Some lessons are learned the hard way in real estate investing. By the hard way, I mean you lost out on a lot of money because of not knowing something important or just making a stupid mistake. Fortunately for me, Lance and I learned a lesson the easy way and it didn’t cost us a dime.
Reading about real estate investing over the past few years, I pretty much thought I knew everything I needed to know about assignments and assignment contracts. It seemed like a very simple concept, you agree to sell your rights to a purchase contract with a buyer and then have him sign the assignment contract and give you your fee. Easy, Peezy, Japaneezy!
In the process of negotiating with our buyer for “deal #1“, the agreement was that Lance and I would get payed at closing. So we went ahead and completed and signed the assignment contract with our buyer and waited for the closing to get payed.
Many of you may already be yelling at me right now. But for those who are asking what we did wrong, you see we just assigned our rights over to our buyer without getting payed first! Our buyer can now legally just close this deal and pretend he never met us. A Big Big Mistake for sure.
Lucky for us our buyer is one of the most respected investors in the area and completed the deal as we had agreed and we got our assignment fee once he closed.
What Lance and I should have done was to have our buyer sign what is called a Agreement to Purchase which pretty much stats that “You agree to assign your rights to the purchase contract over to your buyer for an agreed upon amount only after receiving the assignment fee.” In this case that time would be at closing. That is not the exact wording of the contract, but that is how I understood it when our coach explained the details to Lance and myself.
Sub Lesson Learned….
Only deal with people you trust if at all possible!
P.S. I may have the name of the contract wrong (Agreement to Purchase) so if anyone can confirm this I’d be grateful, thanks
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It’s called an Agreement to Purchase Assignment. And this would have been prevented if you would have consulted your coach first…not after you closed the deal.
It’s one of those situations where we just didn’t realize we didn’t know something, so how were we suppose to know to ask? know what I mean?
Hey Scotty, valuable lesson learned 🙂 By the way, did you take a deposit from your buyer? Also…can you change the link to my blog to say Good Faith Investing? Thank you 🙂
The deposit would have been part of the Agreement to Purchase Assignment contract we “forgot” to get signed.
And your blog name has been changed, thanks for pointing that out
Ah…that’s right. Time to nail the next deal! (thanks for changing blog name)
Great tip. Who let you know of the mistake?
We were talking to another Investor in our coaching program about the deal and he brought it to our attention.