Recently I have had a lot of new investors ask me about using "And or Assigns" after their name on the purchase agreement.  While that does give you the ability to assign a contract, I don't recommend using it.  In fact, what I have been telling them is:

"Get that term out of your vocabulary!"

All contracts by their nature are assignable, unless they state otherwise.  If you are making an offer to a bank on a foreclosure property, the banks contracts are NOT ASSIGNABLE.  And if you put in "And or Assigns" after your name, it would supersede the written version of the non-assignment of contract.  However, the banks will more than likely reject your offer simply because you included "And or Assigns" after your name on the Purchase Agreement.

You see, the banks and financial institutions have been run through the ringer by new investors who have no intentions of closing on the deal.  They know the investor is planning on selling the contract.  And if the investor can not find a buyer, they will simple walk away from the deal and lose their Earnest Deposit.

That causes the banks a lot of problems.  First, they lose the time that the property was in escrow.  What's even worse is how the other investors or prospective purchasers view the property.

Let's say that you put the property under contract and the MLS shows the property as "Pending", meaning it is under contract and waiting to close.  Then you try and find a wholesale buyer with cash, but are unsuccessful.  At the last minute, you back out.  The bank has lost time and incurred additional holding costs and liability.  They then put the property back on the market.

What do you usually think when you see someone was going to buy the property and then the house is back on the market about a month later?  Most peoples reaction is usually: I wonder what is wrong with that property? Did the other person have an inspection and found something wrong with it?  I wonder how the foundation is? 

Do you see how this can devalue the property in your mind, as well as in other peoples minds?  When in reality, the whole problem was the person that put the property under contract was an unseasoned investor and did not have the means to come up with the cash because his/her attempts to find a wholesale buyer "in time" failed.

Most peoples reaction to this situation, if they are even interested in the property after it is back on the market is to make an even lower offer than they might have if the first investor had not even been involved with the property in the first place.

This has happened all to often to the banks and they have stated in the Purchase Agreements that the contract is not assignable.  And if you submit a contract with "And or Assigns" after your name on the purchase agreement, the banks will probably reject your offer, even if it is full price, and you provide them with proof of funds.

Realtors hate "And or Assigns" as well.  They know what that means, as well as the banks do.  And if they are representing an individual seller, they might have a tendency to suggest to their seller to reject the offer for the same reasons as the banks would.

And what about FSBO's (For Sale Buy Owners)... How do you explain to the sellers that the name of the purchaser is (John Doe, and or assigns)?  How does a confused mind naturally react?  If you can not give the seller a convincible answer, they will probably back away from the deal.

Ok Mike, you have convinced me not to use "And or Assigns" in my contract, but what if my intentions are to wholesale the property?  Then what do I do?

I am glad you asked:

First of all, if you are working with realtors and banks, there is not much you can do about that.  However, if you are working with FSBO's, you can have this statement printed or written somewhere in your Purchase Agreement:

ASSIGNMENT:  This Purchase Agreement is assignable.

When I wholesale a property, whether it is bank owned or individually owned, I use a simultaneous closing.  I am not going to get into the details of a simultaneous closing right now, but I will give you a quick overview.  

A simultaneous closing is when you have a property under contract and you find a wholesale buyer to quick-turn it and you close both transactions at the same time.  The buyer brings the cash to closing.  You close in one room with the seller and 5 minutes later you close in another room with your buyer.  The seller walks out of there with a check, the buyer with the deed, and you with the difference between what you bought it for and what you sold it for.

The best thing about a simultaneous closing is that no one but you and the closing agent needs to know how much you made on the deal.  Where as, if you assigned the contract, the buyer would know how much you made because they would be paying you your profit to buy the contract.

After your first deal, you should start building a list of wholesale CASH buyers.  That way, when you have your next wholesale deal available, you will already have the buyers lined up with cash to close.

Happy Investing,
Mike Jacka