For the record, Assignment of Contract is what was called "flipping" for a long time. Only recently has the term flipping been applied to New Construction Speculation. For this site, we'll refer to Assignment of Contract as just that: Assignment of Contract. (change is tough but I get tired of making the distinction)

Also, for the record, this is one of my least favorite investment vehicles. The last paragraph of this section deals directly with this. It's my opinion there are better, more passive investments that involve 1/100th of the time it takes to find more than one of these assignment deals. As a final confession, this is one of the few investment vehicles that I have not participated in myself, mostly because the process does not appeal to me at all.

The Joy of Going Door to Door
For the Robert Allen and Robert Shemin fans out there, this is their main gig. The idea is that you find a property that is undervalued for whatever reason. The typical reason is you find a property on the Notice of Default (NOD) list because they fell behind in their payments, and now the only way out is to sell at a rock bottom price. You step in, tell them that you'll catch up their loan, pay off their mortgage, pay all the closing costs, and give them a few thousand to walk away from the property. If they have enough equity in their house, you might make $100,000 or more. But you intend to let another investor buy it before you ever take possession. You intend to do this by assigning the contract you have with the sellers to your investor.

Why would you assign the contract to the other investor? Why not keep the property all to yourself? First of all, you are going to get a decent chunk of change from that investor. He may pay you $10,000 or $25,000 to let him have that house with $100,000 equity in it. Remember, from that equity, he's got to pay you your fee, plus pay all those costs you're covering for the sellers. Maybe you don't have the financial capability on closing on the property. Maybe you don't want to deal with the actual buy and sell of the property.

Frankly, this is a LOT of work. This isn't cruising the MLS online, looking for the right property. This is getting out in the streets and banging doors of people who are embarrassed by the fact they are in such financial disarray they are going to lose their house. Not to mention you aren't the only one armed with the NOD list knocking on their door.

I love real estate. If you meet me, you'll realize I really love real estate. Personally, there are too many good, easy investment vehicles to have me go bang on doors of people who are already upset at life. Yes, there is some money here. Yes, I go door-to-door asking if people want to list their house. This vehicle is just too messy for me, and I feel I can better utilize my time in another investment vehicle.

There are some benefits to this method. The biggest benefit is that you don't have to use your own money. You don't have any closing costs on the buy or sell because you never actually buy or sell the property. The other investor will be buying and selling, but not you. So everything you make (for the most part) is yours (and Uncle Sam's).

Another benefit of this vehicle is you can do this without being a Realtor, and you don't need to depend on a Realtor to bring you the investment. On the other hand, you're doing all of the work, and it is pretty hard work. So if you have the time and would rather do the work yourself, this might be a good vehicle for you.

Don't Let Your Karma Run Over My Dogma
When I first got into real estate and read about the assignment deal, I thought, "Great. I'll find one of these houses, but where am I going to get the investor to assign it to?" In order to be able to assign the contract to another investor, you had to actually sign a bona fide purchase agreement for the property. Instead of having just "Sean Brown" on the contract, it would read "Sean Brown and/or Assignee." If accepted, this gives me the ability to assign the contract to whomever I wanted.

But if the person I assign the contract to fails to perform, I'm the one held accountable for non-performance. You can craft language into the contract called a contingency that will allow you to not be held accountable if the investor doesn't pull through, but I find this to be shady business. People who employ this technique like to say they are helping out those who have gotten themselves into financial trouble. I'd agree with that to a degree, but if they want to claim to be "helping those less fortunate out," then they need to stand by a fair deal. If they slip a contingency into a contract, promise to bail them out, the investor pulls out, and they walk away unscathed, where does that leave the seller. I have one word for this: karma.

In Search Of: The Investors
It wasn't until I attended an introductory seminar held by the Robert Allen franchise that I realized there was a network of investors out there champing at the bit to take over these contracts. The host was a pretty neat guy; a very good speaker. When he introduced himself, he made himself out to be a millionaire, and I still don't have any reason to think he's not.

But I did have to ask myself, "Self, why would a millionaire want to fly to Vegas to do an introductory seminar? What's his angle, because if I were a millionaire," check that, when I become a millionaire, "I certainly wouldn't be spending my time with the retired, unemployed, and self-employed trying to sell them a $5,000 investment program." Oh, that's right, we give our information away for free ... but that's a different topic all together.

It took me an hour and a half into a two hour seminar to realize that he wanted to be the guy that took the assignment of the contract. Basically, he was saying that he'd give the members of the audience a $25,000 finder's fee to put the house under contract and assign it to him. It was his way of finding a house $75,000 under market value. You found it $100,000 undervalue, you took $25,000, and he got the house for $75,000 under market value. Sounds like a good deal to me. Sounds like the Robert Allen Millionaire Challenge is going to make millionaires out of somebody, I'm just not certain who. (I don't have an agenda against their program as I have not paid the $5,000 to attend it. I just think it's a very innovative way to get other people to pay you $5,000 for the opportunity to locate prime properties and hand them over to you.)

Ask yourself the following questions: Do you know someone who has made money in real estate? Was Assignment of Contract the way they did it, or was it some other way? Do you know anyone who has made money this way? If you do, you likely met them through one of these courses. If you do, and you think you could make money at it, you would not be reading this section for information. You'd pay their educational fee, you'd learn their techniques from them (which, in all honesty, I think they probably do a good job of training you to do this), and you'd be out there knocking doors from the NOD list.

Now, the champions of this concept may want to point out that the reason I don't highly promote this investment vehicle is because it bypasses the Realtor, and after all, I am a Realtor. You tell me. If you want to do all the work and try to cut out the only person in the deal that is on your side, this is the vehicle for you. Frankly, very few investors that NARREIA attracts want to be so involved. It would be easier for them to go get a real estate license and become a Realtor (which is a deceivingly challenging process) than it would be to knock door after door.

This process is very good for those who don't have money to invest but want to be involved with real estate on some level. For those that want a more passive investment vehicle, there are other opportunities waiting for you.

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