Contract assignment is an essential part of the real estate business. It is a wholesale strategy that facilitates the sale of a property between an owner and an end buyer.
Generally, there are three primary parties in an assignment contract. They are assignor, assignee, and obligor. In real estate, this arrangement works simply. Firstly, you find a property seller who is willing to sell a property below the market value. After that, you resell the property to a real estate investor at a higher price.
The assignor (seller) transfers the property rights to another party. The assignee (you, the buyer) fulfills the remaining obligations under a contract. The obligor (the real estate investor) is a party that is obligated to make payments under a specified contract.
Stages in a Contract Assignment
First: Look for a Seller with an Urgency
A seller who is in need to sell his property on an urgent basis is your right target. The sense of urgency is crucial from a buyer’s point of view because only then the seller will sell the property below the market value.
Learn the difference between want and need. If a seller wants to sell the property, then there is no sign of urgency. But, if the seller is curious to sell the property due to some emergency in their life, they will sell the property at your price without any hesitation.
Second: Hire an Attorney and Draft the Contract
The reason to hire a lawyer is to make sure that you draft an entire contract. There are several templates available on the web that you can use. But a lawyer is the best person to work on your contract.
Also, some legal clauses are required to add in a contract. One of which is “and/or assigns” clause that authorizes you to re-trade the property to another buyer. Hiring a lawyer also ensures protection against any litigation matters in the property trade.
Third: Check for Liens on the property
This is one of the critical stages of a contract assignment. You need to submit the contract for a title search to a third party. This third party could be a closing attorney or a title company who can help you with your Bergen county title, and the process to title differs accordingly.
The historical records are checked to ensure there are no liens on the property. A property with a defective title should not be sold. This entire process is to ensure that the deal is fair and just as mentioned in the contract.
Fourth: Find an End-buyer for the Contract Assignment
Many buyers post their requirements on real estate portals. You can contact them. Or you can also find your buyer through Zillow, craigslist, or email marketing. The buyer must be willing to pay the earnest deposit amount immediately.
This earnest deposit money is non-refundable, and it also secures your position in making a profit. It is an indication that the buyer is genuinely interested in buying the property. But, either way, the earnest amount becomes your fee irrespective of the transaction closes or not.
Fifth: Receive the Payment
It is also known as the facilitating fee. For instance, if you told the seller that you would buy the property for $80,000, and then sell the property to another buyer for $87,000, then your assignment fee is $7000.
HUD homes, REOs, and listed properties have many barriers to perform such transactions. There is a seasoning period of 90 days with many REO properties, which means you cannot resell the house before the seasoning period ends.