Option To Buy Question...
Hi,
I keep hearing how, in some cases you can pay a small deposit with an option to buy (in say, 45 days) and then find a seller, never take deed and make money as if you had purchased the house and sold it.
I understand that this is done with some sort of "and assigns to" clause.
My question is, how does this work with showing your buyer the house. I would think that the owner might not like the fact that your are reselling the house at a higher price and might not make showing the house easy for you.
Just something I've been wondering. Any comments are appreciated.
Erik
Not sure if you'e talking about purchasing just an option from a property owner or signing a purchase contract with the right to assign and to access the property on reasonable notice. assuming you're talking about the latter...
If you assign your purchase contract to someone else (who will be closing with the seller), and show the property when the seller is there, you can introduce your buyer to the seller as your partner, which is true. Your partner is buying the property for the price the seller agreed to. The difference here is that your partner is also paying you an assignment fee.
Example: you agree to purchase the property from the seller for $100K. You assign your contract to your partner for a $10K assignment fee. Your partner closes with the seller for $100K.
Once your partner signs an assignment agreement with you, he would pay you your fee and then subsequently close with the seller. Once you get the assignment agreement signed and collect your fee, you are out of the deal. Some people might advise you to lie to the seller. I don't feel that is either appropriate or necessary.
Thanks for the reply. Yes, I was talking about assigning. I'd never heard of an assignment fee.
So you're saying that rather than trying to get a property with enough equity to make money on the deal, you just resell it for the same price that you are paying but you charge a fee. Humm. That actually makes sense and is a better way to handle your seller.
So my "Partner" acts as an investor (as far as the seller knows) and I'm just the middle man. I like it.
Now, how difficult is it to get someone to pay an assignment fee? Is this a standard practice and if so, is there a standard %?
Thanks so much for the info. This is much more clear now.
When I use a purchase option contract, I tell the owner I am going to buy the property from him and then resell to my end buyer. I tell him that I just don't know who my end buyer is because I have many on my list that are waiting for me to get another house. I tell the seller that if I find a buyer coming in with his own financing then I am going to step out of the middle and put them on the purchase and sales agreement . I first get the buyer to fill in and sign the P&S contract then I go to the seller and have him sign an assignment form which is really just instructions for the closing agent to pay me at closing the difference between the amount on the purchase option contract and the amount you sold to the buyer. After the seller signs the assignment form, then I have him sign the P&S contract.
Be careful with the way you handle "stepping out of the way". If you put your buyers on the original P & S contract, it sounds an awful lot like you are acting as a real estate broker. If you are not a licensed agent or broker, you risk breaking the law.
I would put my name on the contract followed by "and assigns". Then you can legally sell the contract to another buyer and assign it to them. Consult an attorney if you have to, but CYA. Good luck!