Do you disclose assignment fee to end buyer?

Question

I have a seller finance deal in contract that I want to assign, I have an end buyer that is asking how much my assignment fee will be. Do you disclose assignment fees on a seller finance deal?

James Heller · Answer

Hi Kevin — There certainly are ways to close without disclosing your assignment fee. Double closing is one way, in that case you will need to actually close and then immediately turn around and sell the property. The trouble is having that cash available up front. There are other ways that your title company may recommend. However, it shouldn’t be a big concern unless you’re bringing home a huge payday. Your end buyer realizes that you need to make money on the deal, and shouldn’t have a big issue with your fee

Jesse LeBlanc · Answer

If you don't tell them what your fee is, then they can do the math when they receive your original contract. So either way, they will know before closing. With that said, it's always best to be transparent and work with a solid buyer that could care less what your fee is as long as the numbers work for them.But I have one better. If your fee won't change your life, then I highly suggest you to take your fee and turn that into a note for your buyer. Sometimes you can even get a slightly higher fee for doing this PLUS interest as well and collect $ over time giving your buyer more buying power to deploy into other deals @Kevin Reinell

Jay Hinrichs · Answer

I get wholesaler calls virtually every day as we are out of area and no debt so prime time on call list.. I had one guy I talked to last week who flat out asked me if I was going to have heart burn if he said I send you property I have tied up for 10k and I am king a 90k assignment fee !! well I said yup I would to me that is absolutely morally repugnant to me I would not want to see a seller taken advantage of to that extent. I mean I get it I try to make as much as I can on my new builds and other deals I do and for sure we made HUGE margins in the timber industry but we also risked capital and market conditions and in logging literally your life LOL. But that was the first time a wholesaler asked me that question. And I did thank him in advance for doing that though I thought it was a stand up move on his part..

Duncan Hayes · Answer

@Kevin Reinell it’s a seller finance deal. You’ll need to tell them your fee, this isn’t like a regular wholesale deal. If you have to hide fees from your buyer then there’s something wrong. Not only that, the purpose of seller finance is to get in the deal with the least amount of money possible. No buyer is gonna pay you $50k assignment on a SFH seller finance deal. $5k-$10k is normal. Especially if they have to make any repairs to the property, and you need to consider the closing costs they’ll pay as well.

Duncan Hayes · Answer

@Kevin Reinell no there’s no issue with bringing in someone else to dispo the deal. I can’t speak for all markets, but in TX I once had a partner. Only one of our names would go on the contract w seller, but for title the invoice would be broken up between us for our assignments. So on a $25k deal we did my partners name went on contract w seller, mine didn’t. When closing day came the invoice sent to title said:$15,000 for him$10,000 for me We both fill out separate forms for wire info and it’s done. Be sure you can trust him; and you be ethical on your side.

Kevin Reinell · Answer

@Jesse LeBlanc yeah exactly how it would work on a cash deal, right. In that structure you would just tell them the purchase price, and I guess once they see the original contract they can do the math. But wasn’t sure how it works on a seller finance deal. I guess I just have to tell the buyer straight up this is the fee for assignment? If the only way to hide it is a double close. Then I’ll likely be straightforward with end buyer and tell them the fee. Agree that if it’s not life changing assignment fee then buyer should be okay with paying the average fee like 10-20k.

Joe Hammel · Answer

@Kevin ReinellAssigning the contract yes, the fee will be on closing docsDouble closing, you can not show your spread because you’re closing first, then just selling it to next buyer. Harder and more expensive this way.

Wayne Brooks · Answer

Well, since it Is a Fee that the buyer pays to you....how would you Not tell him what it is? You understand how an assignment works, right?

Nate Sanow · Answer

I feel like the unofficial rule is that if it’s a fairly low reasonable amount then who cares. If it’s five figures or a significant percentage of purchase price it’s wise to disclose. Reason being, the end buyer could get upset and back out. With wholesale deals time is money so the transparent conversation could help. But it’s definitely tricky if that final person doesn’t respect the hard work it takes just to get a deal locked up.

Eliott Elias · Answer

None of their business. As long as the numbers work for the end buyer why should they care?