Tim Bell walks through an assignment of contract form used to transfer property purchase rights to a new buyer. The example shows a $10,000 assignment fee, a non-refundable wholesale deposit of at least $5,000 upfront, and the rare cases where it gets refunded: if the seller backs out or the title can't be cleared.
Questions this video answers
$10,000.
At least one-half of the wholesale fee (example: $5,000 if fee is $10,000).
If the seller declines to sell before contract expiration or if the title cannot be cleared for sale.
Chapters
Okay, so now we're going to talk about the assignment of contract form. You recall that in our first exit strategy, we have the contract with Sam the seller, and then we're going to sell that contract. We're going to assign that contract to Bob the buyer, and then Bob is going to go in and close with Sam the seller. That's how it works. Remember, we don't actually own the property. We just own the right to buy the property. We own the contractual right to buy the property. We own the agreement. So that's what we're selling. As a consequence of the fact that we're not selling the property, we're just selling the agreement, we're going to use a different form and that different form is called an assignment of contract form. Now, in the packet of information that I sent you, there is a blank one and there is a filled out one. So we're going to go through the filled out one. Okay? All right, so you can see it says at the top here, assignment of contract. Tim Richards, the original buyer, assigns to Bob Buyer, the new buyer, the purchase contract on 12345 Ocean Avenue, long beach, blah blah, blah, between the original buyer, that's me, and Sam seller, the seller, dated whatever the date of the original contract was, the contract is being assigned for the amount of. And that's where you put your assignment fee or your wholesale fee in there. Okay? In this example that we've used throughout all of the lessons, $10,000. Okay? Now, as it says here, upon execution of this assignment of contract, the, the new buyer, the assignee, that's Bob, hereby agrees to pay the original buyer, the assignor, that's you or me, a non refundable wholesale deposit in the amount of $10,000. Now notice that the assignment fee and the upfront wholesale deposit are the same. Okay? In a perfect world, I want to make sure that I get my entire wholesale fee up front. Now, occasionally you're going to run into a buyer who doesn't want to pay that whole $10,000 fee. My strong recommendation to you is that you get at least one half of your wholesale fee up front from the buyer. Okay? So in this case, if our wholesale fee was $5,000 or I'm sorry, $10,000, then I'm going to get at least half. I'm going to get at least $5,000 up front from that buyer in the form of a non refundable deposit. Okay? Again, this is one of the techniques that I use to keep my buyers involved, to keep them engaged, to keep Them obligated to the purchase of the property. By giving me a relatively large non refundable deposit, I find that many fewer of them actually default. Many fewer of them actually don't close. Okay? Because they know they're not going to get their deposit back. And it says non refundable in here twice. Okay? So now occasionally you'll run into a buyer who will complain about giving you the money non refundable. They may say something like, well, what if the seller changes his mind, decides not to sell you? Or what if the title can't be cleared? What if there's some garbage on the title that can't be cleared off of there? Well, if we scroll down a little bit here and reread the next little paragraph there it says the new buyer acknowledges the wholesale deposit is non refundable except only under the following circumstances. So, and then those circumstances of course are, number one, the seller declines to sell at any time before the expiration of the contract and or the title can't be cleared for sale. So if the buyer is concerned about not getting the earnest money back, if one of those two things happens, then of course those two provisions are in there that cover them. So if the seller changes their mind, decides not to not to sell me the property, or we can't clear the title, there's too many problems with it or whatever, then yes, Mr. Buyer, I will give you your non refundable deposit back, but those are the only circumstances under which I will give you your non refundable deposit. Okay? As it says here, underneath the assignment fee area, it says wholesale deposit to be credited towards the agreed upon assignment fee at closing. So if you don't get the entire wholesale fee up front, then it's telling you that the 5,000 you get now will be credited at closing and the balance will be paid at closing. Okay, buyer. And then it further says, new buyer accepts all the rights, obligations and responsibilities of the purchase contract executed by the original buyer and the seller of said property. Okay, that's just saying that they're agreeing to take the contract as is without any changes or anything like that. Okay? Now it says by signing this agreement, the new buyer hereby agrees to fulfill all the conditions in terms of the above referenced agreement, including, but not limited to all settlement requirements as originally stated. There's a place for you, the assignor, the original buyer to sign and date. There's a place for the new buyer to sign and date. And then if you decide to have it notarized, which you may or may not want to. There is a place for the notary to sign and indicate their witnessing of the signatures there. So that's the assignment of contract form again. This is the form that we use to sell our contract with Sam to Bob, the buyer.
