In my last column we touched on the subject of "Assignment of Contract." An assignment is when buyer "A" assigns all his/her rights of the contract to buyer "B" without the benefit of a closing from the seller. This type of transaction has been very popular over the last few years, especially on new construction projects. However, if you are selling an existing piece of real estate you need to be cautious on how the assignment is structured.
When a seller signs off on an assignment, be sure not to allow any material changes in the contract except for the buyer's name or corporate entity. Be specific in the assignment addendum to retain all aspects of the original buyer's contract as to closing date, closing agent, inspections, financing contingencies and property conditions. Your failure to retain the terms and conditions of your original contract could lead to delays in closing and possible escrow disputes.
As an example, let's say the original contract allows buyer "A" to furnish a mortgage commitment within 30 days of the effective date of the contract. If after 20 days from said date, buyer "A" assigns the contract to buyer "B", the clock for financing could start all over again as buyer "B" now has to qualify for a mortgage. This is an often overlooked pitfall in an assignment of contract.
Other avenues a seller could take to protect his/her original contract is to request an additional non-refundable escrow deposit. Another little used condition of an assignment is to NOT release buyer "A" until a successful closing has been achieved. These suggestions will help protect the seller and insure that you have a contract that will be completed.
If you are not clear how to do an assignment, spend a few dollars to consult with a real estate lawyer. The fee for a consultation is a lot cheaper and less aggravating then no sale followed by a court action.
Ric Cornelius is the Broker/Manager of Sand Key Realt Sales and Rentals, Inc. Sand Key Realty has three offices with 40 agents. One office is at 740 S. Gulfview Blvd., Clearwater Beach, 727-443-0032; the second office is at 2701 Gulf Blvd., Indian Rocks Beach, 727-595-5441; and the third office is at 309 Belleview Blvd., Belleair, 727-461-4200.
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