Monday, July 22, 2013

And/Or Assigns

I am purchasing an investment property in my name, "and/or Assigns." That "and/or Assigns" after my name on a purchase contract means that I have the right to assign my purchase contract to another buyer. They then take over my contract, subject to all the applicable terms that I have negotiated.

"And/or Assigns" gives me the right to purchase my property as an individual, as part of a collective of buyers, as an LLC, as part of my self-directed retirement account, in a living trust, or any way I so choose - as long as all of the other terms of the contract remain.

Wholesalers will typically use this technique to get control of a property for another buyer, to whom they will assign their contract.

What I recently discovered, however, is that conventional lenders will not lend on a Purchase and Sale Agreement that does not specifically have the name of the borrower on each page of the contract. So the Seller must agree to change the contract, initialing each page with the name of the new buyer, if that end buyer happens to be funding the property through a conventional mortgage. Many assigners are not willing to do this, as doing so may reveal to the Seller that they are receiving payment in exchange for their services in negotiating the contract.

In fact, the NWMLS paperwork does not allow its Purchase and Sale Agreements to be assigned, unless the Seller allows it, or the buyer is listed "and/or Assigns."

For this reason, many "and/or Assigns" contracts are sold to a buyer for cash.

So wholesalers, be sure you have a cash buyer (or cash!) to make good on your assignable Purchase and Sale Agreements!

1 comment:

Anonymous said...

Or, just use a Land Trust entity and assign the beneficial interest in the trust to your wholesale buyer...