OfflineHey everyone! I'm finishing up my research and putting the last touches on my paperwork/contracts (want to have all my ducks in a row before I swoop down and hit the ground running 
).
My question is concerning the IEE process. Here's the setup for the question:
Sally Seashells wants to sell me her seaside chalet for $110,000. She accepts my offer and I rush over to sign the 4 simple contracts (total of 6 pages, believe it or not!):
1) Investor Disclosure ("I want to immediately sell the property for a profit of approx $10,000).
2) Purchase Option (I created this as a separate contract from the purchase contract, to keep the purchase contract as "clean" as possible. "Sally grants Riffmaster Chris a 30-day option to purchase the property").
3) Purchase Contract ("Sally Seashells is selling her chalet to Riffmaster Chris for $110,000.")
4) Discharge of Agreement ("I, Riffmaster Chris, terminate all contractual obligations on any/all contracts related to the purchase of Sally Seashells chalet for a fee of $10,000.00, payable directly to me upon closing").
Ok, so all the paperwork is done. I get Mr. Bill Ding to purchase the property for $120,000 from me. I call Sally and tell her the good news. But...
From what I understand of this process, once a buyer is found the original purchase contract is "torn up". A new contract is drawn up, listing Sally as the seller and this time, Mr. Ding is the buyer - not me, so his name is at the top of the contract and he signs the bottom.
My question: Where does it say, specifically, that Mr. Ding the buyer will be paying the additional $10k? The Investor Disclosure simply tells Sally the seller that I intend to resell her chalet for $10k more, and the discharge agreement/"invoice" basically says that Sally owes me the $10k for backing out of the original contract. This should be coming directly from the proceeds of the sale (difference between $110k and $120k), so Sally doesn't actually pay - it really comes from Bill Ding the buyer.
Do I increase the sale price on the purchase contract (by $10k) when it's rewritten for Mr. Ding, or is there another piece of paper that I'm missing - a contract between me and Mr. Ding that states he'll be paying $10k more than the face value of the purchase contract I created with Sally?
I missed something along the way. Any suggestions?
Thanks!
Chris
Quotes about me from other users:
"...high and mighty ... I have to bring the hammer down on them"
- My response: "The view from OUTSIDE THE BOX is a lot better than from INSIDE."
I think the process in which this is being handled is very clumsy (My opinion). You may be better off simply signing a purchase option with right of assignment and then assign the contract when you find an end buyer.
In a lot of states, doing your IEE process comes pretty damn close to acting as a real estate agent...and that is something that you cannot do.
Please do some additional research on your process.
BTW, I believe you cannot simultaneously hold a signed purchase contract and a signed option to purchase contract as the former trumps the latter.
Always Looking to Acquire Houses | Always Looking to Amaze Investors
I agree with Bill. As I read your post, I thought it was a long way around a normally easy deal.
Purchase agreement and the right to assign it is much easier.
Sandi
Bill is correct, this is what I do all the time.
1. Get Sally Seashells to sign the ASSIGNABLE purchase and sale agreement for the selling price that she is happy with. Fully disclose that you are an investor and intend to make money on this deal. You will either keep it, fix it up and sell it for a profit or sell it to a fellow investor for a profit. You will be selling it for more than you pay her.
2. Assign your purchase and sale contract to your buyer using the second contract, the "assignment of contract" contract. This contract states what you paid and what your fee is for the grand total your buyer will pay.
Purchase and sale contract from Sally $110,000
Your assignment fee $10,000
Total purchase price for Mr. Ding $120,000
Take your two contracts with MR dings earnest money check to the title company.
Call Sally and tell her you had a buyer offer you $120,000 and you are going to sell it to him and make $10,000 now.
Your $10,000 fee will show on the HUD and you will get a check at closing.
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
Thanks, guys!
I completely understand - and agree whole-heartedly - that the assignment process is MUCH easier, which is one reason I had such a long/confusing question! In the book, it describes a fairly simple process: create a contract with *you* as the buyer (not "or assigns"), and when you find a buyer, re-write the contract with the new buyers name and submit a "discharge of agreement" paper that "charges" the seller (or buyer) with your fee for tearing up the original contract.
I took a serious look at it, considering that assignment deals are not allowed on short-sales in Florida and they may cause heartburn for REO's as well. So, I was just trying to add another tool to my toolbox for just such cases.
I think - based on everyone's input - it would be best for me to steer away from these for the time being and stick with the more simple assignment deals, perhaps re-investigating this down the road.
Thanks again!
Chris
Quotes about me from other users:
"...high and mighty ... I have to bring the hammer down on them"
- My response: "The view from OUTSIDE THE BOX is a lot better than from INSIDE."