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sarge006

HELP HELP HELP!!!

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I am very close to my very first deal going thru--but I need a little help walking thru the last steps. This property was a fire damaged duplex with an ARV of 200,000. It has no mortgage or liens and owner (who was already payed by insurance Co.) wants 8,000. to walk away. I need a definite walk thru with final steps. I got a PURE OPTION signed by owner seller for 8,000. I am assigning it to my buyer for 12,000.. If there is no mtg--am I assuming there is no formal closing? Does the buyer bring 2 checks--one to my company and one to seller? Where does this take place? If someone could give me their experienc here I would greatly apprciate it. THANKYOU

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Sarge, easier than you think. The buyer only need pay you the assignment fee that is agreed to,(certified check or cashiers check, only). From your post I can't be certain if that is $4K or $12K. But whatever it is, he pays you directly. You and he sign and date the assignment agreement, and each keep a copy. That's it; you're done. From there the buyer needs to contact the homeowner directly and arrange to exercise what is now his option to purchase.

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Mike--you said that the buyer and myself are the only 2 partys that sign the ASSIGNMENT AGREEMENT? But, at the bottom-the seller is also to sign? Does he see what I am making on the deal??

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Some deals and agreements require the seller's permission to assign. However, the Pure Option Agreement does not. See Paragraph 9. On the assignment agreement, where it asks for the seller's signature, you can either delete it entirely, or write in something to the effect of "Seller's Signature Not Required. See Attached Option to Purchase Agreement, paragraph 9".

Eventually he will know that you are making a profit. So what? Did you tell him you were a non-profit organization? He agreed to receiving $8K from the deal. If that was good last month, and you're making good on that, the seller has nothing to gripe about. Don't assume he will. And if he does, let it fall on deaf ears. Your only concern at this time should be closing the deal with your assignee.

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Mike, One more question on this deal. Because there is no mortgage--would my buyer (after paying me my assignment fee) just give the seller what is owed him (8K) cashier check and in return receive the title to house? I ask this because my end buyer asked me. SARGE

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That's mostly correct. But both parties should protect their interest in the deal and have legal representation. Suggest the buyer contact a title company or attorney and ask how best to do this so everyone gets what they are expecting. The buyer will want to be certain the title is clear, there are no back taxes owed, no additional owners on title, etc. The usual due diligence, in other words.

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Hopefully--last question, Just found out my Seller still owes about 7500. in taxes to township. He apparently thought the bank was paying this. I told him this would have to be paid before we can proceed and provide proof it was paid. What process do I follow here? My buyer is ready to roll with this.

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Not much you can do here, Sarge, other than letting the homeowner know that he needs to get all straightened out on his end before the deal can proceed. You mentioned above the seller has already received his insurance settlement, so this should not be a sticking point.

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Finally, No taxes owed and no liens. Because this was just a pure option (not exclusive)--do I need to protect my position with a Memorandum of Option filing or just trust that my end buyer isn't going to go around me and go right to the owner or wait till my option expires?? Mike--you've been so helpful with my first deal--I'm nearing the end of this one (hopefully my first successful deal).

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In the real world, if someone wants to screw you over badly enough, they will. With that said, sure, you can file a Memorandum of Option. That will provide some protection. But as you said yourself, if the buyer and seller are in cohoots, they could easily wait for the option to expire. What's your take on these folks? Do you think they would try to cut you out of the deal?

Your best protection is to keep control of the deal and this can best be accomplished by keeping homeowner and your optionee apart.

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Nobody hands over a title in real estate. We use a DEED (and it better be a warranty deed) to do this. By DEEDing your land to someone, you are giving them the title. an option legally binds them to deeding you the property should you bring the specified amount by the specified date.

 

You can do your own deeds, or you can get a title company (or a lawyer) to close the deal. Title companies specialize in making sure the title is clean (no liens or other parties claiming title) and can get your deed prepared for you. It's one thing if you are deeding it to yourself, but I would not prepare a deed for someone else because that is called.... practicing law without a license.

 

On assignment contract law:

1. any contract may be assigned unless there is a specific clause saying you can't. again: if the contract is silent on the matter you can assign it

2. when you assign a contract, you are LEGALLY IN BETWEEN the seller and assignee if the seller doesn't specifically agree to release you from any liability. this release from liability can be in the original contract ('the buyer has the unqualified right to assign his interest to another party with some blah blah about no longer being in the middle') or it can be in the assignment of agreements (seller agrees to indemnify and hold harmless the assignor blah blah). Now in the case of options, there's not much to worry about being in between: nobody can force you to close or sue you for damages because you didn't. in the case of a LEASE, if your assignee doesn't hold up his end, and you have nothing in writing getting you out of the middle, the original seller could come back on you if your assignee isn't holding up his end of the bargain.

 

ON MEMORANDUMS OF OPTION. Your option is a cloud on the title, regardless if it's recorded. Any Title Agent has a legal obligation to not close on a property they know has a cloud still in place. If you recorded that option, the title agent would be a serious ding-bat to close and there's no way they could get the title insurance to go through anyway. In the event of an unrecorded option, they still shouldn't, but they still can. And what are you going to do? Go pay for a lawyer to collect your $xxxx from the seller? sue the title company? You're probably screwed! Damn!

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