Mortgage Assignment Case Study
Among my very first mortgage assignments was a home on Nijmegen. One of my partners at the time tied up the deal. Sadly, because we were all so new, the contract had not been negotiated effectively. The home was currently WAY underwater and my partner had to promise the homeowner $5,000 cash at closing just to obtain the sellers signature. The benefit and ultimately why we all agreed we should still proceed was not only because this was our very first deal but because this home was in an area where families wanted their kids to go to school and the house had lots of upgrades.
Of course, with the good comes the bad. There was a big issue with this residence that we didn’t realize might cause us from being able to sell the property. The seller was a cigarette smoker and in spite of the new paint job and carpet cleaning, the home still had an odor.
Between the smoke, the higher cost, and the demand for a buyer to come with such a huge down payment in order to pay us and the seller, that property sat on the market for around 3 months until we finally got a promising phone call from one of my bandit signs.
The prospect I was dealing with had $7500 cash and was willing to use his $8000 tax credit to cover the rest of the deposit. It was really the wife who sealed the deal. We had viewed a few other properties but eventually the buyer’s spouse said how much she really liked the Nijmegen residence and all the upgrades! (Phew – we knew the upgrades were going to help!!)
So, the decision was made and we wrote up the assignment paperwork and set a closing date. This is where the fun begins… not really… this is where the issues started.
The homeowner was not a gal who liked to just stand on the sidelines. She wanted to participate in everything possible and she started challenging my partner who was having a tough time keeping her in check. We finally made it to the closing day and we were all signing the paperwork at the seller’s residence. When we all strolled in, the smoke smell was horrendous!!!! This almost killed the entire deal completely!!
Ultimately, we did close our very first mortgage assignment that day and here’s the breakdown:
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The end buyer delivered $7800 to closing
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$1800 to closing expenses.
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$2000 to the seller.
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$2000 to my partner.
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$2000 to me.
Then, when the $8000 tax obligation credit was available, the seller, my partner and I each split that with $2800 going to the seller and $2600 going to my partner and $2600 going to me.
Complete earnings on my end for this mortgage assignment was $4600. My partner got an additional $4600 so our team as a whole brought in over $9000 on our very first deal!!
The lessons learned in this deal were abundant which is why I called it nearly a disaster,
yet here are the main things I learned from this deal:
1. Don’t deal with non-motivated sellers. This homeowner tried pulling the strings due to the fact that she wasn’t motivated. Because of this, we ended up paying her a big portion of the down payment and we all had to endure her continuous frustrations and whims. (Interestingly, we learned that when you’re just starting out, you are willing to endure a lot more than you would typically.)
2. Know how you can take care of cigarette smokers. This deal might have genuinely finished in a catastrophe because the seller continued to smoke inside the property prior to closing. If your homeowner is difficult to manage, it might be better to simply walk away.
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