Assigning A Contract...
Hi -
I have heard that when you flip a property you must somehow go on record at the settlement or face breaking the law. It seems that the gov. wants their slice of the the pie too :-( Does anyone know if simply having an "assignment of contract" form satisfy this requirement?
Thanks!
Chad
I'm not sure what you're asking.
Are you talking about paying capital gains?
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Apparently there is a law that a "middleman" in a real estate transaction must go on record. I am assuming it is for reporting income and that money has been made in the transaction. Otherwise, I could be making boatloads of money without any recorded income. I have been told by a settlement attorney that this is mostly for the mortgage note industry but that it applies to the sale of real estate as well. Unfortunately she could not recommend a course of action to remain within the law.
I believe what you are talking about is having to show your assignment fee on the HUD settlement statement. From my research, it appears that producing an incorrect HUD to the lender of a new loan, is illegal. So ... if you buyer is paying cash you can do whatever you want. If your buyer is getting a new loan, then you have to figure out how to get your assignment fee.
HUDs are not for government taxation. So do not worry about the government wanting their slice. The HUD is suppose to be a true representation of the closing. Lenders count on this to not get defrauded.
The easiest thing is to only wholesale to cash buyers. But if your buyer is getting financing, then you can show up on the sellers side. Say you have a contract for 50k and you assignment it for 5k. the easiest thing is to rewrite the contract for 55k and giving you 5k as a "contract premium". I have actually never done this.
Brenda
AHA! That makes sense, Brenda! Thanks for your input. I guess it is a non-issue for me. Sometimes these local REI meetings can cause more confusion than help!
The settlement company or attorney should get a copy of your invoice for the fee. This is probable what the local REI Meeting was talking about. The right thing to do is to put your fee on the HUD this will show everyone involved who got what.
Lori
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