Contract/assignment?

In Dean's book, "Profit From Real Estate RIGHT NOW!" describing an I.E.E deal Starting on page 151, he states that you(invester) tell the seller that your commision doesn't come from his pocket.
He descibes a deal where the investor would offer seller 100K for his property and the investor would make 10K. He then goes on to say that the investor would draw up a purchase contract with the seller for 110K. When the investor finds a buyer for the property(I'm assuming for 110K)the investor draws up a "Discharge of Agreement to Purchase Statement" Which states that the investor is being paid to make null and void the original purchase agreement between the seller and the investor.
Although the funds for this would come out of an escrow account (buyer's funds), technically and the way a seller would (I think) interpret it, the seller is actually paying the investors 10K cut.
Is this a missprint, or am I not getting something? It seems to me that the investor's First purchase contract with the seller would be for 100K, then when The investor would draw up contract signed with the seller and buyer agreeing on 110K, then "Discharge of Agreement to Purchase Statement" would be signed.

Also on page 155 of the book, second paragraph of "Investor Disclosure Statement and Seller's Acknowledgment" It states; " This sale shall be contingent upon the investor finding a buyer that shall qualify for financing according to accepted criteria of ___________________ and its funding sources."

What is this for? The investor wouldn't know (or care) where the buyer got his funds as long as he(and the buyer) got the money. Couldn't you just put "any qualified lender" in the blank.

And what is to stop the buyer from simply waiting for the original purchase contract to expire in the 14 to 30 days, then going to the seller to make a deal bypassing the investor?

I would appreciate any help with these issues as I am a newbie ready to make some deals and I won't feel confident if I don't totaly understand these contracts. Thanks in advance for the help.

I was wondering those things too

I have not closed on a deal yet, but I do know that to keep your buyer from waiting for your contract to expire is this. You tell them you are selling the property for X amount of dollars. That's it. He doesn't need to know how much you locked the property up for. Just what your fee is. He is getting a great deal and I am sure (from the buyers I have talked to) they are not in the business of shady practices. They just want properties at great prices. All of them are familiar with wholeselling (again the ones I have on my list) and they are all in favor of me making a profit as long as the property (at my rate) fits within their criteria. It has good equity for them. Why would they potentially throw away many other deals that I would bring to them in the future by trying to go behind my back for what $5K? $10K? Whatever your finders fee is believe me it is nothing in comparison to what you will make for your buyers. I think they know this too. They want to make money, and if they can find someone to bring them lots of equity, they don't have to work at it, and they aren't splitting the deal I think they are all for it.

Hope that helps. This is how I view things although I haven't just come out and asked a buyer. I just know if I was buying properties I would not bite the hand that feeds me.

Richard
Bothell, WA

Yes you can have him place a deposit...even through he is not in the area he can place a deposit. You might want to stipulate that it is non refundable. The deposit ensures that buyer that you are removing the property from your sales list for him to buy. It is security for both you and him.

No no no....LOL! Hang on a minute mnoble!
If you contract a house for $100K...then you want to make $10K for yourself as a wholesaler this is what you do.....

1. Sign a basic purchase and sale contract between you and the seller of the house for $100K.
2. You and seller both sign the Investor Disclosure Statement and Sellers Acknowledgement statement. This is for disclosure telling seller you intend on purchasing the property for XXXX and are going to immediately sell for a profit. It say that the sale is contingent upon investor (you) finding an end buyer for the property. It also protects you from the seller showing your property or receiving back up offers.
3. Sign the Discharge of Agreement to Purchase Statement (you, seller and buyer) this tells everyone that you are making $10K on the deal for yourself. I know Dean made the discharge statement to be signed between you and the seller BUT in my case I had to add the buyer to satisfy my title company. Title companys like total disclosure to make themselfs feel more protected.

After all paperwork is signed and you have the keys in your hands call your investors and tell them you have a house for $110K.
Find a buyer and get him to pay you your assingment fee of $10K and write the assignment fee contract and then tear up the contract between you and the seller and write up a new one between the new end buyer and the seller.
My title company told me to just add an addendum stating that the new buyer will carry through with the original contract and all the clauses etc...

Some buyer will want to wait and pay you too on closing day...so may have to wait till closing to get your $10K...it is all negotiable.
Hope this helps!

Sistreat,

Wouldn't you use the Investor Disclosure Statement when you are using the IEE stradegy with buyers who need financing? I (again still working on first deal) was under the assumption with assignments you just need to have the Purchase & Sale contract between myself and seller, then use the Assignment of Contract with my end buyer, and if I choose for extra protection, have all parties sign the Discharge of Agreement to Purchase. This is of course when my end buyers are cash buyers. Do you use the IEE strategy just on everything because it is more forthcoming with all parties from the start? I have no problem with that. That is what my agent and I always disclose from the start, but I was wondering if you put it in writing from the start too just to make everything crystal clear for everyone and make everything smoother? Thank you for the information by the way. You posts are always filled with the things we need so thank you again and I hope you and your family are having a great weekend.

Richard
Bothell, WA

found a cash buyer on 1st call spoke to him a little ,about investing and possible bird dogging or finders fees.he said that he would pay me cash for referals and if he buys house would give more.how much % should i ask for and is it correct to pay cash.

you should as on a 3% rate thats $1,000 this is what I'm doing .

Hello to all DGF,my name is Steve and I was wondering about foreclosures and REO If you can do these with no money down and will the bank allow you to assign or purchase these properties with the intent to assign.Big thanks to all DGF.

Most banks will not let you assign a REO. You would have buy it & then sell it to your buyer, either a double closing; you could use trans funding, private lenders, conventional mortgage, or of course cash. As far as a no money down, we have never had a bank willing to do 100% financing, despite both our credit scores being over 800. But Indiana Joe has, I believe it just depends upon the bank & the property location. Gary & Jill

I am new to assignments too and still trying to understand the process before I do anything. I read your comments sistreat on 'HOW TO DO THIS' but I was left wondering, if you write up the contract for the buyer and seller, 2 things, wouldn't the seller expect $110 at the closing? And wouldn't a check be cut at closing for $110 for the seller?
Basically, what I'm trying to figure out is, how does that $10,000 come from the buyer and get to me the investor.

SECONDLY - Is it necessary to have a lawyer assist with the process and if so, wouldn't I be coming out of pocket to pay that lawyer? And what is the lawyer helping with any way? Is he just helping with the writing up of the contract?

THIRDLY - Is it legal to do assignments in any state and can any 1 contract work for any state?

Harday7 (great name by the way) I was wondering the same things. Thank you for asking them. I haven't done my first deal yet because of these kinds of questions.

what is the difference between an iee and assignment? I have read the book over and over and I don't see a difference, or advantage of one over another. please someone inform me thanks

Finder's fee is generally 1k, so I hear.

You should have this form signed first as this is your exit strategy in case you do not find a buyer.

Working on an assignment deal now and was wondering what contingency clauses to put in the contract that will give me a way out if I can't find a buyer.

I like doing assignments and did one with an agent not long ago. He put in there, and/or assigns by such a date, and the other exit was contingent on financing.
In a FSBO I recently signed for an assignment, we have assigning, getting financing, and also upon the inspection of the home.
I have had no problem with it, and have used the Purchase and Sale agreement on this last one.
But make sure the exit is spelled out right with no loop holes that you can stuck with. Always have a third party go over it, or an atty. Just to protect yourself.
I called an atty here in Wis and just asked a question, said I had just started investing and which contract should I use in Wis.. He answered my question, but also gave me some more "free" tips. I also told him that I would like to be able to use him for future contracts, which makes them more willing to talk with you further the first couple times, at no expense!
Hope that helps some
Sandi
Sandi

Good Point Richard

Debbie aka canada
WA State

thanks that has got me going in the right direction