Recently, I was asked to attend a promotional real estate seminar produced by ****** ***** Institute (name withheld purposely). At this seminar, the speaker attempted to sell his company’s real estate investment seminars for $1,500.
Let me say for the record that I think investing in your own education is a wise thing. That’s not what I’m complaining about.
My complaint is about the content of the presentation, in which some advice was given that was at best incomplete and at worst down right negligent.
The advice given was this: “To make your real estate contract assignable, just place the term ‘and/or assigns’ after your name as Buyer. That will take care of it.”
Hmmm. Technically, that’s correct. Practically, it’s way off the mark.
In case you’re not familiar with “assigning” contracts, here’s what it means: Assignment is the legal term for transferring ownership of something. In this case, assigning a contract means to transfer the rights and responsibilities involved in the contract from one party to another.
And there’s the problem with the advice given by this real estate billionaire: While adding “and/or assigns” after your name as buyer on a real estate contract does give you the right to assign that contract to another party, it completely fails to address what happens if the assignment goes wrong.
For example: If you assign a contract to another investor named Sleazy Sam, and Sleazy Sam fails to close the transaction with the seller, who has legal liability? You or Sleazy Sam? If all you do is include “and/or assigns” after your name in the real estate contract, that question is up for debate and will likely require a lawsuit to resolve.
Likewise, if you assign a contract that involves a creative real estate deal, and something goes wrong in the future with the financing or the property taxes or the tenants or anything at all, will you be liable for the problems since you were the original party on the contract, or will it be the responsibility of the person to whom you assigned the contract? If all you do is include “and/or assigns,” you’re probably headed for a lawsuit.
But there is a much better way. I have a well-designed assignment clause that’s used in my famous “Monster Purchase And Sale Agreement”. Paragraph 16 of this contract fully spells out the issues involved, and takes great care to make sure that all liability for the deals in which you’re involved passes fully and permanently to whomever you assign the deal.
If you’d like a free copy of that contract, click here: Monster Purchase and Sale Agreement
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Of course no one mentions that there isnt a single institutional lender – bank or mortgage banker that will accept an assigned contract. Did they mention that????
Adding “and/or assigns” does not always grant the buyer the right to assign. If the contract also includes an assignment restriction clause (most of them do), then your right to assign is subject to the specified restrictions, which usually means the seller must approve the assignment.
All contracts, except personal services contracts, are assignable by either party *unless* the contract specifically states otherwise. However, such implicit assignability does not release the assignor from liability. You must get a written release, either separately or provide for liability release in the contract (in the assignment clause).
A buyer’s lender *will* accept assigned contracts when the notarized assignment agreement is attached as an exhibit, so they know how much the assignor is getting for the assignment. Everything must be clearly disclosed to the buyer’s lender, and the assignment fee appears on the HUD-1 settlement statement as a 3rd party service provider fee.
A cleaner way for assignment is to use an assignable real estate option agreement, and a purchase contract that is signed only by the seller (held in escrow with other conveyance documents). When the real estate investor is ready to flip the deal to the end buyer, he executes an assignment of the option contract, gets paid his fee, the end buyer signs the purchase contract and closes the purchase. Title conveys directly from seller to end buyer, with no title seasoning issues (unlike an intermediate fix-and-flip through an investor).
I know which billionaire investor is offering those stupid seminars. I sat through one of those awful pitches. That billionaire’s buddy, a millionaire investor with a book about his rich dad, is also offering stupid seminars. What they are really doing is licensing their names to 3rd party education companies that offer courses, seminars, and mentoring. If their namesakes really knew what crap was being offered, they’d likely withdraw the licensing of their names. It’s shameful.
As a newbie and falling for the hype of this organization; I must admit that at the Sales(oh, I mean Free) Seminar it seems that they intentionally give half accurate information, bordering on as Bryan put it \"negligence\".
However, at the Advanced trainings they do more accurately describe the process and provide viable instruction. Albeit not the most current applications. I attended a wholesaling bootcamp and aside from using email blasts to notify potential buyers of properties that you had under contract there was not a single mention of using the internet to generate leads, building your buyers list, building rapport or positioning yourself as a local industry expert…all things that we know are vitally important.
All and all I am satisfied with the education that this organization provides. Is it overpriced-YES. Is every technique they teach accurate-NO. Would I have been better off financially to get educated in a different way-PROBABLY.
But at the end of the day the thing of most worth that I have taken away from these seminars is the network of others that that are committed to investing in their future. I have met many great people that are out there trying to make things happen in real estate.
So is your monster contract the only contact we need to wholesale a deal to another investor?
I can comfortably say that it’s been fully sufficient for me. You’ll need to chat with your own legal counsel to confirm this. — Bryan Ellis
Bryan,
Once again, thank you for exposing those who SAY they want us to be successful in real estate, but who are really most interested in THEIR financial success! Of course, they are out to make money–I have no issue with that, as that is what we ALL are trying to do. However, they should at least GIVE the folks what they pay for.
Are they afraid of new competition or what? If they are as good as they claim to be, then they wouldn’t be afraid to actually TEACH the techniques like you do. I suspect they didn’t make all those billions in real estate, but from selling “info” at seminars!
Thanks so much for keeping them honest by sharing the truth with us!
You’re an angel…katy
Nearly every contract I have tried to slip this in on has been reject immediately. If it is accepted and the other party defaults you really do not want to experience what happens next.