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Mark in St. Louis

Assignment of Pure Option question

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I have an question about assigning a pure option:

 

I have a pure option with a seller for $152,500.

 

I have a buyer who will pay me $3,000 for the option.

 

I plan to do an assignment of contract and collect the assignemnt fee. Seller knows this and is not only ok with it but is very happy to get his home sold.

 

My question is this...and is really coming from my buyer.

 

Is there any way for the buyer to get the $3,000 he is paying me to be counted as a down payment with his lender.

 

He is qualified for a 95% loan so he will need a $7625 down paynt on a $152,500 purchase price. He was hoping to get the $3000 he is paying me counted towards that $7625. If not it is really like he is paying $10,625 down.

 

Any ideas?

 

Also, do I need to help with the purchae/sale between the buyer and seller after I do the assignment and collect the money?

 

One more, what if the deal between buyer and seller fizzles out. Does the buyer have any rights to his assignment fee back.

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HI, Mark, long time no hear. I guess you've been busy working your deals.......or pondering whether or not the Rams are going to release Kurt Warner??

Good questions, all. Let's have a rip at 'em......

what if the deal between buyer and seller fizzles out. Does the buyer have any rights to his assignment fee back.
No. All you are doing is selling your interest in the subject property. What the assignee elects to do with that interest once he buys it is strictly his choice, concern, and his doing. You are making no guarantees of the availability of financing, for example. And the seller must honor his option to purchase agreement or the assignee has the right to pursue the matter in court. Highly unlikely, however, considering most sellers are happy to have a buyer.
do I need to help with the purchae/sale between the buyer and seller after I do the assignment and collect the money?
No, you don't need to do anything of the sort. Once you assign your interest you are out of the loop entirely. If you want to, you can I suppose. But that's entirely up to you.
Is there any way for the buyer to get the $3,000 he is paying me to be counted as a down payment with his lender.
Now that's an interesting one. I'll venture a guess and say, yes, there is a way. And I would think that would be to locate and work with an investor friendly mortgage broker who understands that all win if he/she is creative enough to make the numbers work out. My suggestion is to have the assignee shop some brokers and see what he can find out. I'd be interested myself.

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Is there any way for the buyer to get the $3,000 he is paying me to be counted as a down payment with his lender.

Three possibilities if you're willing to wait until closing to get your money:

 

Would the lender count it as part of the down if you received your assignment fee at closing, written the way it is now, just included as part of the closing costs?

 

What if you received your payment at closing from a cancellation fee with the seller? Then the seller would have a new agreement with your buyer at the current price PLUS your fee.

 

Possibly using one of the down payment grant programs if your buyers loan allows for gift monies to used. It's not really free money and has to be paid back. The purchase price would just be raised to include it. I don't see any reason why it couldn't be paid off right after closing.

 

One more, what if the deal between buyer and seller fizzles out. Does the buyer have any rights to his assignment fee back.

I would think this is meaning "what if the house doesn't pass inspection," since it sounds as if financing has already been arranged. Maybe you could agree that if inspection doesn't pass you would help him locate another property, instead of just giving the money back.

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Hello, Kimberly, welcome to The Naked Investor. Thoughtful first post. But I want to take exception to one thing you wrote:

Maybe you could agree that if inspection doesn't pass you would help him locate another property, instead of just giving the money back.
I disagree. Any assignee needs to do whatever due diligence they need for their comfort level before they sign the Assignment of Agreement form and pay their assignment fee. Afterwards, the door is closed and the deal is done as far as I'm concerned. Leave the door ajar, even a slight bit, and you'll find weasels trying to enter, (figuratively speaking, of course. Unless you live someplace really peculiar :lol: ).

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Michael (and Kimberly),

 

I disagree. Any assignee needs to do whatever due diligence they need for their comfort level before they sign the Assignment of Agreement form and pay their assignment fee.

 

My buyer is doing exactly that. He is going to have the inspection performed first before we execute the assignment and pay me my fee.

 

Thanks for the quick response.

 

Yes Micheal, we are wondering if Kurt is going to be let go from the Rams. He is a great guy (goes to my church) and I, for one, will be sad to see him go. :lol:

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My buyer is doing exactly that. He is going to have the inspection performed first before we execute the assignment and pay me my fee.
Good. Avoids any sort of issues later on. Collect your fee and move on.
Thanks for the quick response.
I'll put it on your tab :lol: .
Yes Micheal, we are wondering if Kurt is going to be let go from the Rams. He is a great guy (goes to my church) and I, for one, will be sad to see him go.  :lol:
Yeah, he always seemed like a straight shooter, and I've always read he was a devoted family man and Christian. You don't see too many like him in sports anymore.

On a different note, as a Giants fan I am thrilled to see Eli Manning will be hanging in the Meadowlands this fall. It'll be interesting to see if Giants Stadium scoreboard is programmed to go past 13 points for the home team. Now, if Shockey would just shut up and catch the damn ball.......

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Mark, good to see you again!

 

Couple of questions:

1) What marketing did you do to find the seller?

2) What marketing did you do to find the buyer, and how long did it take?

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Doug,

 

Direct mail to expired listings to find the seller. This took about 3 mailings over a 6 week period.

 

Bandit signs to find the buyer. I put them up all around the area on Sat morning and take them down on Sun evening. Took about 2 weeks on this house...but it is a bread and butter home...always easier to move.

 

Hope this helps!

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Mark, very cool! I'm planning on using signs for selling too. It's very impressive that it took only 2 weeks with signs up only on the weekends!

 

Have you tried any other marketing avenues, specifically for finding pure option deals?

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jmccade,

 

My sign are 18"x24" yellow corraplast. I buy them blank, staple them to a wooden stake, and hand write the following on them (both sides) using a fat black marker:

 

Lease To Own

3bed/2bath

xxx-xxx-xxxx

www.EzHomeHelp.com

 

The phone number drives them to a recorded message. I don't answer calls directly from prospective tenant-buyers. I listen to the messages and call back the ones I am most interested in. The others go into a database and I call back when I have the time.

 

I have found that I get more calls from the hand written signs but they also don't stay up as long. If you want to have a chance of your signs staying up longer (possibly all week) get the pre-printed ones that look like you bought them from Lowes/Home Depot.

 

Just my two cents.

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Mark, I thought this was a pure option? If so, where does the "Lease to Own" come in? Or do you just use that as a teaser to get them to call and run their credit to find someone who can qualify now?

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Doug,

 

Lately I have been getting the seller to sign both the CA docs and the Pure Option doc.

 

I basically tell them that I will be marketing the home as a "Lease to Own" but that I will also get callers that just want to buy...who are already pre-qualified.

 

Most of the sellers I have dealt with would actually rather sell their home anyway.

 

The thing I have found is that the "Lease To Own" signs pull in about 60% interested in lease to own and 40% interested in just a purchase. Even the lease to own callers typically want to know "how much" to just buy it.

 

So, I just cover both bases up front with the seller.

 

It has been working great that way. Either way, I'm looking for about 3%, so they (seller) still save money with me vs a Realtor.

 

It is actually a pretty good pitch to use with sellers to get them to do the CA. Knowing that you could also sell it for them makes it seem like a no-brainer.

 

Heck, I have even been getting them to sign blank Assignment of Agreement docs up front. It just makes it all go so much smoother.

 

Hope this helps.

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Mark, nice work! I thought about doing something similar a while back and here you are actually doing it.

 

So are the sellers willing to take whichever you get, or do you give them the option of accepting a T/B or a cash buyer?

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They get whichever one comes to me first that is qualified and will put the most money in my pocket. :D

 

The only danger in presenting both options to the seller at the same time is that they may say they are only interested in the pure option agreement. I basically overcome that by telling them...NOPE....not interested.

 

I'm basically most interested in doing the CAs....and I let them know that. I add on the pure option if they are still interested in selling.

 

Sometimes they are...and sometimes the are'nt.

 

But the CA always comes first.

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