Contract assignment is the easiest way to wholesale. The days of “bird dogging” are long gone, you cannot receive a “finder’s fee” for bringing a buyer to the table so your options are now assignment contracts, double close or option contracts.  When you have found that seller with equity in their property (I know, I know, sounds crazy but they are out there), that contract now gives you an interest which you can assign to another investor or “end buyer”.  There is a lot of discussion about profit margins and closing via assignment or closing via double close.  Some investors are under the assumption that if you close on a double you can somehow “hide” the profit you are making on a file.  This is a costly misconception in more ways than one. Not only are you increasing your liability on a double close but you are also increasing your cost (in some cases).

On a double close (as the buyer), typically you would pay “acquisition costs” and then turn around and sell the property in the same or next day, paying the cost to sell as well. When I say you increase your liability I mean that whenever there is a chance you are not fully disclosing your intentions for profit, you put yourself in a position of increased risk that one of the parties to the transaction will feel slighted and sue you or your company or both.  The profit will be disclosed in public records by the affidavit of property value that is recorded with the special warranty deed.  Bottom line, full disclosure = limited liability!

In an assignment transaction there is complete and full disclosure to all parties.  Now, instead of ever being listed as an owner of record, you are merely assigning your interest in the contract.  Let’s use this scenario: You sign a contract with the owner of the property and show as buyer John Doe, LLC, and or assignee.  You now have the right to assign the contract. You will also disclose in your contract that you are an investor and plan to assign the contract/property for profit. If one or more of the members of your LLC holds their real estate license in the state of Arizona then that disclosure should also be made in the contract. Now you have full disclosure!  You find a buyer (assignee) to take over your interest in the contract for an “assignment fee” of $4,000.00.  You would supply the buyer (assignee) a copy of the contract and an assignment agreement.  The assignment agreement will dictate the terms of the assignment.  Don’t leave your earnest money on the table – remember to include the replacement or reimbursement of earnest money in your assignment agreement.  All parties will sign off on this agreement, you, (the assignor), the buyer (assignee), and the seller.  Again full disclosure on this gives you very limited liability.  The other selling point for you as assignor is that you pay no fees, you just collect your initial deposit back and whatever assignment fee is agreed upon.  Your title company will require a 1099-m form from you, the signed assignment forms and where to send your money.

It is not all sunshine and roses when assigning your contracts as most REO (bank owned) sellers and short sale lenders will not allow this method to be used in their transactions.  I know in investing there is supposed to be no such thing as easy money but the assignment contract is as close as you can get to it.

Remember, Chicago Title is here to help with anything you need and just a phone call away!

By: DiAnna Jackman

Senior Escrow Officer/Branch Manager

Chicago Title Insurance Company