Double Contract Vs. Assignment Of Contract
Here's the scoop:
FMV is $90k, I'm contracting it for $25k. House needs a little TLC, say $5k. My plan is to sell the contract (is my lingo accurate?) for $55,000. LarryTX, I read your outline and you suggest for a >$5k spread doing a Double Contract, right? First question is, does anyone have comments? Second, if I Double Contract does that mean I have to close on the house with the seller first, then with MY buyer? Go easy -- this is my first deal. 
If those numbers are correct, you have one HECK of a great deal. How did you establish FMV? How do you know repair cost? This would be a great flip (read ASSIGNMENT) to a rehabber.
You should be able to assign and collect your fee on the HUD1 as an assignment fee without needing to do a double closing, Do not get greedy though. If your number are TRUE, then I think a $10k max profit is in order, because the rehabber has other costs like holding, fix up, closing (two closings, one to buy contract from you, and one to sell retail to end buyer), so they make more, but they risk MUCH more.
Good luck, Dave
I, too, thought it was a pretty sweet deal! I came to the FMV by running comps -- 7 of them. As for the repair costs, I'm guessing since I've never done this work myself. It's cosmetic, though.
Yes, I was thinking about making about $10k on this -- I'm a strong believer in Karma.
So, a HUD1 is a form used at closing? I just googled it real quick and that's what I'm getting. So, can't I just sell the contract, cash myself out and walk away from the deal? Is this what the role of the HUD1 form is?
Sorry for so many questions, I just don't want to screw up my first deal! Thank you so much for wisdom![ Edited by crazyfnmama on Date 05/12/2004 ]
The reason doing a double close as apposed as reassigning your rights to the contract really has to do with understanding who your buyer/investor is at what sort of financing they plan on using to fund the transaction.
For example if you decide to go with a investor who is going to use a hard money lender (HML) for financing then the HML is going to want to see the contract if and when they see the original contract and they see that you are going to make $10,000 on the deal then they are not going to want to fund your fee. That is just they way they are. So, in order to get around this if your investor is using a HML you draft up a new seperate contract outlining the sale but you better be prepared to close first with the original seller before you sell it again.
Now if you have a buyer/investor who is ok with you making $10,000 and there is enough of a spread for them to profit from the deal then reassign your contract to them and draft a agreement between the two of you otlining the details.
HTH
PM if you need additional guidance.
Larry Brusatori
awesome! Thank you both for your wisdom!