and put it under contract to purchase it from the seller. In the purchase contract, you negotiate the right to assign the contract. Then, once you find a buyer, you fill out an assignment of contract, collect your fee and help facilitate the closing with the seller and final buyer.

Assignment Example:
You find a property with a purchase price of $110,000 that is worth $180,000. You also feel that there are $10,000 in upgrades and repairs, which leaves an equity position of $60,000.

Typically, you will have spent a lot of time, money, and expertise to find a bargain, negotiate the terms, and get the property under contract. By putting the property under contract, you now have control of the property and the equity in the property.

You find another party that recognizes your equity position of $60,000 and strike a deal to sell them your position in exchange for an assignment fee of $10,000. So, you give up your obligations and rights to $60,000 in potential profit for $10,000 current profit.

This new buyer pays you before closing at the time you assign or sell the contract to them. If the new buyer pays you to little up-front or at closing (sometimes classified as a fee to clear title), they may lack the enthusiasm to perform.

Assignments in New Residential Developments

Opening and closing sale opportunities exist for those who have the timing, or patience to time their purchase with the developer or builder needs. A typical developer will pre-sale some of the lots in a new subdivision or phase to builders for model homes and custom homes. Some lots are sold at wholesale volume discounts to builders who then, offer reduced sale prices to generate buying activity.

Builders will sometimes use an assignable contract when a property is not yet completed and the person that bought it originally is unable to close the transaction. If the property value has gone up and is worth more, the builder may benefit with an assignment at current market value. This typically works with new construction, when it can take up to a year before the house is built and the sale is closed.

Assignment Example:
Assignor enters into a sales agreement to purchase a lakefront lot for $100,000 from a developer as a pre-sale in a new phase. Assignor pays a total deposit of $25,000 with the remaining $75,000 due in three months.

Two months later Assignor decides to sell, and thereby transfer, contractual rights and obligations to purchase the lot for $20,000.

Assignee missed the chance to purchase a lot when the developer was pre-selling. The phase is now sold out. Assignee wants to purchase Assignor's rights and obligations for the asking price of $20,000.

Assignee pays to Assignor $20,000 plus replacement of the deposit of $25,000 which equals a total of $45,000.

When the original closing date transpires, Assignee owes the developer the balance of the sales agreement which is $75,000 (original price less original deposit).

Assignments in Pre-Construction Condo Developments

Through additional new phase price increases and/or appreciation, equity from a pre-built home purchase may build-up. When a new home or condo is reserved with an initial deposit or letter of credit, the profit may be substantial. How much profit can be made at or near completion? It depends on purchase price and market demand. There is no guarantee of profit. However, substantial gains may be realized. Profits can run from 5% to as much as 25% or higher per completed new condo.

Two factors may work in your favor when reserving pre-construction of a new condo or home. (1) Subsequent releases rise in price based on demand. With each additional phase release a 1-3% increase in prices is typical. (2) The longer a home takes to be built, the more appreciation is possible without having a mortgage obligation. If you reserve a $250,000 home with an initial deposit of $10,000 you see an increase in the home value of $625 for every month the project takes to complete, assuming a 3% appreciation rate.

The process of purchasing a new home or condo in the initial sales release or development phase to assign it later requires attention to four important steps.

Step 1: Get to know the different builder, lender and title representatives to find out about their services and policies. The builder, lender or title company may or may not allow you to assign your rights to sell the home prior to it being completed. Read the contract carefully, review all the terms, conditions, provisions, disclosures, and addendums with an attorney and ask questions before signing.

Step 2: Buyers select a pre-constructed home, sign a reservation agreement and get pre-approved by a lender. The buyers put down a deposit which is fully refundable. However, the builder can also back out during this Step or change the sales price.

Step 3: A purchase contract is drafted and a binding agreement between home builder and buyer is made. Buyers typically have a right of refusal rescission period once the contract is signed. At this Step deposit monies may not be refundable. So, be sure to add contingency clauses such as, for the sale of a previous home or attorney review.

Step 4: From the time of the buyer’s initial reservation and deposit, completion of the new home could take up to twelve months. Once the home is complete, closing in escrow is much like a traditional purchase. At this Step, buyers must pay any remaining closing costs and deposits. If buyers elect not to close, any money deposited as the initial down payment will be forfeited. Also, there could be a loss of fees or closing costs paid.

Some Advantages of an Assignment

Small initial investment, typically 1-3% of the total purchase price to control a property.

Since you are not actually closing on the property yourself when you assign it, you don't need to get a special license, a loan, pay transaction fees, pay real estate agent fees or have the cash to purchase the property. And, another benefit is that you never appear on title or public records as having owned the property.

Pre-construction homes and condos are typically offered 10-20% under market value. Similarly, development grand opening and builder close-out sales often reduce prices. With an abundance of re-sale homes, foreclosures and bank REO's there are deals everywhere, which means you often build equity upon the purchase of a home.

Having the ability to choose from the best homes, locations, pricing and financing available gives more choices and achievable return on your investment.

Possible Problems with an Assignment

Lenders are getting very conservative about the loans they are doing. They won't always let you do an assignment of contract because of the unfamiliarity of the new buyer. You may find that the lender will turn it down after it's sent in. When this happens the lender may say that they will only put the name of the person on the original property agreement on the new deed. Without the ability to get the contract assigned, you may have to do a double closing or simultaneous closing.

A seller’s financial condition could affect a closing if there are judgments pending. An insolvent buyer’s problems could affect his ability to get financing or close. A buyer or seller filing for bankruptcy does not doom a sale, but it surely complicates it.

Title companies have been known to limit an assignment fee to 30% of the sales price or they will not insure the policy.

If you accept only a small assignment fee, you are setting yourself up for a possible failure. If buyers don't have enough cash in the deal to prevent them from not closing, you end up not only with a damaged reputation, but you have lost the contract on the property. If the buyer is unable to perform, the responsibility for the contract is still in your hands as you have signed a legal contract to purchase the property.

Some sellers won't go along with an assignment because they have read about what dishonest people have done. They are afraid you will tie-up their property and won't be able to complete the transaction.

In many cases, the buyer and seller each know how much is made assigning the deal. For some people this can be an issue, especially if the amount is considered large. You can try to work with a title company to have separate HUD statements but, some may do this while others will not.

Comparable values in a neighborhood can greatly effect a property valuation. Therefore, Builders, lenders, real estate agents, and homeowners usually want to limit the amount investment property versus the owner occupancy property ratio in a development.

Real estate agents aren't particularly fond of assignment deals because they're services are not necessarily needed.

What information is necessary in An Assignment of Contract?

Since you will be assigning the purchase agreement to an end buyer, you need to insert the right to assign the contract. If the agreement does not state otherwise, a contract is usually assignable. However, by placing “and/or assigns” after your name, you give yourself the right to assign the contract. If, however, there is a pre-printed clause in the agreement that forbids this without the seller’s permission, be sure to cross that part out and have it initialized by you and the seller.

Kimmy, I couldn't agree with you more! I have never had a problem fliping a contract, unless the contract specifically states that it cant be assigned. From my experience, all the naysayers and negative people tell me its illegal or it cant be done I am the one who smiles all the way to the bank!

I have wholesaling down to a science, to where I do it with no money down!!

Thanks Dean!

I have two real estate attorneys that I work with and just spoke to one of them 3 days ago. He is going to be drawing up the Assignment of Contract paperwork for me for my buyers, and I will be stating in the contract that my buyer pays his fees. I got this idea from Matt Larson, who does assignments day and night. As stated above in other posts, all contracts are assignable. I have also been studying for my real estate exam for the state of California, and it is also written in the Principles course that every contract IS ASSIGNABLE! Whether it is real property or personal property does not matter. LEGAL! You are assigning your right to purchase the contract to someone else. It is done every day. You have gotten some very bad information I'm afraid. It is called full disclosure, and as long as you fully disclose, there is nothing illegal about it. Even real estate agents who are investors assign contracts, they just fully disclose that they are going to make money on the deal, and that they are not the agent on the deal. I hope this helps.

can you help me get wholesaling down to a science. I have no money to put down and my credit sucks!!!!

Hello,
I read your post on Assignments. It was an old post dated back to 2010. In your posts you stated that you are a transactional lender. Do you still participate in real estate this way?

Can I find out a little more of your company? I would like help. I am a new Real Estate investor in New York City. I began the institute in April. I wanted to do bird dogging at first but in NY its very competitive and BD doesn't allow for security of your deal unless you lock a place up in contract.

I'd like to learn more about your transactional lending if you are still involved and have the time to work with me.

Thank you,
Summer

I just did one in South Texas with a title company and got a $8000 check at closing. At first I was told they would check into it to see if they could do it. But after I showed them the assignment aggreement signed by both parties, they were good with it. So don't take no for an answer just find a title company that will do it.
Good luck.

Would like more information to work with you on TF'ing some deals I am in >1M. Thanks call me at 713.530.0794 or email Gretchen@TexasInvest.org
Thanks