Posted by ChrisW on December 18, 2002 at 18:15:33:
There’s no loophole to smart investing. But there is a legal problem when you quote things word for word from another site and not credit the source that’s copyright violation. Any copyright lawyer here please stand up.
Jim stated that he didn’t intend to quote and I don’t think the Vaughns would endorse it without credit to the source.
NoDiscount has been the topic of this board numerous times so there’s nothing secretive about it. And I doubt the contract concellation strategy is unique either. That too has been discussed here numerous times. Try searching “contract cancellation fee” for discussions from the past.
So let’s not give them too much free advertising here. The Vaughns might not like it.
Kristine, what has been your experience with nodiscount.com? It may be easier to scrutinize something when you can support it with personal experience.
Anything less is simply an opinion based on assumptions.
You stated, “If it’s a good, sound, legal strategy, no one will mind a discussion, right?”
I agree. I see that you are an active poster on this board so maybe we can learn something from your personal experience with the nodiscount program.
In a previous post, I mentioned that I’ve signed an option to purchase a house good until Jan 31st. There are several buyers interested and they will be making their offers on Dec. 29 at the house showing.
The current owner knows that I’m trying to find a buyer to pay over my Option price and he is fine with that. However, I’m having a very difficult time finding an “out” strategy. I’ve called many title companies and they will not do a double close unless I bring my own funds to buy from the original seller and then sell to new buyer.
I’m still unsure about how to assign a contract. How do I assign for the “new” price so that I get the spread from my option price and the “new” price. One title company suggested I assign my Option to the new buyer and then the new buyer pays me cash for the difference. I doubt that the new buyer will have a pocket full of cash just to outright pay me.
Can I have my attorney do a double closing and use the title company just to do title work? Could I draw up a contract with the seller that we place the Title in escrow and then when the new buyer obtains financing I get paid the difference (option price and final selling price).
All you need to do is to assign–sell–your option agreement for a price that’s the difference between the purchase price that’s stated in the option agreement, and the price that you want to sell your option for. But don’t get too greedy and end up with nothing.There’s an excellent assignment of real estate option agreement in Thomas Lucier’s book, How To Use Real Estate Options To Control Undervalued Property. I bought my copy at amazon.com. Good luck!
Tracy–You’re right–Don’t get too greedy. I’ve read over and over where the new buyer gets upset because they are paying way more. Just got a response from another investor. See what you think:
The most effective way to avoid the seasoning issue is with the contract cancellation fee. It works in all area and financing.
The contract cancellation route is actually pretty simple.
Title companies vary in how they execute this strategy. Just take both purchase contracts to the title company and tell them you want them cancelled for a fee to be paid by seller at closing.
One purchase contract is between you ( buyer ) and original seller. A second contract is between you and your buyer.
You are giving up your right to buy so that the original seller can enter into contract with your buyer.
Unlike double closings there is usually no additional paperwork or title policy requirement.
I’ve never heard of “contract cancellation fees.”
Another option would be to put a “liquidated damages” clause in the agreement stating that the seller has the right to claim the earnest money deposit as liquidated damages in the event that the buyer defaults on the terms of the purchase agreement and doesn’t close on the purchase of the property.
However, I’ll continue to follow Thomas Lucier’s advice and use straight real estate options, and not worry about sellers trying to back-out of my legally binding real estate option agreement,
Jim: I’m not sure you have the complete story about how to proceed with escrow cancellation. You need to get your seller to agree to sell to your buyer in this case. This still won’t get you paid. You still must collect payment outside of escrow unless you want your seller to collect all the funds. Sometimes there are ways to include your fee in the escrow as a misc fee or with special escrow instructions.
I would like to hear from others on this idea of two escrows and cancelling the purchase escrow. Your seller will have to agree to this. I can’t see this working most of the time. But I’d like to understand it better.
Well, let’s discuss this idea then - Posted by Kristine-CA
Posted by Kristine-CA on December 18, 2002 at 16:55:21:
Chris: Jim stated that the quote was from another investor and was asking for input. So this contract cancellation strategy is copyrighted, or what? If most investors, brokers and attorneys are not familiar with it, perhaps this is the perfect place to discuss it. Heaven knows this board has seen many a controversial topic and many, many arguments about the legality of just about everything.
If it’s a loophole strategy, let’s discuss that. Nodiscount.com is not exempt from scrutiny, are they? If it’s a good, sound, legal strategy, no one will mind a discussion, right?
That was not my intention at all - Posted by ChrisW
Posted by ChrisW on December 18, 2002 at 13:33:01:
My intention was only to clarify that this could be done. May it be through an attorney or another investor. I had no idea that was a strategy taylored from ND until you mentioned it. And it was me who posed the question. I’m not trying to appear that cancellation was my idea—very far from the truth. Thanks for your feedback.
Re: Escrow cancellations and seasoning - Posted by Nate(DC)
Posted by Nate(DC) on December 18, 2002 at 16:52:31:
I thought he was having the Buyer give him the amount of the assignment fee, but just calling it a cancellation fee and having the Seller write a new contract directly with the Buyer, as opposed to calling it an assignment fee and assigning his existing contract to the Buyer.
I can’t see that it makes a whole heck of a lot of difference unless the Buyer is using a lender that would have a problem with an assigned contract.