Wholesale Real Estate Contracts | PART 3 | Assignment & Option | Ben Clardy | Skillshare

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Wholesale Real Estate Contracts | PART 3 | Assignment & Option

teacher avatar Ben Clardy, Real Estate Coach

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Taught by industry leaders & working professionals
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Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

4 Lessons (21m)
    • 1. Class Introduction

      0:32
    • 2. Assignment Of Contract

      6:59
    • 3. Option Agreement

      11:19
    • 4. Your Class Project!

      2:38
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About This Class

Welcome to PART 3 of Wholesale Real Estate Contracts!

In this class we'll be covering both the Assignment & Option Contracts.

I will slowly walk you through each line of the contract so that you understand why each line is there, why it's important, and what it can do for you.

Every word of the contract is there for a reason - whether it's to help you get offers accepted, to control deals, or to protect you from liability. By learning how the contract works, you'll be more effective and confident Real Estate investor.

Remember to download your contract from within the resources section of this class.

Finally, be sure to enroll in the other 4 parts of this class series:

Wholesale Real Estate Contracts | PART 1 | "Buy-Side" Purchase & Sale Agreement

Wholesale Real Estate Contracts | PART 2 | "Sell-Side" Purchase & Sale Agreement

Wholesale Real Estate Contracts | PART 4 | Invoice & Marketing Fee Agreement

Wholesale Real Estate Contracts | PART 5 | Amendment & Finding A ROCKSTAR Closer

Meet Your Teacher

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Ben Clardy

Real Estate Coach

Teacher

My name is Ben Clardy.

I'm a Real Estate Entrepreneur, but I'm a teacher at heart.

I create HIGH-QUALITY / LOW-COST Real Estate courses for my students.

I've made MANY of mistakes in my investing career. One of them that I will always remember is the day that I wrote a $25,000 check to a "Real Estate Guru" that promised to teach me everything I needed to know to succeed in Real Estate. That was a BIG mistake.

I lost an incredibly large amount of money that day, but I did learn something important:

I learned that I wanted to save other people from making the same costly mistake.

You see, it's not uncommon for people so shell out 10k, 20k, or even 50k dollars in order to learn the ro... See full profile

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Transcripts

1. Class Introduction: Hi there. My name is Ben clarity, number real estate investor and coach. And I'd like to welcome you to my class series on wholesale real estate contracts. This is part three of five In this class series and we're going to be covering today the assignment contract and also an option contract. I'll also be providing you with a downloadable copy that you can put to use in your own business, as well as going through both of these line by line so that you understand how they work. So without further ado, let's get into it. 2. Assignment Of Contract: All right, the next one on our list here is the assignment of contract form. So let me get that one opened up. Alright, and this is, this is another just single one pager. It's very simple. Alright, now, the assignment of contract is what you use when you have a contract between yourself and a homeowner. And what you wanna do is you want to put somebody else in your place on that contract. So instead of you being on the contract, let's say that you put, I don't know, bob, buyer, in your place on the contract for $5 thousand fee or 2 thousand, or 3 thousand or 10 thousand, whatever. Your trading places with somebody else on that contract for a fee. That's what an assignment does. Okay? Now, and again, I mean, since you have interest in this course and you're learning about these contracts, you probably already have some understanding about wholesale real estate and how it works. Well, the assignment of contract is one of those forms that most anybody that teaches wholesale real estate, this is the form that wholesaling is built around. I mean, it is to a degree. But I mean, my preference, I mean, I prefer to either buy a house and just sell it as it is quickly, or do a double closing, something like that. See, I prefer that to an assignment because well, for one, you don't have to put your feet on the HUD statement. Two is you've got a little more control because you're not basically giving up your position in the contract and giving it to somebody else. But regardless, especially if you're starting out, I would recommend assigning some houses because it's a good way to get you through some closings and through some transactions and really get your feet wet and basically get some income coming in. Anyways, I digress. Let me get down through this contract and let me explain what's going on here. So again, this is the assignment of contract that we're talking about here. The first blank up here, you simply write the date that you put this contract form together. So today's the today's March tenth. So in this day, if you are putting together today, you'd say 3102016. Now, these next two blanks, one is forward the assign or and one is for the assign, ie. Those can be kinda confusing if you don't know the difference, but what the assign or is the person who is doing the assigning. So if you're putting together this assignment of contract, you are the assign or in the person who you're putting into your position in the contract is the assignee, or your buyer is going to be the assignee, okay? Alright. So next little section here is referring to the contract that you would like to assign to somebody else. Okay. So it says the signer entered into a purchase and sale agreement with now this is your gonna put your gonna put the seller's name in this blank. The person who owns the property that you're going to assign to somebody else that's who goes in this blank. And then that original contract which was executed on so today's date might be, you know, 3102016. But in this blank, what you're going to put is the date that the original contract that you wish to assign when that contract was. Except that's when you that's the date you would put in this blank. It's going to be something earlier than today's date. And then the second blank here is the properties address for the house that you would like to assign. Okay. This just says You're giving all your rights and everything that is in that original contract to the assignee. And this sentence here is where you state your assignment fee. So let me just break this out real quick. So let's say, let's say that original house that you want to assign, let's say you're buying it for 45 thousand, you advertise to your buyer for 50 thousand. Okay. So there's a $5 thousand difference there between forty five thousand and fifty thousand. Well, that $5 thousand as your assignment fee. Okay. So in that case, in that example, what you would put in this blank is $5 thousand. So this blank is where you put your fee that's coming to you and the property closes. Let's say I'm just kinda kinda screen and their yearly just one. Secondly, make this a little smaller. And then everything else here basically says that the si110, your buyer is taking over all your responsibility that is detailed and outlined in the original purchase and sale agreement. Okay. So if it says they're closing it, so and so attorney's office on whatever date. And however much earnest money deposit all the all the details are transferring over to your buyer. So whenever you set up between yourself and the homeowner and the original purchase and sale agreement, that buyer takes all that responsibility. That's what this last paragraph sentence and then all that's left is to sign to sign the document. This first blank here is the assign or which is you. The second side over here is the assignee, which is your buyer. And then both of you date this form. And then once you do, this, assignment of contract gets turned in with the original purchase and sale agreement to the closing attorney. And then basically you just kind of help everything move forward. You're going to tell them, you know, the date that it's closing. You're gonna give the closing attorney or the Title Company. Everybody's information that's involved. The sellers, you the buyer, and then the closing attorney is going to bring it all together for you using the original purchase sale agreement and this assignment of contract. Alright? So that's how an assignment of contract works, and that's how you can use this assignment of contract form to assign your real estate deals to your buyers and make money. That's all for this lesson. Moving onto the next one. 3. Option Agreement: Alright, so the next contract I want to talk to you about is called an option contract. And I'm gonna go ahead and open that up for you now. Okay, let me, let me just size this thing. Ok? Now, here is what an option contract is. And it, and it does exactly what its title is. It's called an option contract for a reason. And here's the thing. This is what an option contract does. It gives you the option by house at a specified price, but not the obligation. Okay? So again, let's say, let's say you put together an option contract on a house for $50 thousand. The US sign the option contract, the homeowner signs the option contract. But then you're not actually under contract on that house when you have an option. But let's say that, you know, two weeks down the road after you sign the option contract, you decide that you want to buy that house for $50 thousand or tying it into wholesaling. Let's say that to you. At that point, have a buyer to buy that house from you for say, $55 thousand. Well, what you do, you execute the option contract and what that does, that lets you put the house under an actual purchase and sale agreement for the price of $50 thousand. So again, just to, just to kind of summarize all of that, the option contract gives you the ability to put together a purchase and sale agreement at some point down the road for a price that you agree on now between you and the homeowner. Alright, so that's what an option contract does. Let's blast through this thing line by line and I'll kind of explain what this stuff does and what all this verbiage is. Four. So first of all, first of all, the option date is the date that you put together the option contract between you and the homeowner. In the line 12 here, you can see you title yourself as the option or and the option E. Okay, let me be sure I'm not getting this confused here. Okay. Now, here's the difference here. The option or is the homeowner. Okay. Because the homeowner is granting you the option to buy this house at a specified price. The homeowner is the option or you are the option. The okay. So in this blank V1, this is where you would put the home owner's name or the house is owned under an LLC, you would put the LLC and this first blank and the second blank here, the option E is going to be you, the buyer, and you would put either your name or your company's name. And this second blink. And then the next line down and says real property, the option or the homeowner. Agrees to grant an option to purchase to the option a, you and the buyer, the land and improvements known as and then this third link down here is where you put the properties address. The offer is the price that you are offering the homeowner under this option contracts. So you put the purchase price here in the previous example, you put $50 thousand period under this particular option contract. The term is 30 days. So you would go 30 days out from whatever date you put in this first blank, let's say March tenth, you would put in this first blank Well, April tenth or they're about as the date that you would put in this blank down here or 30 days for March tenth. Now, just to just to again, just to kind of define this for you. Whenever you put together this price, $50 thousand in this blank and you put together 30 days out from the option term or the date the option begins. That means that you have 30 days where you can exercise the option to buy the house for $50 thousand. And again, when I say exercise your option, when you have the option contract put together and you go to the home owner and you say, hey, I'm ready to buy this house using my option at $50 thousand, the price would be agreed on. At that point, the homeowner is obligated to sell you the house at the agreed upon price. That's the way the option contract works. Okay. Getting down further here into terms and conditions, it says the option or understands that option he attends to assign this option contract. This verbage is here specifically so that you can use this contract under an assignment. So that's again, you know, all of these contracts give you a lot of flexibility to wholesale houses. That's why this verb is just hears. You can put the option contract together for $50 thousand. You can assign the option contract to a buyer for $55 thousand. Then the buyer will go on execute the option contract with the purchase and sale agreement, and then close on the house between them and the homeowner and you would make the difference between the $50 thousand purchase price and the $55 thousand purchase price between you and the buyer. So again, this is just setting you up and giving you another option to make money by wholesaling houses using this option agreement. The second line here says option or the homeowner understands that the option a is acting as a principal in the transaction. That means that basically, you know, you are an official person who's involved in the transaction and the homeowner is signing off because they know that they know that you're an official investor involved in the transaction. That's what line number two is talking about. Line number three, upon Option E, x or exercising of this option, that means when you choose to exercise the option and turn it into an actual purchase and sale agreement, both parties agree to move forward with the necessary necessary standard purchase and sales agreement, right? I mean, that makes sense. When you exercise the option, it turns into a purchase and sale agreement. And then you put together the actual purchase and sale agreement that you'll need to close on the house. Number four option or may verbally cancel this agreement at anytime prior to the option a exercising the option. With the option contract. It's not as solid as a purchase and sale agreement. Basically, the purchase and sale agreement locks the homeowner into them being obligated to sell you their house whenever you agree on a price. The option contract is a little more flexible. It's a little more flexible for the homeowner because they can get out of the option contract if they decide to change their mind on it before you guys go to a purchase and sale agreement. And it also gives you more flexibility because you don't have to put together a full fledged purchase and sale agreement. All you have to do is talk to him about the price you want to buy a house for. You put together an option contract, and it gives you the ability to buy that house at that at that price. So with an option contract, either you or the homeowner can get out of it before you put together the purchase and sale agreement, but it gives you the ability to go to the purchase and sale agreement. That's the flexibility and the power behind an option contract. Okay. Let number five, option or grants the option knee you access to the above property for showing prospective buyers, partners, contractors, and appraiser. So this gives you the ability to access the house. Number six, if option E does not acquire an end buyer within 30 days of acceptance of this option agreement, this agreement becomes null and void. So if you advertise the property for sale, you do not have somebody that wants to buy it from you and you can't turn that contract and that house into money at the end of 30 days. Poof. The agreement just it's automatically void. There is no further repercussions, nothing like that. Number seven, all parties agree the properties being sold in present as is conditions. So as the property sits, that's how it's going to be bought and sold. There's not gonna be any improvements made to it. You know, nothing as it sits now is how it will be bought and sold. And then time is of the essence in this agreement. This is just a line that's basically reflects back to the term of the contract that says there's 30 days, that this option contract is good. And it's just kind of reflect meant in a kind of a reminder to the homeowner that you do intend to move forward with the purchase and sale of their property in as quickly and as expediently as possible. And then beyond that is just a signature blanks. Option E. Again, is you the person the option is being granted to the buyer in option or is the person granting the option, which is the homeowner. So that's it. That's the option contract. That's the way the option contract works for some people, they use the option contract a lot. Some people even use it exclusively in all the house deals that they put together personally, I don't use it that much. I tend to just go straight to a purchase and sale agreement, put down the earnest money deposit that way. It kind of I feel like I have a little more control using a purchase and sale agreement. But if what you're looking for is not necessarily a lot of control and you're looking instead for more flexibility than the flexibility can be given to you by using this option contracts. So that's kind of one of its strength is flexibility. Anyways, that's the option contract. That's the way it works. That's how you fill it out. And, you know, it's a good tool to have in your toolbox whenever you are putting contracts on houses, depending on what the situation and how how I'm motivated the homeowner is and how willing they are to work with you. A lot of times you might be able to get an option accepted when you might not be able to get a purchase and sale agreement. So it's a way that you can get some control and kind of get your foot in the door, so to speak, on somehow steals that you otherwise might not be able to. Anyways, that's the option. And we're going to move on to the next contract from here. 4. Your Class Project!: Okay, so now that you understand how the contract works, it's time to work on your class project, which basically means going through the contract and seeing if you want to make any potential changes to it that may basically improve or enhance the contract. So what you wanna do is download the files to your computer. You have both a word or an OpenOffice version, which is the editable version and also a PDF. So take the editable version and go through the contract line by line. And you want to consider making changes to things like, you know, kind of formatting things like fonts and margins and things like that. And also go through all of the terminology and be sure that everything is clear and would make good sense to both you and anybody who would be potentially signing the contract. And also maybe considered things like if you want to add a header or a footer, or a logo or a watermark, just things like that. You want to, you want to consider making this your own. Now, I want to I want to say that it is not mandatory that you make changes. I use these contracts exactly the way they are, but you may want to make some changes to make them more user-friendly and just make them your own. And that's what this class project is about. So once you've been through them and you approve of the way they are and you've made a potential changes, you want to export it again as a new version of the PDF. The PDF is basically your working copy. That's your general use copy hits the one that you would potentially print off or e sine or email to somebody. Again, the PDF is basically your work in copy and the other version is the one that you would potentially make any edits to. So once you have it, you know, any edits made and you have that final version that marks the completion of both this course and also your class project. Now the one other thing I want to say is regardless if you make any edits to the contract or not before you put them to use in your own business and your own market. I always advise that you have it approved by either your title company or your closing attorney. That kind of thing varies state to state, but have it approved before you put it to use. It can potentially save you some time and hassle. So that is always a very, very good idea. So with that said, that marks the end of this course. So Ben clarity, signing off and wishing you the very best and you were real estate investing endeavors.