Assignment Of Contract Real Estate Illinois State

If you’re new to real estate investing, there is a term called “contract assignment.” If you have not come across this term or you are unsure of the intricate parts of contract assignment, I am going to spell it out. If need be, re-read this article again and again. Also do not be afraid to ask questions in the comment section below.

We are in the prime selling season in most markets. During this time, investors are normally busy trying to lock down as many properties as possible. In our market, Phoenix, we are seeing an influx of buyers looking for deals. I recently had a conversation with a group of investors looking to get their hands on almost anything that will generate a profit. It would seem that we have not learned from the previous market crash how the real estate climate can change in an instance. My philosophy is ride the storm and assign as many real estate deals as possible.

If you have sat through any get-rich-quick guru pitches, the majority of them will introduce contract assignment wholesaling, but without giving you all the steps involved. Here is what they are referring to when they say “make $5,000 in the next 60-90 days.”

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What is a Contract Assignment?

Short and simple. This is when you first find a property a seller is willing to sell significantly below market value. You then resell that property to another buyer, normally a real estate investor, at a higher price.

Can This Be Done?

Absolutely, I’ve done numerous transactions in Phoenix, although it is not as easy as it’s normally taught, however it is a proven real estate investment strategy with a very low barrier to entry.

 How Exactly Does Contract Assignment Work?

1. Find a motivated seller.

First let’s begin with what a motivated seller is. This is an individual who NEEDS to sell a property normally very quickly. There is usually some sort of distress going on in their lives. There is a huge disparity between want to sell and need to sell. Knowing which category your seller falls into is the first step in identifying how to handle the situation.

If I want to sell, there is no since of urgency. There’s normally no timeframe in which to finalize the sale. However, “need to sell” sounds like this :”I have to sell this house now because I’m moving to Maryland to take care of my ailing mother, and I have no other family members in the area.” This is a “need to sell” scenario.

Meanwhile, “want to sell” sounds a lot different: “I’m curious to see what my house is worth because I may be selling next year.” As you can see, there is a reason behind the need to sell versus the second scenario, where there is just curiosity.

There are numerous ways to find motivated sellers, such as driving for dollars, newspaper ads, internet marketing, direct mail marketing, etc. If you begin to research real estate marketing, you will find many forms, but make sure you use a combination of multiple strategies.

Related:Wholesalers Get a Bad Rap — But They’re Essential to Investors for These 3 Reasons

2. Get the contract.

There are many assignment contract templates on the web; however, I make sure an attorney at least has laid his/her eyes on it and approves the document. There are two reasons this is so critical. First, you will have comfort knowing your document is legally sound. Second, you will be able to utilize that attorney as counsel in the event you find yourself in litigation.

There is critical verbiage that need to be added to your assignment contract “and/or assigns.” Why is this so critical? This verbiage authorizes you to re-trade the property to another buyer who is interested in the property. When you receive the signed contract, you now have equitable interest in the property and have some legal standing in what happens to the property.

To provide clarity to the seller if asked about the “and/or assigns” clause, I inform them that we buy numerous houses, and we often have funding partners that we work with. These partners ensure we have more than one set of eyes to run the numbers.

3. Submit contract to title.

This process may differ in each state, but there is normally either a title company or a closing attorney that will conduct a title search. The title search will check the historical records of the property to make sure there are no liens on the property. It is important not to sell a property with a defective title. The title company or the closing attorney is a independent third party hired to make sure the deal is fair as agreed upon in the contract.

4. Find your buyer and assign the contract assignment.

Here is another leg of marketing. Working to find your end buyer can be daunting, but once you have a solid buyer, you can begin the process of closing the transaction. First, when you find your buyer (via Craigslist ads, Zillow, email marketing etc.), you should require a nonrefundable earnest money deposit.

Having the buyer furnish an nonrefundable earnest money deposit secures your position in making a profit. This money will become yours whether the transaction closes or not. The earnest money can be as much or as little your require within reason. I’ve seen deposits of hundreds of dollars up to $5,000. When the buyer deposits the earnest money, you then know that your buyer has a real interest in the property and is willing to move forward. This fee is normally held by the title company or the closing attorney.

5. Get Paid!

This is what most of us want to hear. We get paid when the end buyer wires in the funds for the deal. This money will cover what you stated you were willing to buy the property from the seller for, as well as your fee for facilitating the transaction. As an example, if you told the seller you would buy the house for $45,000 and you then sold your interest in the property to the buyer for $50,000, then your assignment fee is $5,000.

Related:The Harsh Truth About Wholesaling Newbies Need to Know

It is important that everything is disclosed because I’ve seen transactions stall at the closing table due to the seller or the buyer does not agreeing with you as the assignor making money. Again, this is why you inform you seller specifically that you are going to make a profit; however, ensure them that they will still receive the amount agreed upon for the price.

Other Considerations

It is standard practice that assignments are done only on profits of $5,000 or below. But if you are comfortable with the seller and the buyer, it’s possible to assign a contract for a much higher fee.

In the event you are not comfortable with all parties in the transaction, a double close or simultaneous close will keep both legs of the transaction anonymous. Be aware not all title companies will agree to conduct a double close, so this needs to be discussed in advance.

Contract assignment cannot be done on all transactions. HUD homes, REOs, and listed properties present many barriers when trying to perform this type of transaction. With many REO properties, the lender will ensure there is a seasoning period — normally 90 days — before you can resell the property.

As you can see, there are some clear benefits to contract assignment for big paid days.

Investors: Have you ever assigned a contract? Any questions about this process?

Let me know your thoughts with a comment!

Contract and Initial Forms

Contract for Deed Form
»This is the form for creation of the contract for deed agreement between Seller and Purchaser. This form allows the Seller and Purchaser to elect specific requirements concerning purchase price, interest, and payment terms. Also, fees related to insurance and taxes can be set in the direction of Seller or the Purchaser at their option before the signing of the agreement.

Real Estate Disclosure Statement
» This form is used when the property being transferred subject to the contract for deed contains a residence. Sellers that wish, or are required, to disclose the residential property conditions should use this form to describe conditions as they exist at the time of the contract signing.

Seller Disclosure Notice for Lead Based Paint for Contract for Deed
» This form is used when the property being transferred subject to the contract for deed contains a residence. Lead based paint could be present in less modern structures and pose a potentially lethal health hazard to children and sometimes adults. A Seller wishing to inform Purchasers of the risks associated with lead paint may do so with this form.

Seller's Disclosure of Financial Terms for Contract for Deed
» This form is similar to the annual accounting statement in that it provides information regarding payment and financing terms of the contract for deed. This form is used at the time of signing rather than as a yearly update of payments.

Accounting

Seller Annual Accounting Statement for Contract for Deed
» This form is used by the Seller to provide an annual accounting of the payments made toward the contract for deed by the Purchaser. This form provides a basic description of the payments made and the payments remaining due under the Agreement.

Buyer's Request for Annual Accounting Statement
» Should a Purchaser desire an accounting statement be prepared by the Seller at any time during the term of the agreement, this form would be used for that request. In order to maintain reasonable use of this form, it is discouraged for Purchasers to use this form more than once per year.

Assignment

Assignment of Contract for Deed
» This form is used when the Seller wishes to transfer his or her rights under the contract for deed to another person or entity. An example would be when the Seller's right to receive payments from the Buyer is transferred to a bank or similar establishment.

Notice of Assignment for Contract for Deed
» This form is provided to the Purchaser by the Seller when a Seller assignment has occurred. This form notifies the Purchaser of the new Assignee and provides any new addresses where payments should be sent.

Default and Forfeiture

General Notice of Default for Contract for Deed
» This is a general default notice that can be used by the Seller to notify Purchaser of being in default. This form allows the Seller to notify the purchaser of the reason why the contract for deed is in default, the performance required to cure the default, and the Seller's planned remedy in case the Purchaser does not cure.

Notice of Default - Past Due Payments Under Contract for Deed
» This is a notice of default provided by the Seller to the Purchaser when the circumstances of the default concern delinquent payments toward the purchase price of the contract for deed.

Final Notice of Default for Past Due Payments under Contract for Deed
» This is the same notice as the Notice of Default - Past Due Payments, but provides a more stern warning to Purchaser that if payment terms are not met by the given deadline then the Seller will resort to the available actions against the Seller to either cure the default or cancel the agreement and receive damages.

Notice of Default for Breach of Contract Terms Other than Non-Payment
» This form is used by the Seller when Purchaser may not be in compliance with specific requirements of the contract for deed that are not related to payments. This form is used to point out those terms of the contract that are not being met by the Purchaser and show the Purchaser what must be done in order to regain compliance.

Notice of Intent to Enforce Forfeiture Provisions Under Contract for Deed
» When a Seller wishes to enforce the forfeiture provisions of the contract for deed notice of the such intention should be provided to the Purchaser. Since forfeiture often is the best remedy, this form should be used in almost all cases where a default is imminent. If you are unfamiliar with the remedy of forfeiture and the process of using this form an attorney consultation is recommended.

Final Notice of Forfeiture and Demand Buyer Vacate Premises Under Contract for Deed
» This form is used to notify the Purchaser that all grace periods to cure default have expired and Seller has now exercised his contractual right to pursue forfeiture of all past payments by the Purchaser and repossession of the property that was subject to the Agreement. Sellers should be careful to follow any specific jurisdictional requirements regarding forfeiture before the use of this form.

Disclosures

Real Estate Disclosure Statement
»  This form is used when the property being transferred subject to the contract for deed contains a residence. Sellers that wish, or are required, to disclose the residential property conditions should use this form to describe conditions as they exist at the time of the contract signing.

Seller Disclosure Notice for Lead Based Paint for Contract for Deed
» This form is used when the property being transferred subject to the contract for deed contains a residence. Lead based paint could be present in less modern structures and pose a potentially lethal health hazard to children and sometimes adults. A Seller wishing to inform Purchasers of the risks associated with lead paint may do so with this form.

Seller's Disclosure of Financial Terms for Contract for Deed
» This form is similar to the annual accounting statement in that it provides information regarding payment and financing terms of the contract for deed. This form is used at the time of signing rather than as a yearly update of payments.

Misc.

Buyer's Notice of Intent to Vacate and Surrender Premises Related to Contract for Deed
» This form is beneficial in the sense that it allows the Seller some notice of a Purchasers intent to vacate. The Seller would still maintain his rights to sue for breach of the Agreement, but sometimes the contract for deed Purchaser is judgment proof in that nothing would come out of a lawsuit even if won by the Seller. With Purchasers that may fall into this risk category, a Seller may benefit from the use of this form by the Purchaser.

Learn more about Contract for Deed by using our Contract for Deed Questionnaire


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