Disadvantages of assignment agreements
Hello how are we. I recently have someone who wants to buy my option contract but they want to pay me at closing. However in the assignment clause they have not specified a closing date my contract expires in 60 days. How do I protect myself if the buyer defaults and the homeowners who house will be foreclosed on if he defaults. I might want to market the property to others. He is buying the contract for 20k.
bigredd,
Having assigned one contract, I'm still fairly new at it. I'm knee deep in rehabs right now. However, and this is a big "however", I've attended some fairly high-powered investment group meetings lately, and they say to "do the right thing". By that, they mean that this is a small world, no matter how big it seems. If you commit to buy a place by virtue of assigning the contract, you need to be capable and willing to close the deal yourself if your assign falls through. Do what you say you're going to do, and you'll last a while. Otherwise, you'll earn a quick name for yourself as I've seen others do very swiftly.
For example, my mentor tied a junker up on contract for 25K, assigned it to a rehabber for 3K. The day of closing, the rehabber backed out. She had to close the deal herself the following week with hard money. It was the right thing to do. Remaining ethical is this business is important if you're to last in it. Evaluating each deal as though you may have to close on it changes your perspective a bit. Now, when I tie a property up to flip, I plan on taking title to it myself and completing the rehab as a contigency plan. Just a thought. Best of luck....
Eric
If the rehabber signed a binding assignment agreement, wouldn't that be a fail-safe method of closing the deal and not having to commit to the vendor?
QueenTess,
Legally, you're right. Reality is that you have to sue the guy for non-performance and nobody really does that on small deals like this; it's a cost/benefit problem. Donald Trump once sued a guy for non-performance in a similar situation, but something tells me there was enough at stake to make it worth his while.
Your right Eric in the investment community weather you new people know it or not a bad name has a way of getting around use your best effort