How much is too much for an assignment fee

Question

Adrien C. · Answer

As a wholesaler, you are like a dinner host and should be last to eat- last to get paid. In a transaction, taking care of the sellers' needs is the top priority; you don't want to mislead them and leave them high and dry. They can be a great source of additional referrals if you treat them well. Secondly, the investor's numbers are important. You need to insure they get a deal where they can profit. If you screw an investor, they won't buy from you again and you'll spend your time spinning your wheels looking for new buyers all the time. So whatever is left is what you the wholesaler get. Most of my buyers don't care what I get as long as the numbers work for them. I just had to drop my fee from 10K to 3K to move a property. I'm ok with that because the seller is out from the house that's been a vacant money hole for 3 years and the buyer gets a great property that will make him a good ROI. I had to be willing to take a big cut to make it happen. Have an abundance mentality- I'll close 35 of these small deals over five 20K deals.

Ned Carey · Answer

An assignment fee is too high when you don't have buyers anxious to buy the deal from you,

Jamal L. · Answer

@Christopher Haynes

Hello Chris, welcome to the BP Community. I am an active wholesaler as well as a buy and hold investor in Baltimore City.  The way in which I was taught in wholesaling was to do so with integrity. By that I mean that I was taught to be fair, professional , and to never exceed the amount of the offer that I would  present to the seller.  For example if I put a property under contract on a house for 50k with an ARV of 250k, my assignment fee wouldn't exceed 50k.  If the proceeds was coming from an investor whom I didn't have any a relationship or prior experience with I would do a double close.

Also if you are interested in learning more info about Wholesaling, Purchase Agreements, Assignment Agreements, etc. Please private message me as we have all of these forms for free on our website and teach their application.

Till next time,

Prosperous Investing to you.

Stephen Nicholson · Answer

Is the seller happy with the price you agreed? Is the buyer taking the property from you happy with the price you agreed? If everyone is happy then the dollar value is really irrelevant. If you think you can make 25-30k on the deal then go for it, if the buyer thinks the price is too high there is always room to negotiate.

When talking to the buyer discuss price of the property, dont mention how much you will be making until you agree on a price. If the buyer knows you are taking $30k on the deal then they will try and squeeze you for a better deal. Dont be shy in taking your cut of the deal.

Jeff Rabinowitz · Answer

@Christopher Haynes if your seller is happy with what they are receiving and your end buyer is happy what they are paying then what you earn should not matter to anyone. You are the one who determines what you will work for. I recently paid what amounted to a $50K assignment fee on a property. That was, by far, the largest assignment fee I have ever paid. I was thrilled to do so. It was a great deal for me. In fact, I ended up wholesaling the deal myself to another investor within one and one-half months and made a profit of more than $20K. (That was not my original plan but the deal came together that way.) Did I pay too much? I don't think so. I would do it again in a heartbeat.

Patrick L. · Answer

If you get a $1M house under contract for $100 then nobody is going to balk at a 6 figure assignment fee.  It's the real tight deals where they see you're trying to squeeze most of the profit out of the deal that people are going to not want to pay a larger assignment fee.

If you're making a huge margin I'd double close, it's not going to cost you that much compared to losing the deal.

Tanesha Mills · Answer

Hi I'm new to wholesaling and live in Florida. Can you be of assistance to me as well?

Ryan Billingsley · Answer

@Christopher Haynes

The amount you make wholesaling is up to you.  It really comes down to analyzing the deal properly allowing for enough profits to pay the end buyer and yourself.  If done correctly, the end buyer will typically be more than satisfied with his projected profit margin.  If you are uncomfortable with assigning the contract you can always double close.  This hides the fact that you are wholesaling and hides your profit.  Double closing has additional closing cost though so that has to be accounted for.

Account Closed · Answer

no such thing as "too much". the term " too much" is a relative term and can be defined differently depending on the deal.

If I get a deal and want to sell it to you, as long as your price is what you want it to be.....what I make has nothing to do with you and is, as a result,  irrelevant

Angie D. · Answer

Hi Christopher,

Welcome and excellent question.  It pretty much depends on several variables.  Who your end buyer is and what their experiences level is will be a huge determining factor in the likeliness that this will raise an issue.  More experienced investors tend to evaluate the deal based on the numbers overall.  They are more focused on counting their money to see if the deal makes sense rather than counting yours.  If the numbers make sense they're happy with what they're making they don't care what the assignment fee is because the deal has profitability to them.  Less experienced investors are more likely to focus too hard on the amount of the assignment fee and if they feel it's too high it can cause them to feel like they are getting ripped off somehow and no longer getting a good deal.  I have seen many wholesale deals fall apart over high assignment fees buyers felt were unreasonable. Everyone likes a good and fair deal.  If you're looking to build repeat buyers that you can wholesale deals to making 3-10k depending on the price-point you're at, the delta of the property, and demand for the property I think it's a win/win.  If you have an amazing deal where you can make a substantial spread and sell at a price an investor is still willing to pay you may want to do a double close rather than an assignment to play it safe.  I'm in the Baltimore market so feel free to contact me if I can run any scenarios or numbers for you? Good luck!

Angie

How much is too much for an assignment fee

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