Hey, how’s it going. It’s Jason Lucchesi. Just wanted to make this video for you to help you understand what’s going on in today’s market. With that being said, what’s going on in today’s market is a lot of individuals are using assignment contracts, and some folks are getting in trouble using these contracts. There’s a lot of different ads out there on Facebook, Google, saying “Hey, use this assignment contract.” I haven’t really ever been a big believer in using an assignment contract to close on transactions, and now in today’s market with real estate investing, there has been a lot of issues popping up left and right, from a legal perspective to where if there isn’t a proper chain of title in place we’re starting to see a lot of real estate investors that are using assignment contracts getting in trouble.
Now, who are they getting in trouble from? They’re getting in trouble from the Real Estate Commission of their particular state. You may not see this happening. It may not be a prevalent thing in your particular state. But a lot of the states, especially in the Midwest, I know for a fact we’re seeing a lot of investors, especially wholesalers that are using assignment contracts and never really becoming a part of title are starting to get in trouble.
I just wanted to make this video to just break down what you can do to where you won’t get yourself caught up in any sort of legal trouble. By no means am I giving you any legal advice in this video. I’m not an attorney. If you want legal advice obviously seek out legal counsel to go over any of the information that I’m going to be sharing within this video. I just want to be giving information, helpful tips on what you could do as a real estate investor, to just make your business more transparent and really just making your business more profitable so you could have more fun and not realizing that there could be some potential harm or danger from a legal perspective coming to you.
What I like to do is this. I like to show proper chain of title. Real estate commissions are starting to crack down on the wholesalers that are putting in 20, 30, 40 offers and not closing on all of them. If you put in an offer you’re expected to close. You have an executed contract. Now, if you can’t find a buyer and you’re trying to do an assignment contract on that particular deal to flip the contract, a lot of people are going to get really upset at you very quickly. If you’re putting in offers, like a lot of offers, and you’re maybe closing on less than 10% of them, that’s not good.
First of all, you need to probably be looking at your numbers to make sure you even actually have a deal. That’s one video in itself that we can go over in another segment here, but for this particular video, I want you to realize you can’t be making that many offers and not closing on majority of them. I understand inspections come up, appraisals come up, maybe something on title work comes up. Something may come up to where you may have to back out of the deal, but you shouldn’t be backing out of 90% of your transactions. That’s just not going to be good, it’s not good business, and it’s also going to throw a lot of red flags up.
Because, if those sellers that you are getting in contracts with, are getting upset that you’re not closing, they could absolutely report you, either to the Attorney General, to the Real Estate Commission, whatever it may be. You just don’t do that. I want to make sure that you are obviously submitting offers that you need to be submitting in order for you to have a successful business, but I want you to be doing it in a way to where you’re actually closing on the transactions.
That’s one of the other things that I’m seeing. I’ve talked to several attorneys all across the country, and they’re seeing that the individuals that are getting in trouble are the ones that are just throwing out a gazillion offers and not expecting that people are going to sign off on them.
Now, if you’re in a position to where you don’t have a buyer’s list and you’re trying to quickly flip these deals, well, that could be a potential problem. If you don’t have a buyers list then you shouldn’t probably be making any offers to begin with. Build that buyers list fist. I’ve tons of videos especially on my blog to where I can help you find buyers. That should not be a problem. You should have at least 10 to 12 people on your cash buyers list before you start making offers.
Even if you are a seasoned vet and you’re still doing wholesaling and you do have the cash buyers, the thing that I’m seeing it’s starting to become a legal issue here to where people are getting cracked, not just a slap on the wrist, but they’re getting in trouble in a big way with big fines. I don’t want this video to just be a whole about me being “Mr. Johnny Raincloud” here. I want to dive a little bit deeper here on how you could become properly recorded on chain of title as an owner of record.
Let’s go over this. In this particular part of this video, or if you’re reading this as a transcript, what I want to do is break this down for you in a way that anybody can understand it. You are doing a deal with a seller. You are now in this particular scenario that I’m going to be giving to you. This is called an A to B, B to C transaction. You’re always going to be B in this particular scenario. For those of you that know what an A to B, B to C transaction is, hang with me here. I promise I’ll get to this here in just a second.
The A means that you are closing with owner of record. The individual that you sought after, you put together a really great contract, you got it under great terms. Now you’re read to proceed forward. You’re ready to execute on that contract and close. Perfect. That’s your A to B transaction.
Now what we like to do as investors, especially deals that we don’t want to keep from doing like a possible rehab on, or putting into our own income producing portfolio, we like to quickly flip it. That’s when we have our buyers list into play. We have our buyers list into play, and before we even close on our transaction, we already have a buyer lined up. Even before we get the deal that we put under contract with in this scenario, we already have buyers lined up that will want this deal at the price that we are able to negotiate it at. Does that make sense? Okay, cool.
Once we have that into play, once we have our A to B contract into play, we could also put into play a B to C contract. That B to C contract is allowing us to sell the A to B property that we will acquire at closing and allow us to sell it to our end buyer. Now, there’s two ways that you can do this when you get to closing in order for you to be properly recorded on chain of title as an owner of record.
You can either talk to your investor friendly title company about you using the end buyers funds to fund your transaction. This is what’s called a simultaneous transaction. Now, some people may be like, “Well, isn’t that illegal?” No, it’s not. There’s actually several underwriting companies out there for title companies that will be okay with this. They’ll be 100% fine with properly underwriting this, and giving title insurance on these transactions, as long as there’s an affidavit signed by the end buyer letting them realize that their funds are going to be used to fund the first transaction too. It’s all again about complete transparency here.
As long as the end buyer has that affidavit signed, I know there’s three major title underwriters out there that will be completely fine with this. Again, you have to find a really good investor friendly title company that will allow you to do these transactions. Now, if there isn’t a title company that you can find that will allow you to do this, not a problem. You can use my good friend Duane Ortega with besttransactionfunding.com.
All you simply do is use submit all the information over at Duane’s company on his website, very simple, easy to use. Submit all that information. You apply for transactional funding. What transactional funding is is just funding for that day. You’ll pay 1.875% I believe just for your transaction, and that will allow you to become properly recorded as an owner of record and you will now show as an individual, as chain of title. You will show up on the chain of tile if anybody ever wants to take a look and see exactly where you are at. You’ll be able to be shown as an individual that is or was an owner of record on title. That’s the key thing here. That’s what these real estate commissions are really wanting to see.
Because a lot of folks are just doing the assignment. I believe, now, as of right now it’s not something that is in play or is enforced, but I do see in the near future, and I don’t have a crystal ball in front of me or anything like that here, but what I can tell you is a lot of individuals that are really trying to get this cracked down to where if an individual is receiving an assignment fee, it’s going to be viewed as a commission. If you aren’t a licensed sales person for your state and you’re receiving a commission, that’s going to be very bad.
That’s why I don’t really use assignment contracts. I really never have. I don’t really advise it to my students to use an assignment contract, unless it’s been reviewed by an attorney, the attorney is completely fine with everything, and you can proceed forward and do the transaction. That’s the only time. But I also, when I’m working with my students, I don’t have them submit 100 offers, crap offers, that will get them into trouble. We make very calculated decisions to where you make those decisions, you make those calculated decisions and you make good offers. I’m not in the business to where we just slap mud up on the wall and see what sticks. That’s not a good business model. We submit calculated offers that make sense for us and have the profits in there that we need so that we can close.
You want to be able to close on executed contacts you have in place. You want to have the mindset that you’re going to close on every single transaction. Yes, that’s more than likely not going to happen. You’re going to have a seller say, “No, that’s not a good offer. We’re not going to do that.” But every single offer you always have to put into play. “I’m going to close on that transaction. I have a buyer for it.” Or, “I have funds lined up so that I can do rehab on it,” or, “I can keep this on my own portfolio and start building up long term wealth.”
The conclusion here that I want to give to you is always make sure you have your buyers lined up, you have an investor friendly title company that will allow you to do back to back transactions same day funding, or they have, they could put together an affidavit that you can have signed by your end buyer acknowledging that their funds are going to be used to fund your first transaction.
Now, keep in mind on that affidavit it doesn’t state the amount that you’re using for the A to B transaction. It doesn’t state anything like that. It’s just stating that those funds are going to be used for that particular transaction and that’s it. The end buyer is just acknowledging. Now, I don’t see this working if you have an end buyer that’s needing to bring in financing. If you have that into play, it’s a totally different ball game at that point and you’re more than likely have to use for sure Duane Ortega with besttransactionfunding.com.
That’s what I would recommend in this particular case. I always like to have a transparent business and staying above board. I don’t like to be in the black or the white and gray area or white and black area, whatever it may be. I like to stay above board. Yeah, we do creative things within real estate. We do creative investing. But don’t get yourself to where you’re constantly doing a step over the board and venturing into the gray area, because that’s what gets a lot of investors in trouble. You definitely want to stay out of trouble or else the longevity that you have within this business may be cut very, very short.
If you do need additional help, obviously from a legal perspective, contact an attorney within your state. If you’re overseas and you’re wanting to do things within a particular state here, contact an attorney first so you can talk to them about things that I’ve discussed within this video and you should be good to go.
Now, if you need help with your real estate investing business, if you want to do some things within your business that you’re currently not doing, you need additional help, you want more motivated sellers, you need cash buyers, you need private lenders, you need how to actually close on either one transaction or several transactions per month, reach out to me for help. I’ll be more than happy to reach out. I’ve got a link within here that you can click on. We could go ahead and set up a time for us to talk and see if we would be a good fit for having a chat, just having a chat about you and your business, and seeing if we could connect with each other and do some business together.
But other than that, I hope you enjoyed this video. Leave me a comment if this is something that you enjoyed. I make these videos out of request from folks that I come into contact with either through email, through Facebook, Instagram, whatever it may be. I make these videos to just try and give you some informative information that you can take and that you could start implementing within your business. Other than that, I appreciate your time. Have a great day and I will talk to you soon. Take care. Bye now.
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