Making money out of any real estate transaction is the fun part, but before the investor gets to the fun part, they have to get through the serious stuff first. One of the trickiest parts of ensuring that the wholesale deal is a success is by making sure that the contract is in order.
The real estate wholesale contract is a vital part of any wholesaling transaction. Several wholesalers have spent thousands of dollars on legal fees to ensure that their real estate wholesale contract is valid and binding.
Parts of a Real Estate Wholesale Contract
The most important real estate wholesale contract is the assignment contract because it states the assignment of ownership rights of the property to someone else without actually passing the ownership of the property from the seller to the wholesaler. When working on a wholesale contract, it is important that all the essential parts of an assignment contract are present. The seller and the buyer can also add their own stipulations and terms to the contract, but these are the most necessary components to ensure completeness of the details of the contract.
Name of the Parties Involved
All contracts should include the name of the parties involved, but when it comes to a real estate wholesale contract, the buyer should be certain that the seller has the actual capacity to sell the property. It is important that the seller can provide sufficient proof that they are the rightful owner of the property in question. In addition to this, it is important that the complete name of the assignor and the assignee, along with their signature and date is going to appear on the document so that it signifies the agreement of both parties. The signature of the parties involved is sufficient proof that the contract has been agreed upon, even if the contract is not notarized.
Address of the Property
The address that is stated on the contract should be the exact address of the property in question. The contract would not be enforceable if the property that was discussed in person and the property stated in the contract are of two different addresses.
Deposit Amount or Earnest Money
This signifies that the contract is binding as it is mutually beneficial for both properties. The earnest money is the collateral made in good faith and it demonstrates the willingness of both parties in completing the contract. The earnest money is not necessarily of high value because it will be forfeited once the wholesaler fails to find a buyer for the property upon the end of the agreed period.
The wholesaling process is hugely dependent on the capacity of the wholesaler to sell the property at a quick pace. A real estate wholesale contract would include a stipulation regarding the inspection period, which is the pre-determined period that allows the wholesaler to find a buyer for the property. Once this period has lapsed, the assignment contract is no longer in effect and the wholesaler will lose the capacity to assign the contract.
The terms and conditions of a real estate wholesale contract should be tailored to the needs of the parties involved. Each buyer and seller is different. This means that each client has a different specification and demand. In order for the conditions to be binding, they should be written on the contract. This will provide the necessary proof needed when enforcing the terms of the contract.
Remember: If it is not stated clearly in the contract, the parties cannot demand enforcement based on an oral promise. It is important that everything is in writing and it is not an ambiguous statement.
Assignment of a Real Estate Wholesale Contract
Sample Contract - Assignment of Contract Agreement
In consideration of the sum of $ (Assignment Fee) , (Name of Assignor) hereby assigns and otherwise transfers all rights, title, and interest held by Assignor in the contract to (Name of Assignee) described as follows:
Contract dated (Date of Contract) between (Name of Assignor) and (Name of Assignee) with regards to the property located at (Complete Address of Property) .
The assignor warrants and represents that said contract is in full force and effect and is fully assignable. Assignor further agreesthat it has the full right and authority to transfer said contract and that contract rights herein transferred are free of lien, encumbrance or adverse claim. The said contract has not been modified and remains on the terms contained therein.
Assignee hereby assumes and consents to perform all remaining obligations of Assignor under the contract and agrees to indemnify and hold Assignor harmless from any claim or demand resulting from non-performance of Assignee. Assignee shall be entitled to all monies remaining to be paid under the contract, in which the rights are also assigned hereunder.
The assignment fee shall be paid at the time of closing to assignor in the form of cash, official check or wire transfer, and recorded on the HUD-1 settlement form.
Closing shall take place no later than (Date) . Assignee has given a non-refundable deposit of $ (Amount) .
It is hereby acknowledged by Assignee that this Assignment of Contract Agreement and the original contract for Sale and Purchase is not assignable by Assignee without the express written authorization of Assignor, authorization of which may be withheld for any reason by assignor.
This Assignment shall become effective as of the date last executed and shall be legally binding upon and inure to the benefit of the parties, their successors and assigns.
Name of Assignor and Signature Date
Name of Assignee and Signature Date
To sum it up, before you get excited with the prospect of earning money for your wholesale deals, it is important that you sort through all the legal issues first. This will ensure a smoother business deal and a better working relationship with your clients.