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THIS IS ALREADY SIGNED IN TO LAW —
On March 1st, 2011, Texas Representatives Drew Darby, Charlie Geren, Rodney Anderson, Jim Pitts, and Jose Menendez authored Texas House Bill 8, to the ?preservation of private real property rights?, specifically prohibiting non-commissioned, or lender based fees in real estate transactions. This would include the ?assignment fees? we as Investors would normally charge when wholesaling and conveying our interest in a contract to purchase real property. As of June 12th, 2011, this bill has passed both the Texas House and Senate, and is waiting for Governor Perry?s signature to become law.
The Texas Property Code is being amended to make selected private transfer fees null and void, more specifically:
Sec. 5.202. CERTAIN PRIVATE TRANSFER FEE OBLIGATIONS VOID.
(a) Except as provided by this subchapter, a private transfer fee
obligation created on or after the effective date of this
subchapter is not binding or enforceable against a subsequent owneror subsequent purchaser of an interest in real property and is void.
A ?Transfer? means the sale, gift, conveyance, inheritance, assignment, or other transfer of an ownership interest in real property. Within the bill, a ?private transfer fee obligation? is an obligation to pay a ?transfer fee? (insert any of the synonyms in the previous sentence, i.e. ?sale fee?, ?conveyance fee?, or ?assignment fee?) created under any contractual agreement or promise, recorded or otherwise, against real property.
Penalties and finesNow, I?m not an attorney, but to me that?s pretty cut and dried wording that directly affects any wholesaler who buys and sells on assignment. The bill also authorizes a fine of up to two-times the amount of the transfer fee as a penalty levied by the state, and chronic abusers of this regulation can face a $250,000 fine if a continual pattern can be proven.
Anyone who?s been working with me knows the two ways to wholesale property, ?By Assignment?, and with a ?Double Close?, along with the advantages and disadvantages of using each.
Who are the authors of this bill?Let?s put that aside for just a bit and look at the ?happy? marriage of business and politics by seeing who the authors of this bill are. Drew Darby, who is a successful businessman and attorney representing District 72 around San Angelo, owns and operates six Surety Title offices that serve 11 counties in Texas. Charlie Garen, representing Tarrant county in Fort Worth, is a two-time Texas Realtor Association Hall of Famer, active in the Greater Fort Worth Association of Realtors, and a very influential member of the Texas Association of Realtors (which has one of the biggest lobbying arms in the state of Texas). Representative Rodney Anderson, has 11 years of experience working with various title companies, and is now the Vice President of Commerce Title, while Representative Jim Pitts, an experienced real estate attorney is the owner and operator of Ellis County Title in Waxahachie, south of Dallas. And if Representative Jose Menendez sounded familiar to San Antonio residents, yes, it?s our very own former District 6 Councilman who took his talents to the State Legislature? oh, and did I mention he is the National Director of Stuart Title.
Follow the MoneyAll we have to do is read the ?Lease-Option? legislation passed a few years back, and the recent ?license requirement to sell owner finance properties? to understand why the Texas Association of Realtors wants to put Investors out of business. But why would title companies want to prohibit one of the best ?bird dog? and wholesaling techniques we have? As my Father says, ?you have to follow the money?.
As I stated earlier, I teach two types of Wholesaling, one that involves an assignment of contract, and one that involves a double close. There are good and bad points to each technique that I go over in my training, and one of the bad points to doing a double close (also known as a simultaneous close) are the closing costs. An assignment of contract for an ?assignment fee? is very basic, the wholesaler (contract holder) assigns and conveys his equitable interest in the transaction to another (wholesale buyer) for a fee payable at their discretion. While a double close involves two separate transactions, one where the wholesaler must close on buying the subject property, and turn right around and sell the property to another buyer, usually on the same day.
Follow the money? if you can no longer ?assign? for a fee, then you have to double close in order to wholesale the property. Double closing means double fees, and yes double closing costs charged by the Title Company payable by you the Investor, brilliant! I hope this lesson in business and politics turns your stomach as much as it does mine, but as they say, it makes for one happy marriage.
Improvise, Adapt, and OvercomeThe full text of the bill can be read here:
http://www.capitol.state.tx.us/BillLookup/History.aspx?LegSess=82R&Bill=HB8
WHAT WOULD JACK MILLER DO?
Jack would read the law word-for-word to see what it says and … more importantly, what it does NOT say.
Do that, then let’s discuss the obvious solutions to the problem.
Let’s talk about all the solutions:
(1) You can set up a couple of extra LLC’s – will cost $200 in Texas. Write the contract in the name of the LLC and then SELL the LLC. This is not real estate, it’s personal property.
(2) If you are paid to RELEASE your contract or your option, it is not an assignment of the contract.
(3) Write the Purchase agreement in the name of a trust. Sell the beneficial interest of the trust – that is PERSONAL PROPERTY, not real property so it is not violating the new law.
ok… it’s your turn, what else can you think of? There are other ways around this.
If we could remove from office all the crooked politicians, there would be very few remaining. The vast majority of politicians are in politics to line their own pockets. They are a disgusting lot. I have a theory that God has created a special room in Hell for politicians, crooked judges, police, etc.. Extra hot in there.
Another solution to this problem in Texas is to leave Texas. I understand not all Texans will want to do that, or be able to do it, but it might be worth considering for those who can. Sadly, wherever you go, there exists that lowest form of human life: politicians.
One last point in my bitter diatribe: it is lawmakers like those who are responsible for helping put the economy in the condition it is in.
I agree with you completely Gary. The self-serving politicians and lawyers ARE the source of the problem.
I AM voting with my feet!
As Jimmy used to say, you’re not a tree.
Greg
There are already Glat’s Gulch’s set up all over the world but you won’t find any in the US.
See this one:
http://www.valleescondido.biz/our-story-a-safe-haven.html
Gary
I’m moving!
Lame, lame, lame.
Well, for one thing, just because the obligation to pay the transfer fee is void, does not mean that it cannot be paid. So since it is not illegal to pay a transfer fee, why is there a penalty? Lawyer question, I think.
As Jackie said, the title cloud of the existing contract needs to be released somehow.
It’s a huge issue with retail financing for the end buyer anyway, due to seasoning requirements. what are some solutions for that?
By the way, there was recently a big thing where brokerage transaction fees on real estate transactions were prohibited by some helpful bureaucrats. Now brokers commissions are often made up of a variable part and a flat part. Coincidentally, the flat part is the same amount as the transaction fees used to be.
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