Here’s how it went down-very long - Posted by Brad (sd)
Posted by Brad (sd) on December 13, 2002 at 17:34:33:
So I show up, fill out some little form and go into his office with him. Tell him I’d like him to look over some documents that I’ve acquired to make sure ther’re legit. He does, very quickly, and says I have a lot of stuff. Yep.
ATTORNEY-“So what do you want to do?”
ME-“Stop being poor and make some money. I basically want to find owners of houses who would like to sell, below market value, then sign a contract, find a new buyer, assign contract and get some money. Or I could go to double-close.”
A-“Why would you want to double-close?”
M-“So I can make more money.”
A-“OK. I see some problems here though. Why do you want to use a Contract for Purchase?”
M-“So I can assign my position or keep my position and close with 3rd party.”
A-“Your probably not going to find a escrow or title company who will do that, not now.”
M-“Oh really?”
A-“It seems to me that you’d be better off using a straight Option to Purchase instead of a Contract.”
M-“Why?”
A-“You have different responsibilities in an Option than a Contract. There are certain things that are required of you if you sell RE via a Contract like disclosure of properties condition, which you wouldnt even know about if you sold quickly.”
M-“But if I have contingency clauses in the Contract which states that property is sold as-is then its ok right?”
A-“No, you are still responsible. You’ll also be acting as a RE BROKER if you assign.”
M-“Really? I’ve never heard that and I know people here in CA that do it. I’m not bringing the buyer and seller together, I’m bringing myself and the seller together and then assigning MY position in the Contract to the buyer.”
A-“Well, that puts a VERY fine point on it. That seems subject to interpretation. You dont want to deal with the Comminsion of RE.”
M-“No, no I dont. It just seems very odd to me that your saying its illegal unless you are licensed. I dont understand.”
A-“Maybe the people who do this are lucky. The people they likely deal with are not in a position to bring it to anyones attention.”
M-“So why is an Option better?”
A-“It’s much simpler for one thing. You dont have a double-close either, which is expensive. The Option simply provides you with the option to purchase under a certain amount of time, and if you dont buy the property then you’re not breaking a contract because you never stated you would buy it, you simply had the OPTION to buy it. The seller on the other hand, must sell it to you if you desire. With an aption you could simply assign it.”
M-“So it sounds exactly like what I want to do. But I still dont understand why I cant just put in contingencies which state that my purchase is dependent upon…partners approval, inspection, financing, etc etc etc… I would also state that the contract is assignable and that I probably wont be the one to close with them. How is that different than what your suggesting?”
A-“If the other party doesnt close then what?”
M-“I have a spot on the assignment of contract where the seller signs and it states that all parties release me from liablity.”
A-“It seems very tricky. I dont know why you wouldnt make it so much more simple and use an Option?”
M-“I think there’s a pschological element to the seller seeing a purchase contract which would help to cement the deal.”
A-“Yes, there probably is. So you have a seller sign the Contract with you and they think “ok, my house is now going to be sold!”, but you assign the contract and the assignee doesnt perform. Then what?”
M-“Thats a good point, but I dont think I would ever present it like that unless I was really confident that the house would close. I want to be on the up-and-up here, I want to tell them that I probably wont close with them and that I’m going to assign this contract to another person who’ll close. Besides, if I’m good then I’ll have gotten the houes for the right price and it will probably close in less than 2 days!”
(It had become a little tense by this point because I really wanted to figure this out! I needed to know what he was talking about and WHY he thought my idea was no good. His last comment where he impersonated a seller portrayed the investor(me) in a real shi*ty light. I was getting kinda tired of it. So it put the ball in his court.)
M-“Well, like I said before…I’m new, I’ve never done this before, so where do we go from here?”(silence)
A-“If I were you, I’d go get a real estate license and learn this business that way.”
M-“Yea, I thought of that before, but I dont really want to be an agent.”
A-“I think you need to find some houses first, then come back and I’d be more that happy to draft the documents for you.”
M-“I just want to have documents first so I feel confident to go out and make some offers. Sorry if I came off rough or anything, I didnt mean for it to seem that way.”
A-“No I understand, its good that your doing this now, most of the people I meet didnt do this and I deal with the aftermath.”
M-“THanks a lot, I appreciate your candor.”
A-“Give me a call if you ever need me to look over a deal.”
(Handshake, smile, stand up…)
M-“Ok, have a nice day.”
A-“Have a good day.”
(I’m out the door)
I apologize that this is so long but I wanted to document the occasion.
-Brad Pennington -CA