So you have a property under contract and you aren’t sure what to do with it now. How do you wholesale real estate when it’s a Non-Bank owned property? Well the first thing you have to do is find yourself a buyer. Once you do this there are a few ways you can wholesale a property in today’s market and this article will discus Assignments.
Assignment of Contract. This is probably the easiest and the preferred way of many investors to wholesale a property. The reason being is that you don’t have to close on the property. You are simply assigning your rights of the contract to another investor, for a fee of course. According to wiki
“Assignment of rights under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if party A contracts with Party B to sell his car to him for $10, party A can later assign the benefits of the contract – the right to be paid $10 – to party C. In this scenario, party A is the obligee/assignor, party B is an obligor, and party C is the assignee. Such an assignment may be donative (essentially given as a gift), or it may be contractually exchanged for consideration. It is important to note, however, that party C is not a third party beneficiary, because the contract itself was not made for the purpose of benefitting party C. However an Assignment only transfers the rights/benefits to a new owner. The obligations remain with the previous owner”
Reading that still confuses me a little bit, but I figured it would be good to include it in this article. When you wholesale real estate by using the assignment method, most of the time you will have a separate agreement that both parties (you and your “buyer”) will sign that states you are assigning your rights over to your buyer. You could even simple write it in the margin of the original contract. Once the agreement is signed there must be consideration passed between the two parties, and this consideration is your assignment fee.
There is no rule on how much you can make for an assignment fee. New investors seem to settle on $5000 though, but it’s really a matter of what you can sell the property for that will determine your profit margin.
Not all contracts are assignable though. Banks do not let you assign their contracts. There will be verbiage in the agreement that stats “This contract is un-assignable.” There are some people who have had success in assigning a bank owned contract by telling the bank in order for you to close they have to sign this addendum to allow the assignment. These are rare cases and probably depends on how desperate the bank is to get rid of the property. This would fall in the “it can’t hurt to try” category.
A few additional items about assignments…
- All contracts are assignable unless they specifically state it is not allowed.
- Some people teach that when you put your name on the contract and “and or assigns” which will allow you to assign it.
- You can generally not assign Hud properties
- You can not assign a Short Sale
Assignments are the least risky way to wholesale real estate. The reason is that you don’t have banks messing you up or buyers not being able to get a hard money loan. If they can pay you your assignment fee you sign the agreement.
Look for the next article where I will talk about Double Closing…
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