Sellers and their REALTORS® can sometimes receive an Offer “In Trust”.
Here your buyer may wish to assign the Purchase Agreement for any number of reasons, some of which are:
- The real buyer or 3rd party may not want to be identified,
- The buyer named intends to sell or flip the contract,
- The Seller may not want to sell to the 3rd party buyer,
- A pre-arranged business deal exists.
An Offer to Purchase will state something similar to,
“The Buyer: John Doe in Trust, agrees to purchase from the Seller….” The 3rd party’s identity is undisclosed.
An improvement to this would be:
- “The Buyer John Doe in Trust for Jane Smith…,” identifying the 3rd party, or
- “The Buyer John Doe in Trust for a company to be incorporated”, used with commercial properties.
Though an Offer is not “In Trust”, a buyer may wish to assign his Offer for other reasons. For instance:
- The circumstances of the buyer have changed,
- A change in market conditions causes the buyer to re-think the purchase.
What is assignable? A buyer can generally assign his rights and interest to an agreement without the Seller’s consent. Yet he cannot assign his obligations and, therefore, remains liable. To free himself of added accountability, “In Trust” offers can state that on notice of assignment to the Seller, the buyer shall “stand released from all further liability.”
Consider a change the offer to read, “The Buyer shall not assign the agreement without the Seller’s consent and if granted the buyer shall remain liable.” Also, make the offer conditional on your lawyer’s approval.
Other Important Considerations
- Does the Seller want to negotiate with an undisclosed buyer?
- An assignment may have a price attached as the buyer may be selling the offer. Is the Seller okay with that?
- Any amount for the assignment, the purchase price in the Offer and the value of extras, upgrades and installations are subject to land transfer tax.
- Some trustee purchases are legitimate, as a developer amassing a land bank. His identity may drive the price up.
- On assigning the agreement, the price may not change.
Protecting your interests is important to us.