Legal Question in Real Estate Law in Illinois
assignment of contracts with real estate
I've seen this technique advocated by numerous successful real estate entrepreneurs, whereby they will use a sales contract to control the property and then assign that contract to another party, who will close on the deal. The person making the offer will write their name ''and/or assigns.'' They will then sell the rigths to the contract, and make money on the transaction without ever having to close. I have a friend who is a mortgage broker who is insisting that this is illegal, but he is the only person I've ever met to say so. So my question is, is this illegal or is my friend misguided.
3 Answers from Attorneys
Re: assignment of contracts with real estate
I believe that your friend is wrong, especially if it is a cash deal. You should ask him for the statute or code provision that makes this illegal. If he gives you one, please email it to me as lawyers just like doctors or mechanics can be wrong.
Re: assignment of contracts with real estate
Your friend is correct because the license law that governs real estate agents and brokers in Illinois (225 ILCS 454/1-1 et. seq.) makes "finder's fees" and such things illegal. If you bring together a buyer and seller of real estate in almost any fashion, you are performing the role of a real estate broker or agent. There are certain exceptions (such as an employee of a company working on behalf of the company and some other limited circumstances) where a license is not required.
The relevant state agency is authorized to fine people for that kind of stuff, but I'm not sure how often that happens. Whether this is "right" or not is irrelevant since this is the current status of Illinois law.
Also, all fees related the the closing MUST be shown on the "HUD-1" according to RESPA (a federal statute), so the "finder's fee" would have to be disclosed along with all the other numbers under federal law.
I suggest the person who wants to make money in this way obtain a real estate agent's license and hook up with a broker or get a real estate broker's license directly and work for themselves. I know this is not the answer most people want to hear, but it is what it is, as they say.
Re: assignment of contracts with real estate
It is legal. It is not selling the property, it is selling the contract.
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