How to Assign a Real Estate Contract.
Flipping houses has many connotations. Investors buy a property, rehab and renovate and then sell for a tidy profit. This requires a lot of work. There are house finders also known as wholesalers, flippers or bird dogs that find good deals, get the property tied up and under contract, and then find and assign the contract to the actual buyer for a fee. This process is known as assigning a contract, and requires little if any money.
1. Locate a suitable property.
Write an all cash offer to purchase. Once all parties have signed, take it to a title company or escrow company so that they can get it ready to close by doing a title search, ordering a survey and home owner's association information.
2. Make an offer.
The offer should include the verbage "and or assigns" after you are name as the buyer. You should also retain the right to inspect and reinspect the property prior to closing, giving the seller at least a 30 minute notice before any inspections. This allows you to let other investors come and see the property to make a buying decision.
Get the seller to put a lock box on the door to help facilitate entry if they are not home.
Write in an escape clause in special provisions that will allow you to terminate the contract at no fault if you are unable to find another buyer. An escape clause could be as simple as "the offer is subject to my partner's approval."
3. Find a buyer who wants the home.
Have them execute an assignment contract with you, effectively taking over your position to perform on the contract based on the terms and conditions set forth in the contract. An assignment fee will then be collected from the new buyer prior to closing. This fee is typically $1000-$3000, but can be anything that is mutually agreed upon. Also, have the new buyer reimburse you for any earnest money that has been deposited. Hopefully there was none required on the original contract.
4. Collect the fee.
Give a copy of the assignment document to the title company with the buyers contact information. That's it. You've just tied up a property, assigned the contract, and got paid prior to closing.
This article was written by PocketSense staff. If you have any questions, please reach out to us on our contact us page.