Hello all I recently closed on a house where I got a greal deal house is worth 480k I got the house at 340k and Currently selling it for 390k closing is in a couple weeks..The real quesion here is the guy who I bought the house from did a assignment he never owned the house, and at the table there was the seller, him (assignor), and me(buyer/assignee). After a couple weeks I called him we did a little chitchatting, and he made 140k on an assignment fee all legal. He basically told me he offered a seller 200k for it he agreed, and found a buyer (me). Im currently in the same situation Im finding deals left and right and I want to do assignments making that much money. However why is it when I search online people only charge a 5k-10k assignment fee when there is anywhere from 70k and above to be made on these types of deals? As long as the Assignee is happy with how ever much potential equity is in house and the assignor is oviously happy cause he never owned a house just was the middle man and made massive prophits. Can anybody clarify this for me, or give me some tips/pointers?

Not sure Im understanding your question.... You can make fees like that if you consistently find suckers who want to sell you their home at 40% of value, and owe very little on these homes. Truth is, investors are getting careful and Sellers want top dollar, or they owe too much. In current market conditions, you would probably be lucky to make 5K a deal on a consistent basis, dealing with average priced homes.

When you bought the house was it contingent upon final bank approval or acceptance??

well when I bought the house im sure they allowed assignments becuase the guy who I bought it from never owned the house he just organized it all. I was happy with the price I got it for and he was happy cause of the money he made...

When you say find the suckers, you mean this deal that i have going worth 400k and ima get it for 137k and wholesale it to somone else for 220k the guy im getting this from is a bank so Im sure some "sucker" messed up his payments and only owed bank 137k and I got my hands on it first. In those cases you can make that type of money 70k+...anyone disagree?

I'm going to guess here that you don't have a professional license (like real estate license) so you don't have any ethical issues with this type of windfall profit.
Anyone with a real estate license would recommend that the homeowner list and sell the house for market value, pay off the mortgage and other leins and keep the profits.

PA----- not everyone with a license with a license would do that, but they all SHOULD do it
Eclipse----way to go, if the bank is selling you a 400K property for $137K, thats some great negotiating, or luck. So why dont you buy it and sell it to an end user for $350?

REO---The philosophy that I have learned is make a little money off alot of properties rather then off one. The stress to sell a property at value takes months even years. To sell a home to an investor would take days or weeks. I want money to work for me not work for money..Reo the real question here is whether or not a assignment fee of 78k is legal. Im sure it is I read up so much stuff but im still not convinced.

It is legal

Let me ask you another question Reo...Instead of assignment fee...If I know a owner of a property in a pre-foreclosed status, gave them a offer say for example 200k...I gave them the offer but then I found somone else to 280k...Do I need an assignment form, or does my buyer just need to get qualified and then close the loan. basically what im saying is Im not getting properties from bank im getting it from a actual owner who is in pre-foreclosed status. If I sign a contract with pre-foreclosed person for 200k then what do I do after... Make a contract on the property for 280k? then at the closing I just put them at different sides and underneath on the hud statement title company will put 80k as misc fee's? which would go to the realor, and then the realtor would cut me a check as a consulting fee? or how does that work?...

Nevermind...who cares?

what do you mean who cares it doesn't matter? what does not matter, how I get that 80k?...All I gotta do is just pay taxes on it and im good?

Well what I said was I'd never work with you. Not for one minute. Happy? In my opinion you are taking advantage of people in an already stressful situation and they are under duress.

It's legal to pocket the difference between what you buy for and what you sell for but what you are describing here would probably be considered the illegal practice of real estate without a license in many states. You're trying to get around it by calling it a "consulting fee" but what you are actually doing is trying to broker properties for a commission and the law isn't fooled by ruses like that.

That too.

Alternatively if you had simultaneous closings it would be a flipping scheme. Tsk, tsk, tsk.

What seller would ever do this if everything was out in the open? I don't know anyone who would go through with a closing when the Realtor or consultant comes away with 80k and they walk away with next to nothing.

What you are doing is unethical at the least. Why should you get the 80k for a fews days work when the owner has built up the equity in the home for years?

The "seller" who never owned the property and just put the whole thing together is practicing real estate without a license, which is a big NO-NO in the great state of NH and I'm sure everywhere else. Let's assume that the "seller" did have a license. Wouldn't this then be a net listing? Again, completely illegal...at least in NH.

you could do a double close where you buy the home first and immediately sell it higher
or you could assign the contract, this way you do not have to go to closing

I would stay away from padding the HUD1 in any way

The cleanest way to do the deal is buy it and then resell.

The other way is to assign it. In order to assign the contract, you just need to put "John Smith or assignee" under buyer's name on the purchase contract. If the seller signs it, your good to go. You then 'assign' the contract to the end buyer for $xxx and he closes on the deal for the amount agreed upon in the purchase contract. You can be paid before the deal ever closes.

It's just another way to invest in r.e. and doesn't require a license. It's probably better if you aren't licensed. Running it thru your corp is usually the best way to protect yourself.

The down side of assigning is taking the risk that the seller will decide down the road that he was a victim of some sort. Even if the deal saved his @#s at the time, the court will often side with the owner.

I am highly cynical in this case.

Fundamentally, why would any seller turn over their equity to a third party?? No one would voluntarily.

That means that one or more of the following scenarios are playing out: 1) The sellers are being tricked into selling below market. 2) The sellers are being manipulated into selling below market. 3) The sellers are understanding their options. 4) The buyers are buying above market through deception, outright fraud or some form of loan fraud. 5) The buyers are being induced by some form of lease-purchase or other financing scheme.

Simply put, folks don't give away value voluntarily. I've seen people engage in these kinds of activities. Never have they been on the up and up.

What you all are saying are true however you are all really thinking outside the box here...Basically im talking to a person who is in pre-foreclosure...I am Assigning the deal to someone else for a higher price and taking the difference. I do not have a license so its not illegal real estate practicing as 1 person on here said. I could simply do a double closing but that takes to much bank work etc. The easiest way is to assign the deal which I am doing..Im making a purchase agreement for say a value of 200k to the seller...Then I make a agreement with a buyer that I found for 280k..The seller is happy the buyer is happy, everyones happy..nothing is being done illegally or unethically, Its called real estate wholesaling (No License Required)..You call it taking advantage of a person? I call it helping somone save there credit and make money when the banks where just gonna take it and give them nothing..

People have and will be ripped off for their equity, but there are also times when it benefits the seller. Sometimes a person is drowning in debt and are about to lose their home. They wake up one day after having stuck their head in the sand and realize that the house is going to auction in 5 days and they are going to lose everything. In a case like this it may be in the seller's best interest to get what they can and start over.

Anywho, this isn't really an reo/bpo topic.

So surfer what im doing is not illegal its being a real estate wholesaler

You cannot accept a commission for the sale of real estate without a license.

"So surfer what im doing is not illegal its being a real estate wholesaler "

Yes, if your doing it correctly it's fine.

Roswell, it's not a commission because it's not based on the house selling. You don't care if the house sells (in theory). You are selling your position in the contract with the seller's approval. The seller is receiving the agreed upon price.

Maybe it is legal, I am not nor have ever claimed to be, a lawyer.
I CAN tell you this....someday someone will be sued for this because the people he's "helping" are under duress when they signed the contract. And then the old 'well they would have been foreclosed on anyway' schtick isn't going to fly because no one can predict the future. For all this guy knows two days after the people he's "helped" have signed a contract to sell (while he collects a huge chunk of their money), they win the lottery and can afford to pay off their mortgage, or 3 days after signing say a neighbor offers to buy it for full value. Uh-Oh.

Eclispsehood what you have my friend is an INVESTOR question!!!!!

You need to pose this at http://www.dealmakerscafe.com or http://www.biggerpockets.com

It sounds like to me you read a stupid seminar or book and are asking for clarification.

The TRUTH is how and if you can assign something is based on federal and individual state laws.To do something one way and apply that across every state is really,reeally dumb.

Brokers-agents are held to higher standards and can't say DUH I was ignorant and didn't know.

The reason most don't buy then sell is they are wannabe investors with crap credit and no cash trying to get started assigning things for a fee to make money.

The contracts you use,the disclosures you make,the entity you purchase in or assign from will depend on the state your in.

Please if your serious about this get an attorney in your state to draw up a specific form you can use.

no legal advice

Soooooooo, let's just run through this real quick. Let's just say for the sake of argument that there is a total dumb@$$ seller that has had their head in the sand. And for long time too. Because they would have had their head in the sand the entire time they were either (a) working their butt off to pay down their mortgage, or (b) their real estate was appreciating like crazy. Because any half wit would know they had equity and when things got tough they would put their house on the market for fair market value then take the money and pay down their debt. But let's just say...that person exists. And let's pretend too that there really is that much equity in this property. Real equity based on current market value.

YOU can get paid one of two ways (unless I'm missing something here): (1) outside of closing just to put your assign's name on the contract, or (2) at closing on the HUD.

So now we have to REALLY stretch our imagination to find a dumb@$$ buyer if we're looking at option 1. Who in their right mind would pay you before they were able to close on the house? ANYTHING can happen and I'm sure any agent can attest to at least ONE surprise they've encountered in a hopeful transaction that prevented the property from being sold. So, I'm just saying. Even a half wit would not pay you before closing on the house. And I'm thinkin' it might be a RESPA violation.

So for option 2, this payment to you is fully disclosed. Ummm, what lender in this conservative lending environment that we're in, is going to approve that HUD? No financing involved? Then why would dumb@$$ #2 (the buyer) honor any kind of arrangement with you? Once they're documented as the assigned party couldn't they just terminate that contract and write one directly with the seller for a few bucks more and cut you out?

I guess you could conceivably have dumb@$$'s on both your seller and your buyer side and somehow make this happen if there's no financing involved. But eventually one of them will get a whiff of what just happened to them and you'll have hard time explaining that the person who's claiming they were taken advantage of NOW was really on board with this when it was happening. Really.

I guess there could be a third option where you're paid outside of closing after the transaction has completed. Again, I think that's a RESPA violation. And I don't know what would compel your buyer to honor that payment because they now own the house.

And please don't take my previous comment about simultaneous closing to be any kind of support for an assigns deal. You're defrauding a lender (assuming the assign is using one) because they are very concerned about chain of title and lo and behold in your scenario they are not made aware of your ownership, however brief it is. It reeks of an illegal flipping scheme.

But I do understand that lots of people are paying lots of money to go to weekend real estate investing seminars and being coached to do this. And the coach may have actually done it before. But I've seen a lot of things done before that absolutely will not fly in today's environment. Mortage companies and title companies are not into taking risks right now. And politicians and the legal contingent are just looking for people to hang out to dry for troubles in the real estate market.

But hey, don't listen to us. Go wholesale. A term which is typically reserved for business to business dealings. You're talking about consumers here. And typically agencies like to protect consumers.

You are sadly misinformed. What makes it illegal is what you are describing REQUIRES a real estate license in every state I'm aware of because no matter how you phrase it, yes, you are brokering real estate for a fee and you can't do that without being licensed. I know there are "gurus" out there telling people this is all okay, it's just a form of "investing", but they are WRONG. Several states are cracking down, hard, on these kinds of practices, and the result can be jail time. Don't make the mistake of thinking that just because you haven't gotten in trouble yet that you won't.

I know an attorney who turned in two guys who were doing this a couple of months ago when it became clear they were fleecing his client and they are now under investigation by the State Real Estate Commission as well as for suspected RESPA violations, which can mean hard time in a federal pen.

I am sure you will ignore the good advice you are getting here, but if I were you I wouldn't dream of doing another one of these "deals" without REALLY GOOD legal advice, not just on the say-so so-called guru.

Highest I would of never owned this property. Im not defrauding a lender im just bringing A(Seller) and C(Buyer) together which makes me B(wholesaler). Im not owning that house one bit what makes it a illegal flipping scheme. From my understanding a illegal flipping scheme is when apraisors, lenders, realtors are all involved in making the house far above value, getting somone to buy it and split the prophits between buyer and everyone involved. Actually the reason why im bringing this up is because my last house I bought somone assigned it to me and walked away with 132k clean. I got house with 120k in equity I did not no about his prophits but I did not care I got house what I wanted it for the seller got the money from what ever he was happy with, and the guy who I dealt with just organized it and collected the difference. yes cutting out the middle man is something that I have to watch however, You make a purchase agreement with and/or assigns after it let the seller sign it. Then find buyer and make a contract with him for a higher price. Right there are 2 written documents that would not allow them to cut out the middle man. At the closing table they would sit at different ends of the table, so documents would be privately signed. personally I looke this up on every site nothing is illegal about this however some on here are saying its legal then others are questioning it. What is it people?

Ellen45 i looked up about it specifically states that assignments are great for people with no money down, no credit, no license required..Im not ignoring the advise, im just getting 2 different sides. Are you sure the people that attorney turned in were doing assignments, they had to be doing some other type of fradualent activity.. Assignments have nothing to do getting a license..Thats like saying to buy a home you need a license.

Honestly, I ADORE people who think they know more about selling houses after a 90 minute webinar than a Broker or Realtor who had many hours of classes, continuing ed, state tests, and certifications, not to mention knowledge of Real Estate Laws and experience, behind them.
It's astonishing how stupid we are compared to these people.

Naturally you're not ignoring our advice because that would be stupid.

http://www.lre1on1.com/faq.htm

That is a site that tells the legistics on real estate wholesaling it states that you do not need a license and it is legal..This is why im confused half of you experts are saying its legal half are saying illegal then sites are saying legal??????

What do you mean you "looked it up"? It's obvious you don't have a clue of the implications of what you are doing. Do you even know what RESPA is?

Well YOU'RE the expert. YOU'VE been to http://www.lre1on1.com/faq.htm. Why don't YOU tell US?

what you're doing has been done here in charlotte..course, its' probably a bit harder for the guy to do what you have proposed (and what he did) behind bars....Considering the mortgage implosion lately, you would be remiss not to contact your commission of banks to see where you may run afoul...
Just an opinion

So when you have to go to court to explain what you did you are going to say this site told you it was okay and you figure the judge will be fine with that?

I am not saying that it is always illegal to put together deals involving "bird dog fees" and the like but I AM saying that if what you are doing is an obvious ruse to avoid licensing laws it may bite you in the butt.

And the odds of that happening go up drastically if you don't even understand that is what these sites are suggesting you do.

If you'll read my comment a little closer I was referring to a simultaneous closing. That would be where you buy the property and sell it the same day. And in that case you are indeed an owner for a short period of time. It's a cleaner way to structure the transaction IF there is no federally insured lender involved (private money loan only in my opinion). No RESPA violations.

So, why on earth would you not just buy the property outright and re-sell it at market value? Pocket all the money. Get a hard money loan if you're confident in the values you have presented.

You've chosen to post this on a real estate agent board. As Super Realtor said we are held to a higher standard. You're getting advice and information that this type of transaction stinks in a lot of ways. It's a very risky thing for you to do both ethically and legally, regardless of how you've justified it in your mind. If you just wanted someone to support the concept that you're a savvy investor go post it on a real estate investment board.

yes I no what respa is i was just reading every statue on the site.. I see what your saying section 8 of RESPA

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

The keyword is not actually performed, as long as im performing a duty im not in violation correct?

eclipse - if I were you, I would go back and read EVERY THREAD since your initial post....You are treading on some VERY DANGEROUS ground in light of recent mortgage issues (regardless of who's getting what mortgage- even if you aren't on any mortgage docs, you are stepping into an arena frought (sp?) w/ state and Fed looking to crack down on ppl like you....You just happen to be Johnny Come Lately and are likely to be made an example when they catch up w/ you... regardless of what you do, remember: what goes around, comes around. Good luck

So basically I should not do this assignment deal, is what everyone is saying.

Ecllipse-You have no duty- if you don't have and agency agreements......where are your fiduciary docs??? If you don't have them, you can't participate in any negotiation, collusion, or transaction for fees.

If you are performing a duty then you are collecting a commission which is illegal if you are not licensed. So you're either gonna get nabbed under RESPA or the State licensing laws and maybe both.

Not to change the subject but I had a client not too long ago that insisted he knew for a FACT that he could buy an REO we had listed for half what the bank was asking because it had been on the market 89 days and the government has to get rid of them in 90 days. Has to. Fact.
There was no telling him any different. So I submitted his silly offer and he left smiling thinking the cat was in the bag. Boy was he in for a rude awakening when it was rejected. And then he had the nerve to cop an attitude. He didn't leave the office smiling that day.

hard to spend that kind of money at the commissary in prison,dude.

Thanks guys I appreciate the advise..but one question assignments are done every day on many deals, why is it going on if it is illegal?

In most cases, greed and ignorance. There is an awful lot that falls into "gray areas" when it comes to real estate. Sometimes people do things because they see others getting away with them, somehow believing that makes them okay. And very often a lot of people can get away with questionable or even illegal practices for a long time so long as things go well. It's when the stuff hits the fan that all that changes. Just ask the sub-prime lenders.

I see yea thanks for the help guys I do appreciate it

Most folks realize this feels wrong.

And, it is more than that. This is called an "equity-skimming" scheme. It is based around the idea that you can trick people out of the value of their home by preying on their desperation. The feds love to indict folks for these. The just nailed a group of folks in Cleveland for doing exactly this. Made the national news I think on Monday.

Why is it wrong? Simply put, no one in their right mind is going to sell their home to someone else by an assignment or another method and give away substantial equity. If a home is worth X, someone will not give it away for X minus $$$$$$$. Virtually every American has a rough idea of the value of their home.

Thus, the ONLY way such a deal is going to happen is through some kind on non-disclosure, tricky or other form of fraud.

Remember, just because the buyer signs a piece of paper does not mean that it then is legit.

This is at its core fraud. Pure and simple.

The web site referenced is an indicator of the illegitamacy of what is being suggested. This is yet another "real estate educator". Probably teaches at Nouveau Riche's "University run by a former car thief". All of these guys rely on people's greed to sell their dumb courses and idiotic materials.

Here's a simple test: If it was so easy to make money this way, why doesn't everyone do it? Simple reason: It doesn't actually work.

There are NO shortcuts. You make money by doing legitimate, above board business. Otherwise, you eventually end up in a state or federal penitentiary.

Staggart Equity Skimming has nothing to do with what Im doing..That is when you trick a homeowner into signing over a deed, and that person not making payments...Im done with this thanks for the advise guys..

Steve,

That is not actually what equity skimming is. Equity Skimming happens this way:

1) Homeowner falls behind on their payments.
2) "Investor" comes in and offers to catch the homeowner up on their payments and assume their current mortgage.
3) Homeowner will continue to be allowed to live in the home but must send payments to the "Investor" now.
4) "Investor" pockets the money and never makes a payment to the bank.

These schemes can continue for 6-12 months before the home is actually foreclosed on depending upon the lender. But, that is why it is called "skimming". They're taking a little bit of money each month and not one big lump sum.

Now, what has been proposed by the OP is a typical investor scheme. However, he has a few problems.

1) Lenders are limiting what an investor can make on a flip right now (and have been for several years). That's why a lot are doing this "wholesaling" idea. At some point, there is non-disclosure being made to the lender because they won't allow this loan to close by seeing those types of fees on the home unless the investor got the homeowner to sign a mortgage or deed of trust.
2) The investor will more than likely be found to be acting as a real estate agent without a license if somebody complains. He never had any intention on closing on the home so he is acting like a broker in the sale of a property in which he does not, nor ever has had, an ownership in. In TX, you can get a nice fine and, more than likely, jail time.
3) There is fraud involved in this deal. Period. Homes are not sold at 33% of market value. Ever. So, the fraud will probably be found in one place--the final appraisal of market value and you can point your finger at the appraiser and investor for that one.

As far as the comments regarding net listings, net listings are not illegal here in TX so long as full disclosure is made to the homeowners and everybody involved. The problem arises when a realtor wants to make a huge profit and that's where the fraud starts happening. Several "companies" and "investors" have been sent to jail for these schemes because there is always something in there that involves fraud.

A lot of assumptions have been posted here.
Eclipsehood - go spend $500 to sit down with the best atty in your area and have him help you structure the deal and make sure it's legal in your state.

I imagine I am going to upset a few people on this board, but this is kind of r.e. investing 101. Noone is getting a loan for these assignments. Simply pay the seller what is agreed to and cure the existing loan, taking title subject-to the existing financing. Before everyone screams that there might be a due on sale clause and the loan can't be assigned, ask your local bank exec if he would rather have his defaulted loan cured by a third party or go bad. You are helping out the homeowner and the lender.

I have probably done a half dozen deals like this in the last 15 years or so and each time it was a win-win for everyone involved.
The sellers called me, i never solicited anyone.
I have the sellers sign a contract that basically states that I have advised them to get an independant appraisal if they desired, that I am purchasing the property for what I think is under market value, and that I plan on making a profit. It also states that I may not be the one closing the deal. If they have a problem with that, I wont do the deal, because I dont care if I do the deal or not.

The notion that one must have a r.e. license to make money in real estate is incorrect. In fact some of the wealthiest investors I've met have never been licensed.

Surfer I appreciate your imput I wanted somone to post here who has been doing these deals...So basically just have everything in the contract and everything is fine..Surfer do you have a aim/email or sometime of contact that I can contact you at?

You don't have to be licensed to make money in real estate but the role the OP described in these deals can be and has been construed as practicing real estate without a license. There are other pitfalls involving RESPA as well. I am not anti-investor, in fact mroe than half of my business is dealing with investors and I invest myself. But the OP seems to be very uninformed and on dangerous legal ground.

Eclipsehood,

What you really need is an attorney to sit down with.
What I will do myself isn't necessarily something I would
advise to others.

Good luck!

northtxbroker -- There is a bit of variability in definition of "equity skimming".

A year ago, I was able to view an FBI presentation on loan fraud. It deal with loan-related issues and then what they described as "real estate fraud". One element was "equity skimming/stripping" which was outlined several different ways. One was the scheme you outlined. Another was getting folks to quick claim over their property by false pretenses and then reselling it.

I believe this falls in that second category.

Staggart Im not quick claiming a deed...and im not doing anything by false pretense which means the intent to fraud somone..nobody is commiting fraud

Cosign!

IMHO.....You need to talk to a real estate attorney in your state for legal advice. If you are going to make 180k on this deal pay a lawyer to keep it above the table and you out of jail.

I would hope that prior to learning real estate law and brokerage practices from "personally I looke this up on every site" that you get some sound legal advice as well as a spelling and grammar coach. If you are "bringing people together" for a deal then that is brokering real estate. I have practiced real estate for 17 years and consider it to be my full time permanent profession. I hate to be the one who has to clean up after you amatuer "wholesalers" are long gone or better yet--in JAIL!! Why not just get a job and earn your money the real way instead of fleecing people in the name of "bringing people together"

The problem is the original poster is making blanket statements and wanting someone to say YES!!!(sarcasm) you can do this and it's safe.

Every purchase and assignment and deal is DIFFERENT.What you have is inexperience and that is dangerous in this environment.

RESPA for instance does not apply to commercial deals.There are many different state differences in how deals are structured.If you were experienced you would know this.

If you want someone to train you pay them 500 to 1,000 an hour or go birdogging for them and bring them deals for an education.This is not an investor board and we don't get paid to educate you.

Don't you get it????They make this info there selling sound so easy and fast to make money!You know why one of the biggest money makers out there is selling information to people.

Look, you really need to get an attorney and a good, experienced real estate mentor who knows what he or she is doing before you land in big trouble.

For instance, someone needs to explain to you that all it takes is one of the sellers in these deals to talk to an attorney or real estate professional about what happened before there is a lawsuit and possibly criminal complaint filed against you.

Yes, there are ways to profit legally and ethically from real estate deals but just from your obvious ignorance of basic real estate issues I can tell you wouldn't know a legal deal from one that will end with you behind bars.

I do believe Eclipsehood will get 99 of us to tell him not to do it and the 100th person that says, sure go ahead [with reservations], he will give the most weight to that post and plunge into a questionable act with scary consequences. If you ask enough people a question, eventually SOMEONE will tell you what you want to hear.

I have 6 years of experience doing investment deals, handling REO properties, and generally being involved in the REO/foreclosure marketplace as a licensed real estate broker. I have never seen somebody sell a legitimate $400,000 home for $137,000. Has anybody else seen that? The only time I've seen deals with those type of numbers is when fraud is involved.

Steve, you're right about the skimming. I think the key to those deals is the investor somehow gets title to the property without being responsible for the underlying financing. In short, it's a scam and preached heavily in Nouveau Riche community circles by their "gurus". Luckily for the OP, I don't think he's getting title so this is at least one thing he isn't doing wrong.

I think the OP mentioned he thought the property was worth 480K and the first "purchaser" who assigned it to him somehow got the seller to agree to $200k. And yes, with figures like that there is certainly fraud somewhere. No one knowingly sells a house for 40% of value.

Wow, this thread got more action then if he worked for Ocwen,

My Take:

Net listings are not illegal in NC, but the commission frowns on them.

Generally a Licensing authority, like a R.E. Commission, can not do anything unless the person 'has' a license. However that is not to say the 'States Attorney General' can't.

Basically I believe you can use 'Options' contracts and 'ASSignments' to legally conduct business, but if you are asking about how to do them here you shouldn't be doing them at all.

When investing it most often better not to be licensed.

Your opportunities are only restricted by your morals and willingness to take risks.

There is a better place then here to discuss this, like anywhere but here.

Be careful of what you say, even more careful about you write and leave behind.

E - are you aware that regulatory agencies often check forums and that you have now identified yourself as a person of interest to them? You should also know that this can be and will be used against you in a court of law.


Good Luck.

Pinehurst I think this will work in my favor in a court of law...Im dealing with a mentor and other lawyers who are convincing me that this is legal...If its not legal this forum is a perfect defense for me in saying that I was skeptical about the situation however I was being pursayed by people that have professions that they have licenses for. Im just a innocent 21 year old kid in college about to graduate, that met some people who are working with me because I show an interest to the business..If they mislead me, that means they are taking advantage of me, and I went along with it because of the money they were talking to me about. Theres a law term called undue influence. Under the second subgroup of undue influence it is when a person or group of people influence or pursaude a indivisual to perform an action that he does not understand. Why do you think im on this forum I don't understand if I understood I would not of posted in a forum..I would love to use this forum as a defense in court

Welll....for one thing 'they' say ignorance of the law is no excuse ... and from your last post .. well that pretty much blew that defense.

I don't know that you are or intend to do anything illegal, of course I am not a lawyer, and I don't work for any governmental agency, but I do know how to contact them and so does everyone here and thousands of lurkers.

There is right and there is wrong, I'm comfortable with what I do.

You also appear as you say you are, good luck with everything.

Real Estate Commissions (at least here in TX) regulate all transacations having to do with real estate. Licensees are definitely held to a higher standard than typical citizens. If an individual is acting as a broker without a license, it would fall under their jurisdiction and they aggressively pursue them.

Also, I hope everybody knows this is why it is illegal for banks to allow "and/or assigns" on their contracts.

This law is in place to protect the public and homeowners from people like you. Don't see it working in your favor. Especially after your post.

That post. The one where you try to manipulate the situation making you, the predator, the victim.

That is correct pinehurst ignorance is no excuse whether you go state to state you are suppose to know the law in that state regardeless if you are from different state. Being mislead by people who have licenses and me having trust in them because of their license that could be considered an exeption to the law. Is it not reasonable to assume that that person in college (me) will put the trust in them because of their professional degree's/licenses by the state? Being mislead under the 2nd subgroup will pertain to me in my favor. I appreciate for your help thogh pinehurst thats why im here to try to understand this type of real estate transaction. I did not get really far here other then here people's opinion but I will contact a lawyer other then the lawyers I have been talking to, too get his opinion.

Suggestion....stick with college. And it wouldn't hurt to throw some English/Grammar/Spelling instruction into your classes.

ok

Fabulous. Glad to see you are actually going to follow some of the advice given to you.

E- it's not personal ~ you shouldn't try so hard to make it that way.

In my opinion, you are wrong in your assumption that being lead by others into doing something wrong can be used as an excuse. You're not a kid anymore and as such you now are held accountable for all your actions, and anyone who helped you down this road will be held accountable for theirs. My opinion is that whoever lead you to believe otherwise has done you a disservice.

If you do it, you are responsible .. no whining or whimpering to the judge saying... baba but they said it was OK.

I was going through this again because of this post I remembered. What do you mean the guy you bought it from is a bank? In other posts you said he was an investor who assigned it to you and never owned it.

In this post it also sounds like the previous owner lost the home for not making payments, in other posts you said he sold it to the investor.

I think you need to explain exactly how you bought your house and how the seller ended up selling it for half of what it is worth. You never have answered why someone would leave 300k in equity.

Mark-The person was in a pre-foreclosure status, could not make is payments so through my contacts I got ahold of this person spoke to him, he basically told me that he wants to save his credit and sell the house. He told me bank was going to take the house if he did not get rid of it. So Im going to make a sales contract for real property probably for more then 137k I want himt o make money to maybe Ill give him 160k..I sent a appraisor in there, and he said house was worth 400k which is possible because they just built up brand new apartments there. So witha house worth 400k and a house that im getting on somone who is basically giving the house to me for nothing im goign to then find a buyer make a contract of sale for 220k maybe more maybe less. btw on contract with current owner I will have in there that I will find another buyer, and make a prophit. after both party sign both contracts with me at the closing title agency would then cut me a check for the difference. thats basically how it would work

When I say through my contacts I mean this was a deal my mentor presented to me as a good deal for my first assignment as a learning experience.

Mark sorry I mis understood your question, I thought you were asking about the deal I got going on. No basically the house that i recently bought was exactly what I just said previously the guy I bought house from basically foudn somone in pre-foreclosure signed a contract, found me made a contract with me and I closed on the house and he took the difference. at the closing We were on different sides, and the guy who found me was in the middle signing documents from both sides.

First off, if the homeowner is behind, his credit has already taken the hit. The claim that you are going to save his credit is bull**** and you are misleading him. The biggest hit on a credit report is a 30-day late on a mortgage. By the time you make it to foreclosure, it just can't go down anymore.

Secondly, apartments do not help the value of a single family residence. Ever. Period. They are two different property types.

Thirdly, having the homeowner sign a contract where you state you will be finding a buyer can easily be construed as you attempting to act like a real estate agent and/or broker. You are brokering the house. Oops.

Also, what you described with 3 parties signing documents at the same time is called a simultaneous closing and is heavily frowned upon because of its necessity in fraud schemes.

Are you getting this info from Nouveau Riche University?? This is the crap that they peddle and it gets people in trouble.

No I dont even know what Nouveau Riche University is

Sounds like the property deal you are looking at is an inflated appraisal which does involve fraud.I see alot of investors reselling to investors or homeowners with inflated appraisals.

Look man I am done with this post.Every deal is different and legalities are in the DETAILS of each deal.good luck

So Eclipse, your defense if you got into hot water with this transaction would be that a bunch of licensed professionals told you it was okay and you didn't know any better. They took advantage of you.

So what about all of THESE licensed professionals telling you it is a questionable deal? You're ignoring these licensed professionals.

Therefore you cannot claim you put all your trust in licensed professionals and they're steering you wrong.

Good luck man. You're going to need it.

"Sounds like the property deal you are looking at is an inflated appraisal which does involve fraud"

Where did you see that?

Eclipse.....you are still talking about this? No matter which way you cut it, it's unethical and more than likely illegal. You are, in effect, practicing real estate without a license. The act of finding a buyer for a property that you do not own and receiving compensation would constitute practicing real estate without a license. Not to mention....this sounds like something you might have heard about on a late night infomercial. If you want to risk some serious legal trouble by screwing people, that's your business. However, this is a forum for REO and BPO and what you're talking about has nothing to do with with topic. Not to mention you don't seem to care that pretty much everyone here has told you that the whole scenario sounds crooked, and ILLEGAL. You're going to find youself in some pretty hot water eventually. A homeowner that would agree to a deal such as this would be doing so under duress and eventually will realize that you screwed them. I don't know how you could feel good about doing this anyway. People build up equity in their home and somehow you feel entitled to it? In regard to the whole situation...if it sounds too good to be true, it probably is. How much are you paying these people that told you it is legal?

Devil's advocate here:

Husband dies, wife is left at home with 2 little ones and doesn't work. After a period of grieving, she begins to sort
through the finances only to find that the bills are all past due
and the bank has sent notice 2 months ago that they have started the foreclosure proceedings. There is no money in the bank and the husband didnt have life insurance.

After further investigation, the wife finds that her home is going to auction in 10 days. She calls every friend and family member she knows. Noone can or will loan her enough money to cure the default. She also finds a crack pipe that her husband had stashed in the garage and everything is starting to come into focus for her. Her husband had led a secret 2nd life.

With 5 days to go, her neighbor (an aquantance of my wife and I)calls me and tells me the scenerio. I end up giving her $15,000 for the house and cure the loan. I ask her to move within the next week which she agrees to (moved back to where she was originally from) and in the meantime I cured the loan.

I sell the house shortly afterwards to an investor for a large profit.

I am:

A) Going to jail.

B) Going to hell (because it 'just isnt right' to make a lot of money in r.e.)

C) Guilty of taking advantage of a helpless homeowner/widow.

D) Going to receive a Christmas card each year from the seller along with the latest school pictures of the kids?

surfer---that is not what the OP proposed. Not even close.

Yet, you are taking advantage of the WIDOW. I don't see anything wrong with making money in real estate. You obviously know how to help the WIDOW out of her situation. Yet, you decide that it is ethical to lay claim to the WIDOW's equity that the WIDOW and her DEAD HUSBAND have been accumulating for years. If you were such a nice guy, you would show the WIDOW how to save her equity and sell her home. That's what agents do.

You're probably one of those guys who reads the obituaries and looks for people to take advantage of.

Eclipsehood...If you have the answers then why do you persist in asking the question? Methinks thou dost protest too much...

northtxbroker,

Before I respond to your post, the answer is (D).

Okay hotshot, 5 days before auction, noone will lend her money and she doesnt work. What do you think I should do? List her house, lol? I threw this out there because this stuff does happen.
She talked to every Realtor she could come up with.

eclipsehood - your beating a dead horse. go talk to an atty and follow his advice.

K thanks surfer..Tell the admin of this forum to delete this post because I know other people will post on here...Im done Later guys

Eclipse, this is the definition of a real estate broker in the state of Texas.

§ 1101.002. DEFINITIONS. In this chapter:
(1) "Broker":
(A) means a person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person one of the following acts:
(i) sells, exchanges, purchases, or leases real estate;
(ii) offers to sell, exchange, purchase, or lease real estate;
(iii) negotiates or attempts to negotiate the listing, sale, exchange, purchase, or lease of real estate;
(iv) lists or offers, attempts, or agrees to list real estate for sale, lease, or exchange;
v) appraises or offers, attempts, or agrees to appraise real estate;
(vi) auctions or offers, attempts, or agrees to auction real estate;
(vii) deals in options on real estate, including buying, selling, or offering to buy or sell options on real estate;
(viii) aids or offers or attempts to aid in locating or obtaining real estate for purchase or lease;
(ix) procures or assists in procuring a prospect to effect the sale, exchange, or lease of real estate; or ...


http://tlo2.tlc.state.tx.us/statutes/docs/OC/content/htm/oc.007.00.001101.00.htm

From what you have described, you are doing (iv), (vii), (viii), and (ix). You need a license.

Also, the penalty for acting as an agent without a license in TX is "not less than the amount of money received or more than three times the amount of money received". You might want to point this out to your "professionals" you are working with.

Surfer,

And what benefit are you providing to the WIDOW? None. Absolutely none. You're taking advantage of her.

And, if she had talked to multiple realtors and had that much equity in her home, it would sell. Sorry, dude.

The other thing that is wrong with your proposal is we're supposed to believe that you will cure the note? Don't think so. Taking title without assuming the underlying note is another step in fraud.

You are right about one thing---these things do happen.

ntx -

"And what benefit are you providing to the WIDOW?"
First off you dont need to cap. 'widow' everytime you write. I get it. Benefit? Um, how about all of her equity was going to go to the bank and she would be virtually homeless?

"And, if she had talked to multiple realtors and had that much equity in her home, it would sell. Sorry, dude."

Market it and close it 5 days? One slip and she loses everything.

"The other thing that is wrong with your proposal is we're supposed to believe that you will cure the note? Don't think so. Taking title without assuming the underlying note is another step in fraud."

It's not a proposal. I am talking about an event that occured. I had to cure the loan or it would have gone to auction before I could sell it. Taking title with the existing financing merely triggers the due on sale clause. I had no agreement with the bank, the seller did. When I resold it the note was paid off.

I really don't appreciate someone who doesn't even know me telling me what I did or I didn't do in a deal.

You can brow-beat the kid who started this post, but a lot of you are showing a real lack of knowledge here. Statements like "It just isn't right" or "Theres no such thing as easy money in this world", "You need a license to buy and sell r.e." etc., shows a real narrow focus of r.e. knowledge.

Northtx So what you are trying to say is even somone who sells a car is acting as a broker. Come on man your the expert here by law if you are the principle you can do whatever you want with that property. If what you are saying is true this would be a really ****ed up country. excuse my languauge, but your basically saying that a person can not sell anything without a license. What about people who buy tickets for a plane or a cruise your telling me they can't go sell it on craigslist because something came up? they have to obtain a license to be a travel agent to sell those? What you are saying is incorrect you do not need a broker license to sell a house. Oh brings me to another point FORSALE BY OWNER, I can rest assure you, that person does not have a license. All the owners out there that find tenants for their properties your saying they need a realtors license to do so, No you can use one if you want to but you can take dick jane and harry off the streets and house them in your house without a realtor's license I know I do not know much about real estate like you guys but general business transactions under the Uniform Commercial Code I do understand.

For the last time: In order to make money off the sale of a home that is NOT yours you must be licensed. Can we make it any clearer to you?

So, she sent her equity to you and was virtually homeless? You're right, that makes a lot of sense!



You said she had talked to multiple realtors already. That means it was before your 5-day period.



I can't believe you don't see anything wrong with taking title and not being legally responsible for the loan on the property. By the way, this is the definition of equity skimming.

You are never the principle, buddy. You never own the property or take title!!!!! If you buy and close on the deal, do whatever you want. Otherwise, you are acting as a real estate broker without a license. End of story.

You are the principle on the contract to purchase it, transfering that is 100% Legal. I could also form a LLC put contract under that and have my end buyer buy my LLC but im not going into that...

"By the way, this is the definition of equity skimming."

No, this is:

61.34.010
Legislative findings.
The legislature finds that persons are engaging in patterns of conduct which defraud innocent homeowners of their equity interest or other value in residential dwellings under the guise of a purchase of the owner's residence but which is in fact a device to convert the owner's equity interest or other value in the residence to an equity skimmer, who fails to make payments, diverts the equity or other value to the skimmer's benefit, and leaves the innocent homeowner with a resulting financial loss or debt.

Don't just make stuff up to support you theories.

I will say this one more time in case you missed it.... I am not relaying a scenerio that I witnessed in an opium dream. The deal I wrote about was real. No theories, no legal problems, no laying in bed at night because I ripped off a 'WIDOW'. It's a deal I did and we do in fact exchange Christmas cards and she thinks I was sent from heaven. Any thoughts or opinion by you are irrelevent and won't change the facts.

That's because most of us enjoy selling real estate and would like to keep our licenses and not go to jail. lol

No one said you need a license to buy and sell R.E. and he isn't buying R.E. he said it himself.

It seems pretty simple to me. He goes to a home owner to try and get them to sell their home. Then he finds a buyer for the home and then he gets everyone together to sign papers and transfer ownership. That sure seems like he is acting as a Real estate agent to me, not to mention the enormous fee he is getting.

I know around here the Real Estate commission is searching for people to bust. They won't hesitate to take people to court even if they may lose a few cases.

I do a lot of investing and purchasing of distressed homes. There are situations when a buyer in foreclosure will come across a lot of equity they did not know about. In the case where the buyer has a lot of equity we always try to sell the home for the person because they will get more money out of it. In a lot of cases the buyer will not know they have equity in it unless we would have told them. Yes we could just buy the house from them and leave them in the dark and take the profits but we choose do what is in the best interest of the seller. If you are just an investor then you have less obligation to the seller but as a realtor we are held to higher standards.

Just because you did a deal in the past and didn't get caught doesn't make it legal. I'm not saying your deal was illegal cause I don't know. There are tons of deals done out there that are illegal that are never found out.

Mark -

Good reply. I appreciate rational thought. There are a million ways to deal in r.e. Some are legal and some aren't. In the last few years there have been a lot of classes on how to do certain things that are questionable or least not for the inexperienced. I dont like people ripping off others any more than anyone else does.

My point was that Realtors tend to dismiss nonconventional ways of doing r.e. as 'bad' or 'illegal' when in fact there are many legal ways to do things.

The scenerio I mentioned was real and as I pointed out i was playing devil's advocate to show that there are times where it is in the best interest of everyone to sell for less than what a place is worth. Im not an crook, by the time the woman's situation was presented to me, this was the only option she had. I didnt contact her. I didnt care if I bought her house or not. For someone who has no idea of the details of a deal that was about 5-6 yrs ago to question my motives really sucks.

I have also purchased a property for much less than market value from a seasoned investor that needed cash right away for another property and it was better to sell for less than to miss out on the new deal. There's a ton of scenerios that dont fit into a Realtor's normal business plan.

I was pointing out that some of the answers to the kid's questions were based on personal opinion rather than fact. And no, it sounds like that guy should not be playing in the r.e. game yet and I have repeatedly advised him to see an attorney.

Eclipse- I'm probably going to get my newbie self in trouble with this one, but assigning contracts is in no way illegal. You have been getting a lot of bad advice from well-intentioned, uninformed brokers who claim to work with investors on this site. Only a few of the responses show any real knowledge of what you are asking about. Surfer seems to have done this before, and his responses seem the most valid.

People can assign contracts, and this does not apply only to real estate. I can assign any contract that I have with someone, given the proper provisions. What you are trying to do does not require a brokers license, because you are not listing or selling real estate. You are selling your legal right to purchase real estate.

For instance- you are selling your home. I sign an offer with you for $200,000. The next day someone says to you- "I would have bought that home for $210,000". I may say to that person- "Give me $5,000 and I will sign the contract over to you". The current owner has lost nothing- we had an agreement that he was bound to. I made $5,000. No harm, no foul.

Having said all of the above- you are probably also getting poor information that recommends you do this. I have seen this in many seminars and books, and it is over-hyped. As stated before- in reality, this technique has very limited uses because very few owners in their right minds would relinquish their equity. However, as we all know, benefits are not always in the form of money. They may be in the form of speed, or piece of mind, etc. So there is a time and a place for this.

The end result? The technique for arriving at the conclusion may have been wrong on this board, but the conclusion is still valid- seek an attorney who has experience in this. I would not discourage you from doing this with proper legal advice and when the time is right, but I would discourage you from seeking this out as a way to make money on a regular basis. This is one of those ideas that people think will make them "get rich quick" but really only leads to them wasting time chasing the pot of gold at the end of the rainbow.

My last comments on this.

Eclipse, you never own the property. Your name is not in title. Sorry, but in TX you would easily be found to be acting as an agent without a license.

Surfer, the only difference between what you said you did and equity skimming is you claim to have made payments on the loan. At the best, you are in a very gray area legally that is morally ambiguous. At the worst, you defrauded a woman of the equity in her home. My opinion is that you took advantage of an elderly woman who had lost her husband, stole the equity in her home, and that is absolutely disgusting to me.

Northtx let me ask you a question a serious question...Does a realtor mak a purchase of sale agreement with his/her name on it? Now correct me if im wrong doesn't a realtor connect the seller and the buyer with an added fee on the hud-1? Now what im doin is, im making the purchase of sale agreement on my name and then selling that for the difference of what ever price I negotiated with my end user.

Do you guys realize I had to search and talk to lawyers on the internet to find out exactly what its called I 1 think person said it in here its called a Double Escrow, that as broad as it gets
http://www.simple-mans-guide-to-real-estate.com/double.html is the site. Not Illegal, No License, No Fraud..Have a nice day

Eclipse, I'm the one that brought up simultaneous closing (or double escrow or whatever you want to call it). I never said it was illegal. I'm not a lawyer and I haven't done any research. I do know that legalities are determined by test cases, or many test cases, and the outcome of test cases are driven by the perception/mood of judge and jury. If you're not sure, I can tell you what the current mood is as it pertains to people losing their homes (through foreclosure/stealing as in another thread/equity skimming, etc). Better yet, just pick up a newspaper and determine for yourself.

You're missing a subtlety here. In a simultaneous closing YOU are purchasing the property FIRST. Then turn around and sell it to someone else. Albeit it all happens simultaneously (more or less). You are a principal on both transactions. First as the buyer, then second as the seller. It avoids the whole assertion that you could be practicing real estate without a license. But it opens up the whole 'nuther can of worms commonly known as "flipping." This was commonly done in the past, the warnings that you've been given is that THE CURRENT MARKET IS A DIFFERENT ENVIRONMENT THAN THE PAST.

Simultaneous closing is different than and/or assigns in which you just sell your option to buy the property and never purchase it yourself. In that situation there is a strong case that you are practicing without a license.

Regardless of what you may think, we all operate within an external environment. Think prohibition, when buying alcohol was problematic. There was/is a time on both sides of that era when it wasn't/isn't a problem. Or smoking. There's a gradual backlash and there are fewer and fewer places that you can smoke...who knows where it will end. When the general public gets all up in arms about something they lobby their legislature and sometimes laws get passed preventing certain activities. It's not instantaneous...a tide starts to turn and certain practices become more and more unacceptable over time. Can you see how the current environment can be slanted toward the protection of consumers at this time? Where your role is perceived as nothing more than the money hungry investor taking advantage of poor uneducated consumers? There's a backlash right now against those perceived as profiting from hard-working consumer trying to achieve the American dream only to be cheated out of it by investors and mortgage machine (NO, I don't agree with all of this BS, I'm trying to illustrate a point that it IS the current environment we're in and to ignore that is foolish).

Nobody on this board has a personal interest in what you choose to do one way or another. We're all offering our input as seasoned professionals...and offering it for FREE. You should take all input, from this board and otherwise, and do what your morals/ethics/motivations compel you to do. And be prepared for any consequences if there are any. There's no reason to be argumentative and say we don't know what we're talking about because someone told you differently. As with most things in this world, it isn't black and white. Experience is what teaches you to operate, and operate well, within the shades of gray. At 21 you cannot claim that badge of honor.

I'm sorry but you are wrong. The minute the OP goes into the situation planning on finding a different buyer before he has taken title he is in legal hot water, at least in my state. As I have repeatedly said, there are legal ways to accomplish what is called a "wholesale flip" but the way the OP describes simply isn't.

I have remained silent on the issue of the ethics of the situation he describes because it IS a matter of opinion and also there certainly are cases where the seller feels it is worth giving up a considerable amount of equity to get out of his position. However, a very large profit combined with questionable legality is a recipe for lawsuits and/or criminal investigation. Also, in my many years in this business I have yet to see someone with 60% equity be in the position where he actually benefits from giving it away. Just doesn't happen unless something funny is going on.

Ellen,
I am sorry, but I am not wrong. What you are missing, and understandably so, is the fact that we are not talking about the sale of real estate. We are talking about the sale of a contract, or a legal right. The OP is talking about selling his legal right to buy the property to another person. This is the key to the entire thing being legal. I agree, a non-licensed realtor cannot accept a commission on the sale of real estate, but anyone can accept a profit on the sale of a contract.

As far as the ethics point, and legal point- you are correct 90% off the time (if not more often). As I have said, while this is pitched in many seminars as a way to make money in RE- the situation where it would be a benefit is rare to begin with, and one where you will find 60% equity is rarer still. Not many people have 60% equity and aren't paying their mortgage any longer to begin with. Despite what seminars tell people, assignment is usually done for much smaller profits ($5-20K I would say). Are their instances where the profit is $100K or more, sure. It's just incredibly rare. And when the profits are that large, often someone is getting screwed.

Beyond this, however, if you make a mistep, you may have liability to a seller if the buyer does not follow through, and you have not done things correctly.

I agree that this is not a great way to make money, in most situations. I wouldn't spend my day looking for this to pop up...unless you like being hungry.

Excuse me, Alwaysthenewbie, are you a lawyer? Because I pay my lawyers very big bucks each and every month to make sure I keep my dealings and my client's dealings on the right side of the law and they have told me in no uncertain terms that deals involving assigns that were clearly entered into with the intention of finding a different buyer to take title can be and HAVE BEEN construed as the illegal practice of real estate.

I understand the point you are trying to make, that selling the "right" to buy real estate isn't the same as selling the real estate itself, but apparently that can be looked on as simply a ruse to attempt to get around licensing laws.

In this climate, investors have to be doubly and triply careful about how they do business. I am not much comforted by the idea of trying to argue on a technicality if I'm called on it, especially when I have been told by legal counsel that I'm taking a risk by doing so.

And as you rightly point out, this technique is hardly ever even a viable one, in spite of it being touted by every Tom, Dick and Harry guru as a way to "break into" real estate investing.

I do understand how new wannabe investors are attracted to methods that don't require credit or large sums of cash but there are a lot better ways to get started then by crossing into dangerously ambigious legal waters to do it. True, newbies aren't going to make $100k profits on their first deals but most experienced investors don't, either - in spite of the late night infomercial hype.

I have built a large part of my business by helping new investors grow into being large investors. A lot of them came to me first with cockamamie schemes and foolish ideas learned from "gurus" that either would never have worked or would have landed them in trouble. I've made it my business to work with them when most Realtors just ignore them or avoid them. I have clients who started off just as wet behind the ears as the OP who now buy and sell multiple properties a year with minimal risk. And I would never, ever advise ANY of these clients to participate in deals like the one described by the OP.

Ellen,
I am not a lawyer, but I play one on website forums. J/K.

I don't claim to be a lawyer, and clearly we are both advising that the person receive good legal advise in doing this. There can be a lot of exposure here. However, there is nothing illegal or unethical about the practice itself. It can be used in unethical ways, however.

The only point left to be made is this: if assigning a "real estate" contract is illegal- how do mortgage companies assign contracts on a daily basis, by the thousands, for a profit, with no real estate broker involved and never get sued for it?

Finding random links on the internet doesn't prove anything. If you get in trouble for this and go to court are you going to produce this website as proof your actions are legal? Do you know how many things on the internet are batantly wrong? Plus as stated before the laws in every state are different. Anything that claims something is legal across the board is asking for trouble.

You have to talk to an attorney who specializes in real estate law. We aren't attorneys and cannot tell you if this is legal or not just give you our opinions and past experiences.

I already found one thing in that article that is not true. Around here you have wait 90 days to get fininancing with VA, HUD or FHA after a property has been bought and sold again, not a year.

You keep grasping for any little thing that will make you believe this is legal and okay to go ahead with while ignoring the 95% who say don't do it. The other 5% say you better talk to an attorney before you do anything. If you are going to make 10k's of doallars on these deals why can't you pay for a sit down with a good attorney?

Of course I would be pretty worried about spending money on an attorney too if I was in your situation. Being a 21 year old with little to no experience in real estate being told by my "mentor" I can make $100k per deal for doing almost no work. My too good to be true alarms would be blaring in my ear and it would be nearly impossible to drown them out. Why would your mentor give a deal you can make that much money on? Why wouldn't he do it himself? Does he have more money than god and is giving you charity while in the process taking 40% of the equity away from home owners in distress? Doesn't make much sense to me.

If I were you I would make sure you know these guys really well. I would make sure you know the values of the homes really well, not just take the word of some appraiser they hired. I would make sure it is all legal by talking to an attorney in your state who is an expert on Real Estate law.

Yes, the practice can be construed as illegal, as I have explained, under state licensing laws. Will each and every person who tries it be immediately charged and arrested? No, just like not everyone who speeds will get caught. But if you are singled out to be investigated, it will be cold comfort knowing other people are getting away with it.

As for mortgage companies, that has nothing to do with what I am talking about. Contracts can legally be assigned so long as doing so does not violate some other law. In the case of real estate, assigning the contract to buy and sell can be construed as practicing real estate illegally if the person involved does not possess a license.

Mortgage business is different than the Real Estate business. Mortgage brokers didn't even have to be licensed around here until last year.

Mortgage Companies are assigning contracts company to company, not individual to middle man back to individual or company. Two completely different situations, but that isn't my point for this post.

Again, I'm not a lawyer but this is my opinion.

A judge has tons of room to wiggle when deciding cases. Like it was said before they use past prededent almost as much as laws when deciding cases. If they beleive a homeowner was screwed over they have and can deiced for the homeowner even if 95% of the peope in the court and the law says it was legal to do so. Sure you can appeal it and keep trying to fight it and have 100k in legal fees real quick.

Anyone can sue anybody for monetary damages, criminal charges don't have to be brought by the state or some other authority. It isn't cheap hiring lawyers and going to trial even if you win. If you lose you are really screwed, I have heard of many people getting their houses back and completely paid for after being taken advantage of by investors or Realtors. Just something to think about if you are doing something on the moral borders.

The key point is that you are NOT selling real estate. This is NOT a technicality. Also- what the mortgage companies are doing is NOT different. They are selling their position in a real estate contract for a profit. There is NO difference. This is why they call it "Assigning a mortgage". They have a certain interest in the real property, and certain rights that go along with that, and they are assigning those, completely to a new entity. It does not matter if it is a company or person. This is basic common law 101.

The act of assigning a contract in real estate, regardless of licensing laws, is legal. I am not arguing that it is a great idea. Just that most of the advice on here is missing the real legal premise of this- it is valid and legal. Valid and legal doesn't make it a good idea, and does not mean you cannot get yourself in legal hot water if you mess up. Heck, as pointed out by markmandude- you could be completely right, get sued, and still pay a lot to defend yourself. It's lose-lose

The key point is that none of us are lawyers. And as said earlier in this thread, the concept may be legal, but it is the details of the execution the that may cross the line.

We are all real estate agents and brokers though, and know the licensing laws in our individual states. I don't agree that the concept may be legal, at least not in my state.

III. "Broker" means any person acting for another on commission or for other compensation, for the promise of such commission or other compensation, or any person licensed under this chapter who:

(a) Sells, exchanges, purchases, rents, or leases real estate.
(b) Offers to sell, exchange, purchase, rent or lease real estate.
(c) Negotiates, offers, attempts or agrees to negotiate the sale, exchange, purchase,
rental or leasing of real estate.
(d) Lists, offers, attempts or agrees to list real estate for sale, lease or exchange.
(e) Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or
improvements on real estate.
(f) Collects, offers, attempts or agrees to collect rent for the use of real estate.
(g) Advertises or holds oneself out as being engaged in the business of buying,
selling, exchanging, renting or leasing real estate.
(h) Assists or directs in the procuring of prospects, calculated to result in the sale,
exchange, lease, or rental of real estate.
(i) Assists or directs in the negotiation of any transaction calculated or intended to
result in the sale, exchange, leasing or rental of real estate.
(j) Engages in the business of charging an advance fee in connection with any
contract whereby the person undertakes to promote the sale or lease of real
estate, through its listing in a publication or data base issued for such purpose,
through referral of information concerning such real estate to brokers, or both.

331-A:3 Prohibition.

It shall be unlawful for any person, directly or indirectly, to act as a real estate broker or real estate salesperson without a license and otherwise complying with the provisions of this chapter.


You can't argue with that.

I'll just throw in there that when a mortgagee signs papers they also sign one saying that the mortgage may, and probably will, sell the mortgage. Thereby they give their permission for that to be done. The document is a legal document. Maybe there's an appropriate legal document for the current homeowner to sign that gives Eclipse the right to sell the house immediately for a gross profit without recourse...but again we're referring back to an attorney.

PS - the buyer also pay for an appraisal so that they know what the house is worth and sign a contract so that they know what they're paying for it. Two crucial pieces of evidence if the homeowner starts to feel bilked afterwards and says they paid too much, that indeed they should have been fully aware. There's full disclosure that they knew all the facts. And they are BUYERS at that time, not SELLERS. You have to cover yourself that the SELLER knows what the house they are selling is worth and that they sign a contract knowing what they are selling it for. And that they know the buyer may, and probably will, re-sell it immediately for a gross profit. Disclose, disclose, disclose, cya, cya, cya...and still scared as crap that it will come back to bite you. I am aware of mortgage BROKERS that have had to buy back loans they made from the investor they sold them too because their was a default the first month. That's not completely related to this topic but it just goes to show that even when you think all the t's are crossed and i's are dotted it can still come back.

1. YOU Are missing the key point, which is that courts have found that using assigned contracts IS the practice of brokering real estate under licensing law definitions.

2. It absolutely IS different selling a mortgage than a piece of real estate. There are totally different laws governing each.

3. Bottom line - It isn't illegal to assign a real estate contract UNLESS you are doing it in order to collect some kind of middle man fee which may be construed as brokering real estate, because to broker real estate not owned by you you must have a license.

Northtxopinionator-

"My opinion is that you took advantage of an elderly woman who had lost her husband, stole the equity in her home, and that is absolutely disgusting to me."

Oh, you thought i asked for your opinion? I thought this was a r.e. subject. You keep making assumptions that are incorrect and treat them as fact. As far as the 'old lady' she was in her 30's at the time. Your too funny.

You did indeed ask.

Also, the widow in her 30's with two small kids who just lost her husband......I'm sure she needed that money and could certainly use it for her kids someday. How do you sleep at night? If you were REALLY in it to help her out of an 'impossible' situation then, you could have loaned her the money and given her time to pay it back, or loaned her the money, sold her home, and let her pay you from the equity.
You did not do any of those things....instead, you got her to sign a contract at a time when she is clearly under duress from the loss of her husband, her financial situation, and the loss of her home. And then you made a HUGE commission while she essentially got peanuts if anything. A licensed Realtor is prohibited from signing a contract with someone who is clearly under duress. If WE (who are LICENSED) were to do such a thing WE could and would be sued. Which is why WE have to adhere to a strict code of ethics. For some reason YOU and your little buddy seem to think you can reap the same benefits as we who are licensed without having to adhere to any guidelines or laws, or do any of the work. THESE situations are why you MUST be licensed to sell real estate. Because without having standards and guidelines for assisting people in the sale of their biggest asset the public could be taken advantage of. Just like the two f you are doing. Whether it's a legal loophole, whether it's slimy investors, the fact is.... you are taking advantage of people already under duress. So don't come on these forums and try and convince us you are exchanging Christmas cards with someone you clearly took advantage of.

Ellen- I get what your saying however in a Double Escrow I create two contracts one with seller one with buyer. As soon as they sign that contract escrow opens up with both my buyer and My self. Now at the closing table I will close with my buyers fund and my first transaction is closed then, and I own house. Right after I sign it over to him and his Escrow closes, and he becomes owner. The Escro Agency or Title in some states its combined, they will cut the check out to me. Thats not brokering a deal and is legal in all states.

Eclipse, you realize that is NOT how you started this thread. You are taking that concept from what I have presented in this thread.

And it's still slimy. LOL! Don't forget the challenges I've mentioned associated with this. Among others that haven't been mentioned.

Good luck!

Are you a lawyer? Because I wouldn't be so quick to make blanket statements like thats not brokering a deal and is legal in all 50 states. Have you checked the laws out in all 50 states? lol

well said MadHatter.

Last post -

You are all right. Next time I will know better and do the right thing and let the widow lose her home and get nothing.

Your insights on transactions you had nothing to do with are amazing and Im sure serve you well in all aspects of life.

Peace.

I promise you don't have to "explain" this process to me, I am more familiar with it than I really want to be.

Let me try again. Your "Double Escrow" ruse doesn't change anything. If you found the buyer before you took title, it can be and has been construed as brokering. Because if you look for or solicit someone to buy a property you do not own, even if you subsequently own it yourself for the five minutes prior to signing it over to the next guy, that is brokering. It is the act of soliciting the buyer for a property you do not own that is the problem. All the paper shuffling in the world doesn't erase that.

I will repeat. There are safe and legal ways to accomplish the same thing you are doing. You need to find someone who can help you do them and forget about playing with fire. Yes, someone who knows what they are doing will probably charge you. Consider it the cost of your education. In the long run it will be much cheaper than the legal trouble you will get into if you keep doing what you are doing.

Actually, you don't have to be licensed to be sued in such circumstances. Any contract that involves duress is potentially voidable and the person who signed under duress could sue to not only void the contract but possibly for damages. In a situation like that, it could result in TWO lawsuits to the "wholesaler", one by the seller and one by the buyer if the contract is voided and he has to give the property back to the original seller.

Everybody wants to maximize their profits whether they are buying or selling real estate. But there are lines you shouldn't cross if you don't like spending your life dodging process servers. And cases where duress exist or the investor is making what would look like an "unconscionable" profit in the deal are among them. A good rule of thumb is if you don't feel 100% cheerful at the thought of explaining your actions in court, don't do it.

I'm not a lawyer but I have certainly seen enough horror movie scenarios involving real estate lawsuits to know I want to stay VERY far away from even the appearance of fraud or duress.

Ooops, I forgot,

Madhatter,

"If you were REALLY in it to help her out of an 'impossible' situation then, you could have loaned her the money and given her time to pay it back, or loaned her the money, sold her home, and let her pay you from the equity."

Now this IS breaking the law. It's called predatory lending. Loaning money to a homeowner that has no means to repay other than to sell their their place of residence is illegal. Come on,
you don't give advise like this to your clients do you?

Ok, now I promise Im out of here.

She has the means to repay it. From the equity you took. And it isn't predatory lending when it's done between "friends".

Or did you mean ADVICE?

I'd been reading these posts, I just wanted to put this out there- I'd recently been working with a real estate coaching company, with the intent to assign properties, due to the fact that I have no license, and was told this is legal...had no real estate experience or knowledge beforehand. A few weeks ago when I mentioned to my older brother (who's a lawyer) what I was up to, he pointed out that he and his team tried to defend a man who was assigning contracts (without a broker's license), and he wound up being fined $750,000! (that's coming from an attorney with a good record by the way)....

The way the statute stands in some states, at least in the state of New Jersey, is, although the money being made by such assignments are referral fees, and not commission off of the sale of the property, the statute prohibits commissions, or fees, or any valuable consumption...though assigning assists the buyer and not the seller, such as a birdogger under contract, and the fee being made is not commission off of the sale of the property, an investor without a broker's license is not permitted to make such deals with the intent (though stated in a clause) to simply turn over a property not owned by them. Though they have made it clear with the seller that they "may or may not do this if they choose not to take the property themselves", because they have not completely disclosed their intentions, this action can be construed as fraud, regardless of what the clauses are. Esentially has to do with the fact that a contract can be completely void if it wasn't legal to make in the first place. Nor is an unlicensed investor allowed to bring people together, such as a new buyer, to assign the property to someone else, even if the first contract with the seller is honored down to the last detail. Though the assigner of the contract has his/her name stricken from the new contract, the transaction is illegal. I personally do not have any personal opinions as to whether or not this should be legal without a license, and I know these assignments are constantly happening. I just figured I'd throw this information out there as these are the words of an attorney involved in a case dealing with these issues, and I wouldn't want anyone to have the wrong idea (like I did) about it...