I got an email earlier this week from a guy who I’ve never met before. From what I can tell, he’s fairly new to the investor/wholesaler game judging by the emails he sends out and the questions he asks (ie- who has a hard money lender, etc). I’ve never met him before, and have no idea how much business he does. However, I do get a couple emails a week either asking questions, or, posting a possible deal he found.

This specific email says that he has an investor looking for a property on the East Valley. He wants a quiet, nicer neighborhood at about 70-75% LTV. When I replied explaining that I can find him a deal for his investor- he tells me he won’t work with a REALTOR® because he can’t tack on ‘his fee’ to then pass on to his investor. NOT TRUE.

I try to explain how assigning contracts work, and after 2 attempts of follow ups, I never hear back from him. It’s too bad, too- he could’ve just had this deal that just slipped away. So, for all the others out there- let me explain quickly how you can assign a purchase contract.

You get a home under contract, with ‘<your name> and/or assignees’ as the buyer. Most investors will do this so that they can assign the contract to a different buyer or entity before closing escrow. The way you do this is you simply ask your title agent to assign the purchase contract to whoever you want before closing. It’s that simple. The kicker is whoever is taking over the contract, must stay within the terms of the original contact as written. As long as they do, it’s smooth sailing. Many REALTORS® and banks have a problem with this, simply because they don’t understand it. They tend to cringe because most investors will use this tactic making it difficult to stay current on the paperwork. It also tips off the seller/bank that you don’t intend to close on the property yourself, which explains why most banks hate it as it as they see it on their short sales all the time (which, have a high failure rate of closing).

As an investor myself, I ALWAYS write a contract with my LLC, and/or assignees as the buyer. Even if I don’t intend on flipping the paper, you never know what will come up before closing. And yes, this is what’s deemed as ‘flipping paper’ in the seminar world.

So back to this ‘investor’- if he wanted to flip the contract to his buyer, and tack on a little fee for himself- he just charges his buyer an ‘assignment fee’. Most guys will try to snag around $5,000 for this ’service’ of finding the deal. How this is handled is entirely up to the middleman- but most will take care of that through the title company to ensure it’s done properly, and everyone’s happy. It’s perfectly legal, and done all the time with most experienced investors. I wish this guy luck, and hope he comes back after getting more educated from his ‘mentor’.