Is contract assigning is legal in my state?

I thought of something else after I sent my first response. If we had an real estate agent submit all the contracts wouldn't that be a way around the problem. As an agent I submitted all the paperwork to the seller or buyers agent and once everyone was agreeable to everything it went to the settlement table where the Title company took over. If we got the agent to be with us at the time we approached the seller (who has not yet obtained an agent) and convinced our agent that he/she would get the full 6% or whatever that the seller would pay, wouldn't that work?

I don't know what that idea would mean in terms of the dollars in the overall deal though so that the investor who locked up the contract still doesn't have to come out of their pocket with any money.

Anyone want to weigh in on that thought?

newage8767

I have been in contact via email with a couple of successful investors on the Western shore of MD. I am gradually getting some info on the ins and outs. If you or anyone ekes is interested in what I find - PM me and we can share info. There are also few REI groups on this site where we may want to all hook up. The more we all find out the better off we will be.

I am trying to get started but I am not sure if this is legal in Louisiana. I feel that there i money to be made in Real Estate but ma unsure as to how well this will work. I feel like I would a an agent of sorts. Is there anyone out there who has had success in LA?

Assigning a contract is legal in all 50 states, and always will be. Anyone can enter into any agreement with anyone else, to do or not do a certain thing (definition of a contract). Once you have an "equitable interest" in that contract (meaning you have at least $1 to gain from it), you can perform the contract yourself. Or! You can transfer your commitment in that contract to someone else (definition of assignment) for at least $1 of benefit to them.

We only talk about RE PA's on this site because we're REI's, this is the only type of assigning we'll ever do. This is where people start to think "it's too good to be legal." Wake up people! All kinds of contracts about everything you can imagine get assigned all the time, not just real estate! That's why it's legal in all 50 states, and always will be. It is a big part of how business people leverage other people's time and talents to make money.

What you need to have are the following:
1) A good RE attorney to examine your documents to make sure they're correct.
2) A prequalified buyer that can close fast, preferably with cash.
3) A "Non-Compete/Non-Disclosure" form signed by Buyer, which keeps your fee a secret between you and Buyer. Also protects you from Buyer trying to steal the deal without buying it from you.
4) An awesome RE deal locked up (purchase agreement, land contract, lease option, straight option, etc.) at 30-50% off ARV. Whichever agreement you use, it must allow for assignment (that's the key!!). It can be written up "and/or assigns," if the seller balks at that, change it to "and/or financial partner."
5) Complete and sign your "investor disclosure" document between you and your seller and one between you and your buyer. It's Dean's document that states that you are a RE investor and you intend to make a profit from this property.

Since the assignment does not happen at closing, you will be passing on the same agreement you have with Seller along to your buyer. So at the attorney's office, this is what needs to happen:
1) You show up with your purchase agreement (PA) between you and Seller.
2) Buyer shows up with your fee and his signing hand.
3) You write up a new PA between Buyer and Seller.
4) Buyer pays your fee and signs the new PA.
5) You sign the "dissolution of contract" which will cancel out the 1st PA. It's now replaced with the new PA between your buyer and your seller.

Attention! - You have NOT just sold someone a property! You have sold your "interest" (which is worth more than $1) in this transaction to someone else. Any RE agent who tells you this is illegal is trying to earn your business by lying to you. RE agents study for 3 months, take 1 test, and pay a $500 fee to do what they do. Attorneys go to college for 4 years, law school for 3 years, take the bar exam and an ethics exam, and wind up dishing out over $150,000 to do what they do. Don't EVER let a "realtor" (or title company, or secretary, or your plumber) tell you what the law is - they have no clue what they're talking about!

Remember that "assigning" a contract just means SELLING the CONTRACT. When I was still fuzzy on this, I called attorneys in different states where people had question. Assigning is nothing more than selling the words that are on a piece of paper. Once you assign your contract over to another buyer, you are out of the picture. You never have had any part of the title in your name. It is not a double-close, it does not reflect you as the buyer at all. In essence, you never existed in the deal, and it never shows in any record that you were. Remember that an "offer to purchase" contract really means nothing except giving you the sole right to buy a property within a given period of time. THAT is what you are selling (assigning).
Hope that helps. (Helped me when I finally understood it. )

Rina

Now that I've got assignments mentioned, here's where everybody gets confused (according to what I've read on these posts):

Wholesaling and birddogging: These are not the same as assigning, not in the eyes of the law. When you wholesale/birddog, everything is word of mouth, no papers are ever signed, and the birddog (guy who found the deal - you!) doesn't even make 1 month's rent for their efforts. Most are lucky to get $500 for finding a deal. However, it's quick, easy, and almost always, cash.

RE agents are LIVID at the idea of someone ELSE making a dime with property, so they've lobbied for laws in several states (some much more successful than others) that try to make assigning "look" illegal, and has straight-up banned wholesaling and birddogging without a RE license by "claiming" that only REA's can sell real estate. As you can tell by previous posts (assuming their correct, of course), some have even changed the property laws in their state to reflect this hatred of wholesaling.

3 HUGE holes with this, though...
1) If only REA's can sell RE, how do FSBO's (without agents) get done in states where REA's swear up and down (stomping their feet) "You CAN'T do that!" Hmmmm?
2) When you do assignments, you're not selling the property! You're selling your place in the PA to someone else (perfectly legal).
3) When you wholesale or birddog, you're selling information! There are no contracts!

What to watch out for:
1) Every state allows for assignments, but every state is different on the language to be used and requirements to be met. Get a RE attorney first!
2) Don't ever let someone who isn't an attorney tell you what you can't do. REA's (the unprofessional ones, anyways) are notorious for this.
3) Think of it this way: if I let you drive my car for the weekend, and charge you $500, does that make me a rental company? If I sublet you my house for the summer, does that make me a "realtor"? Of course not! Well then, how can you accuse me of impersonating a REA when I sold you a place in a contract (not a property) or a piece of information?

Even if you look up the law in a book, you have no clue how it's applied or what it means in everyday business use. This is where you need a RE attorney. Tell him what you want to do, and if he's worth your money, he should be able to tell you immediately "yes/no" whether you're on the right track or not. I hope this helped. Take care, everyone...

This makes much more sense. Explained this way, I can see the difference. Thanks again.

I have been waiting for someone to provide a complete and detailed answer to the question dealing with the legality of assignment contracts and how to handle completing the assignment contract with the assignment buyer in reference to the closing! Thank you! thank you! Thank you! Your explanation was so clear with your specific steps. Now I think I can get started without fear of ending up behind bars for doing something illegal!! LOL

Question 1: The document you referred to about having the assignment buyer do to prevent him from snatching the deal from under you -- I didn't see any reference (or I don't recall seeing)to that document in Dean's books. Can you provide a reference for that or a PDF link to that document?

Question 2: When you do the assignment contract with the third party investor -- Can that be done separate from the actual settlement closing? That is, can I first meet with the assignment buyer and the seller to have the assignment contract signed and get paid at that time. Once I am paid I am done and would be free to leave that meeting and the actual settlement on the sale between the assignment buyer and the seller can then take place. In other words, the assignment buyer would need to agreement to pay me directly and I wouldn't have to rely on the Title company to include my payment on the HUD-1 (I think that is how it works). I hope I have posed this question so that you know what I'm asking!

Thanks again for your help. It was sooooooooo beneficial to me and others I'm sure. I have been reading these threads and your response is the first one I've read that gives a full explanation and then tied everything together. It's the "tieing everything together that I think most of the answers fail to do. People tend to forget that there are 'newbies' out here and without complete answers it tends to leave us with even more questions. But I appreciate everyone who provides information for us because I have still learned things that have been a help to me. I'm talking about when different people ask the same questions but only get partial answers.

Thanks Dave and everyone who take the time and effot to help us newbies.

newage8767

Thank you for your input. I just wanted to make one quick note. There are in fact agreements signed for bird-dogging and wholesaling. Not that you HAVE to have one signed, but you would want to protect yourself. And the fees I have collected for "bird-dogging" have been in the $1500 range. Just depends on your agreement and how much you do as part of it. And I have heard said, on a wholesaling deal you will want to make around $10,000. Yes, getting $500 quick cash for passing along information is great, too, but there isn't a limit to be made using the fast-cash strategies. Pretty cool.

Thanks again,

Rina

I am glad you are finding answers on the site. It's great that we can all learn from each other. Please remember that each of us answers according to our own experiences, which makes it amazing because there are so many variables in REI. You will learn so much as you take action, nobody has the exact same experience, so don't feel like you need to geteverything down-pat before starting. And you're right, the more a person reads through the forums, the more knowledge you will absorb. With almost 2 years worth of answers in here, I know it's difficult. That's why it's so great when fresh enthusiasm (like Dave) come in to revisit all these subjects so a person doesn't have to search back so far.
Thanks for your contribution, and I wish you all the success you deserve in your REI!

God bless,

Rina

Your 1st Question: The agreement you're looking for is a "Non-Disclosure/Non-Circumvent Agreement." I didn't see any here on the DG site, except for one that was posted earlier by KimmyJ7601 from Google's search results.

NON-CIRCUMVENT AGREEMENT

Non-Circumvention, Non-Disclosure and Confidentiality Agreement

THIS AGREEMENT entered into on this _______ day of ________, 2005 is for the Professional Association and arrangement of Non-Circumvention, Non-Disclosure and Confidentiality between

YOUR NAME, known as “Buyer”, whose office is at 6721 Harford Road, Baltimore, Maryland 21234,

And ________________________________________________________________ known as “Consultant”. (REAL ESTATE AGENTS NAME)

whose principal place of business is at _______________________

hereinafter called “The Parties”.

The Parties agree to respect the integrity and tangible value of this agreement between them.

THIS AGREEMENT is a perpetuating guarantee for six (6) months from the date of execution and is to be applied to any and all transactions present and future, of the introducing party, including subsequent follow-up, repeat, extended, renegotiated, and new transactions regardless of the success of the project.

Because of THIS AGREEMENT, the Parties involved in this transaction may learn from one another, or from principals, the names and telephone numbers of investors, borrowers, lenders, agents, brokers, banks, lending corporations, individuals and/or trusts, or buyers and sellers hereinafter called contacts. The Parties with this acknowledge, accept and agree that the identities of the contacts will be recognized by the other Party as exclusive and valuable contacts of the introducing Party and will remain so for the duration of this agreement.

The Parties agree to keep confidential the names of any contacts introduced or revealed to the other party, and that their firm, company, associates, corporations, joint ventures, partnerships, divisions, subsidiaries, employees, agents, heirs, assigns, designees, or consultants will not contact, deal with, negotiate or participate in any transactions with any of the contacts without first entering a written agreement with the Party who provided such contact unless that Party gives prior written permission.

Such confidentiality will include any names, addresses, telephone, telex, facsimile numbers, and/or other pertinent information disclosed or revealed to either Party.

The Parties agree not to disclose, reveal or make use of any information during discussion or observation regarding methods, concepts, ideas, products/ services, or proposed new products or services, nor to do business with any of the revealed contacts without the written consent of the introducing party or parties.

The Parties agree that due to the many variables surrounding each Business/Financial Transaction that will occur because of this agreement, the commission to be paid and/or the fee structure between the Parties can vary. A separate fee/commission agreement will outline compensation for each Business/Financial Transaction. The fee or commission agreement must be drafted and acknowledged by signature before all Business/Financial Transactions.

In case of circumvention, the Parties agree and guarantee that they will pay a legal monetary penalty that is equal to the commission or fee the circumvented Party should have realized in such transactions, by the person(s) engaged in the circumvention for each occurrence. If either party commences legal proceedings to interpret or enforce the terms of THIS AGREEMENT, the prevailing Party will be entitled to recover court costs and reasonable attorney fees.

The Parties will construe THIS AGREEMENT in accordance with the laws of the Sate of where the property is located. If any provision of this agreement is found to be void by any court of competent jurisdiction, the remaining provisions will remain in force and effect.

THIS AGREEMENT contains the entire understanding between the Parties and any waiver, amendment or modification to THIS AGREEMENT will be subject to the above conditions and must be attached hereto.

Upon execution of THIS AGREEMENT by signature below, the Parties agree that any individual, firm, company, associates, corporations, joint ventures partnerships, divisions, subsidiaries, employees, agents, heirs, assigns, designees or consultants of which the assignee is an agent, officer, heir, successor, assign or designee is bound by the terms of THIS AGREEMENT.

A facsimile copy of this Non-Circumvention, Non-Disclosure and Confidentiality Agreement shall constitute a legal and binding instrument. By setting forth my hand below, I warrant that I have complete authority to enter into THIS AGREEEMENT.

FINDERS/CONSULTANT FEE: As negotiated per property offered at the time of the disclosure
Investors Requirement
Any type of real estate or business opportnity with real estate that would yield a small short term profit: commercial, apartments, land, lots, sub-division, farms, land with potential re-zoning upgrade, water, lake, stram or pond fronts, and non-conforming properties.

For:

________________________________________________________
Consultant

Address

__________________________________________
City/State

__________________________________________
Telephone

__________________________________________
Joe Sample/Buyer

It would be a good idea to Google "Non-Circumvent Agreement and (your state here)" to get a more state-specific example. Also, ALWAYS have an experienced RE Attorney look over your agreements before you start using them in the field. Both Dean's books cover in good detail (with the exception of this agreement) the assignment process, and how it's different from all other REI techniques.

Your 2nd Question: Yes! The assignment CAN (and I think, should) be done separate from (and preferably before) closing. Matt Larson has a thread on this, make sure to look it up and read it on this site. It's easier for you because you can "get out of the way" after you lock up the property and sell the deal to your Buyer (which is what you're trying to do anyways).

Do NOT have your Buyer and the Seller contact each other until after you're paid, signed off, and out of the picture. Do NOT give any contact/location info. about the Seller or his property until your Buyer agrees and signs your Non-Disclosure/Non-Circumvent and the Investor Disclosure Agreement. Yep, you will be out of the closing altogether, because you will have been paid and released from the deal before closing happens.

If for some reason, you need to wait until closing to get paid out (like you want a larger amount of money, or your Buyer needs to use financing, or he doesn't have your fee money in his pocket), then use Dean's IEE approach instead. It will protect your position and yes, that's when the Closing (HUD-1) Statement will be used.

I'm glad my answers helped someone, all this studying and re-reading has to be useful somehow! I have yet to do an assignment, but it is definitely one of the easiest and most straightforward techniques to use when looking to make a fast $5-50k depending on the math of the deal involved. Don't stop pushing, and take care...

Perfect example of a bird-dog agreement. Thanks!
Remember, for an "assignment", you do not need such an agreement because you already have the property locked up. You have the SOLE right to buy the property. No one can go around you.

I'm getting very excited now. I had a big fear about doing a deal and getting stuck by ending up having to purchase I property that I have no money to buy! LOL

I am somewhat anal about organization. If I feel things are unorganized I can't think properly. For me, making sure I know what all the steps are before I attempt something is just what I need to do to feel comfortable. I'm not OCD or anything. I just like to work in an orderly fashion and I feel I'm more in control.

Thanks for the encouragement.

newage8767

Thanks for clearing up the wholesaling/birddogging thing. I just used what I said as an example because people were mixing up wholesaling, birddogging, and assigning on these threads to the point where they couldn't see any difference anymore. Really, the difference is just in what somebody calls it. Whether it's for a little money and no written agreements, or alot of money and several contracts.

From what I understand, assigning means you already have a PA with Seller, so that's what makes that one different. Um, wholesaling/birddogging, at first I thought they were just what people in other states called assigning. You know how people in the south call iced tea "sweet tea" (because there's alot of sugar in it), when I'm technically a "Yankee" up here in MI, and I just call it "delicious!" Potato, Po-tah-tow, you know?

Some states have passed laws trying to ban birddogging, so people there call it wholesaling, follow the law of their state, and get it done anyways. Until you see other states that have tried to ban wholesaling, then investors simply call it birddogging, and stop using contracts. When you switch from contracts to simply handshakes, the risk is always higher, and the payout is usually much smaller. I would shout with glee if I could find a Buyer I could trust enough to pay me $10k or more on just a handshake! I'm sure someone on here has, I'm just not sure if I'll ever be that "fortunate," lol. I used $500 as an example of an birddog fee because that's the most frequent amount I've read for that service. I've read $1,000-5,000 usually called a "wholesale", and any fee over $5,000 I've usually saw called an "assignment." But you're right, the amount of the fee paid, and the use of contracts or not, does not dictate what it's called. I hope I didn't confuse anyone!

Thanks Dave. I appreciate your help. Your responses are very informative.

newage8767

No problem. It really can get confusing, I admit. That's why when I first started, I was determined to use each of the techniques so I could learn first-hand and then speak from my experience. I do like the "assigning" because it is so more cut & dry as far as a strategy, and you really can make more $ with it than bird-dogging. But, it does come with more work/responsibility because you actually have to get a property under contract.
You are right about the other stuff, and the words bird-dogging/referral-fee/wholesaling probably ARE used for many different things. In my mind, bird-dogging is like you said, getting paid for information. It could include as little as giving an address, or as much as taking photos, getting comps, etc. for an out-of-town buyer. Wholesaling, to me, is more selling a product, buying/reselling as in a double-close (which I also have done). Now there may be others that use the word for bird-dogging or assigning too. I guess YOU just have to know what YOU mean when talking to your buyers. I guess it doesn't really matter that much. What really matters are end results. Whatever gets the deal done. If only we could be making money for the knowledge we acquire.. Sadly, we don`'t get paid until we do the deal. So, I guess to end I'll quote Matt Larson (my coach and friend) who would say just "Get it done!" That's all there is to it.

My best to you all!

Rina

P.S. Dave, thank you so much for all the information. I really mean that. You are helping a lot of people, and I think it's important that everyone be willing to contribute. Hope I didn't squash that desire..

Try your best to locate a Title Company. Title Companies have Real Estate Attorney's which handle all the legal paperwork that's needed to transfer names on ownership on a property, from one owner to another. They can better explain if it's legal in your state. I really cant see this be illegal anywhere. You are basically getting paid as a middle man. Seller agreeing to sell "his or her" property will agree because you made them feel like you are offering them a solution that will bring them peace of mind. Coordinating an "Agreement to Purchase" contract with seller with Terms, Contingent to... Determined by conditions or circumstances that follow. This is all legal. Just be sure to have an Exit strategy to get rid of the property. Finding real estate investors will be one of the most valuable list you will create. Sell it to an Investor for a profit is all legal. Double Closings might not be legal in all state, it's not in mine! So I go with a "simultaneous closing". I just have my title company call the seller last for him to pick up his check... He doesn't know he was last to get paid in full from this transaction.

NJFJ --

You said "Sell it to an Investor for a profit is all legal. Double Closings might not be legal in all state, it's not in mine! So I go with a "simultaneous closing". I just have my title company call the seller last for him to pick up his check... He doesn't know he was last to get paid in full from this transaction."

How can you call the seller last? If you are doing an assignment contract for the end buyer. The assignment contract can't be binding or legal if you transact the sale with the end buyer BEFORE you own the property. That is, until the transaction goes forward first with the seller, you are not legally allowed to effectuate the assignment contract because you don't own the property until the transaction has been completed with the seller.

I can see a "simultaneous closing", but I believe that legally the closing transaction must first be completed with the selle first.

Please tell me how you do that in a legal manner.

Thanks,

Verna (newage8767)

Thank all of you for the information you give to us

I'm talking to a RE lawyer soon and hopefully difinitively find out. So far I've called the dept of RE, and they said that I needed a RE license to do it. But the person also said that he could not give legal advice on the matter. If anyone know the answer to my question please help, thanks

Does anyone have a copy of an "assignment - contract", suitable for use use in New Jersey? Or perhaps you know of some NJ RE professionals (agents, attornies etc) familiar with the selling of contracts. I'm told that the law here states that the word "assign" can't be on the document (as it is in the standard sales agrrement). I met an investor who said he'd give me a copy of his customized contract but he later reneged. I'd happy to here from anyone in the New Jersey, Tri-State area, anyone at all. Thank you and God Bless you!

MsCharlie