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Cooperative Assignment


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#1 Guest_Craig S - CA_*

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Posted 22 April 2005 - 11:19 AM

I've been investing in foreclosures for several years, and using the same lawyer the entire time. He is a savvy long-time investor himself and has done lease options and foreclosure investing himself. I called and explained that I will be getting into Cooperative Assignments and explained it to him. He basically told me he wants no part in even reviewing the contracts because he is so sure there will be legal problems.

He basically said that you are putting 2 parties together that have no idea what they are doing and hoping they will close once it's time to exercise the option. When it falls through, they will get together and look at the wreckage of the deal and figure out that the only one that made money on the deal is that slick investor.

This scared me, because my attorney is a risk taker normally. If you consider that only 25% of these deals close, there are likely to be some people who feel 'screwed over' at the end of the deal. I appreciate the fact that there is a paper trail making a case that what I'm doing is legal, but the courts look at the essence of what my intentions were and what I actually did. I also appreciate the recommendations of others on this board that you stay involved and 'offer to help' them close, but if I keep contacting these people asking if they need help with anything or keep coaching them, I fear that this will actually work against me because it implies that I still have an interest in this transaction going smoothly when I'm trying to create a case that my obligations and interest in the transaction ended the second I assigned the contract.

My lawyer told me to just do SLO deals, so I stay in the middle and make sure things go smoothly, so that's what I'm doing for now. However, I really want to do some CA's. My lawyer isn't paying my bills, so I don't want to just not do it because he advises against it. Have any of you been sued by a tenant/buyer or seller because a CA didn't close? How have you all protected yourself from this scenerio?

Thank you in advance for your response.

Craig

#2 MichaelC

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Posted 22 April 2005 - 11:49 AM

Craig, I must respectfully disagree with your attorney. While his intentions may be admirable, he is, like most attorneys, erring on the side of caution because there is something before him he isn't familiar with and doesn't understand.

If you consider that only 25% of these deals close, there are likely to be some people who feel 'screwed over' at the end of the deal. I appreciate the fact that there is a paper trail making a case that what I'm doing is legal, but the courts look at the essence of what my intentions were and what I actually did.

Considering the ease and frequency with which folks sue one another these days, it doesn't surprise me in the least if someone feels "screwed over" and decides to make a payday out of it by using the courts. Truth is, anyone can sue you for anything. We can't stop 'em from trying. But winning is a whole 'nother thing. As you noted, we have a paper trail. And it is a paper trail that, in my opinion, covers me quite well. I am fully confident in my agreements should I find myself in a legal matter over a CA. And for what it's worth, the contracts I use were drawn up by a California based attorney many years ago. But then, two lawyers reading the identical document and interpreting it differently shouldn't surprise any of us.

I also appreciate the recommendations of others on this board that you stay involved and 'offer to help' them close, but if I keep contacting these people asking if they need help with anything or keep coaching them, I fear that this will actually work against me because it implies that I still have an interest in this transaction going smoothly when I'm trying to create a case that my obligations and interest in the transaction ended the second I assigned the contract.

Helping someone and smoothing some ruffled feathers should they occur will go a long way towards keeping all parties happy. However, I draw a distinction with something you said, Craig. I don't initiate phone calls to either party in a CA. My feeling is no news is good news. If someone calls me with a question, I'll offer my opinion. That hardly puts me back in the deal, in my opinion.

Have any of you been sued by a tenant/buyer or seller because a CA didn't close?

By a seller? No. I have had a few t/b's get squirrely on me, and who have made some noise because they "suddenly realized the $5K option money wasn't refundable". Riigghhhttttt... Nevertheless, sometimes taking the path of least resistance is the wise move, even if we believe we are wholly correct in our position. I've offered to give back some portion of the option money to make the problem go away. And that usually does it. It's about the money. It's always about the money. I might offer $1,500 and ultimately agree to give back $2,500 of the $5K originally received. I didn't like it. I still believed I was in the right and would have won in court. On the other hand, who needs the aggravation and stress? I've got in-laws for that. :ninja:

#3 Guest_Craig S - CA_*

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Posted 23 April 2005 - 10:44 AM

Michael,

Thank you for your insights and words of encouragement. I thought of something that might reduce the chance of the seller and the tenant/buyer screwing everything up. Maybe I could help them setup an escrow/servicing account with southwest title (someone on this board suggested them) at the same time I sign docs with the tenant/buyer. That way the escrow officer will handle getting docs notorized by the seller up front and make sure payments are processed, credits are applied, and that the closing goes smoothly. They can also coach them if their is any confusion down the road, so they will become the most visible 'expert' involved with the transaction and therefore the most obvious TARGET if things go wrong. Maybe everyone is already doing this :ninja: Is it a good idea?

#4 MichaelC

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Posted 23 April 2005 - 11:33 AM

Is it a good idea?

To the extent that the title company allows you to use them this way. In a sandwich lease, anyone of us in the middle of the deal is advised to employ the services of a third party for making payments to, rather than directly to the homeowner. That's just common sense.
In a CA, that same advice applies for the t/b. Whether or not this makes the chosen title company liable for anything that might possibly go wrong is for the pointy headed attorneys to work out.

#5 Adam King (MI)

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Posted 25 April 2005 - 07:05 PM

I have to throw my 2 cents here.

I am a FIRM believer in full disclosure!! I have had CAs criticized like this before by attorneys AND real estate brokers. And after telling them how I work, they have all said the same thing. Okay, I guess you’re doing it right.
It's very simple: Educate everyone to the best of your ability and DO what you intend!

The most important thing to do is make sure your seller knows the facts to the best of your ability. (Your ability is growing just by reading this) That simple….

Yes, I have had sellers come to me when things go wrong. What did I do? I helped as much as possible, JUST LIKE I DID WHEN I FILLED THEIR PROPERTY! (Read my posts for reference) What happened? They were in a stronger position than they were before.
Let’s not forget about the tax advantages etc. I also ALWAYS make sure they have the option to show ALL OF THE CONTRACTS to their attorney.
So, if you’re worried about looking like a “slick investor” scamming people, write something in your agreements that the seller was allowed to seek legal counsel before signing. I encourage it!!!!!
Just had to vent,
Adam

#6 Kimberly

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Posted 25 April 2005 - 08:47 PM

So, if you’re worried about looking like a “slick investor” scamming people, write something in your agreements that the seller was allowed to seek legal counsel before signing. I encourage it!!!!!

Adam, I know you don't use MC's Agreements, but for anyone thinking about ordering the manual...MC's Agreements already INCLUDE the seller being advised to seek professional legal, tax, and financial counsel.

#7 Adam King (MI)

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Posted 25 April 2005 - 08:56 PM

Kimberly,
I don't "only" use MC's agreements. But I do use them AND more importantly, his techniques. Wouldn't be where I'm at if I didn't.
Regards,
Adam

#8 Kimberly

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Posted 25 April 2005 - 09:58 PM

Adam,

I was thinking of some posts of yours on another forum -- you had a LONG list of docs and steps. Didn't know you'd started doing things the "simple" way -- not easy, just simple!

Based on your posts in the last month or so, I'd say you're using the "techiniques" more than anyone else on this forum. Will this month be a repeat of last?

#9 Adam King (MI)

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Posted 26 April 2005 - 07:22 AM

Kimberly,
I still use my "complicated" system, but I have switched over to MC's option on several occasions when I don't use a seperate PA. I have also started to take security deposits as well as considerations. "The reason for that is also in his manual" ;)

As of income this month? I'm doing pretty well, but I don't think I'm going to do quite as well as last month.
I do however, plan on making the $75K months a habit! B)
Regards,
Adam
PS According to my calculator, I have fallen just short of the 5 figure mark. I still have a few more days though! :D
Damn trip to FL. ;)

#10 MichaelC

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Posted 26 April 2005 - 02:37 PM

Damn trip to FL.  :lol:

Oh, sure. Blame it on me. :lol: By the way, the waitress at the Bada Bing says hello... :wacko:

#11 -Tony-

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Posted 28 April 2005 - 05:58 PM

Oh, she's called a waitress now?
Tony

#12 MichaelC

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Posted 29 April 2005 - 09:12 AM

Oh, she's called a waitress now?

<{POST_SNAPBACK}>

In case Mrs. King visits the board... :D

#13 AmyB

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Posted 12 July 2005 - 02:04 PM

Hmm.. just found this doing some searches on CA's and found the last couple comments amusing...ahem...
anyhoo...Adam, did you make 75k? more than once? cool! :ninja: Do you do a little bit of all types of investing or just CA's?
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