How do you handle a seller's questions about your assignment fee

Question

Hello BP family,

I'm just starting to dive into Wholesaling and I'm wondering how you handle disclosing the amount of money you plan to make on the deal so the seller isn't surprised with this number at closing. I'm thinking of assigning my contracts to another person and I've heard that sellers are sometimes upset when this comes up at the closing table.

Please let me know your thoughts.

Thanks in advance,

Brandon

Rashawn Stevens · Answer

Hello Brandon i'm still new to wholesaling myself i'm currently in the process of closing my first deal. But here are some helpful tips that I think you can use and will answer your question:

1. I never let a seller know that I will be assigning the contract to the property so the conversation is never even brought up. I always tell them that either I will buy there property or one of my partners will ( I always refer to my end buyers as partners) but either way they will receive the agreed upon amount for there property. ( Sellers don't care who buys there property they just want it sold).

2. In the Purchase and Sale Agreement I have in the contract that the PSA could be assigned and that the seller is not entitled to the assignment fee.

3. Don't use an actual " Assignment of Contract". You want to use two purchase agreements, One between you and the seller, and one between you and your end buyer. This way you are never discussing assignment fees and only discussing the purchase price. If you work with an investor friendly title company they will know that the differences in the two contracts is your assignment fee. You can also ask them if they will leave your assignment fee off of the HUD statement.

Hopes this helps.

Mike DeChristopher · Answer

I wholesale as a function of having a circle of REI friends. I *always* contract with the intention to buy, but occasionally (often during inspection) it becomes obvious the property might be a better fit for my buddy Jim, who is an electrician, or Bob, who is a plumber, or Dave, who is a GC (all of whom flip houses on the side). I've been on both sides of this table; they've wholesaled projects to me as well.

To head that surprise off at the pass, I explain to the seller at the time of contract signing that I may assign the contract, or double close, or any number of other instruments to a partner but that their dollar figure remains the same. They rarely care, but when they do it's because they're worried the closing might be complicated, or take longer. Explaining the process up-front goes a long way.

If I did not know the group of end-buyers so well, I'd be hesitant to wholesale anything in the first place. But communicating with the seller (and, for that matter, the end-buyer) would seem to alleviate a lot of the issues on this forum.

Peter Mckernan · Answer

Hey @Brandon Pettis

I’m not a wholesaler, but I have been involved with a deal that was brought to me by a wholesaler. We were well aware of the assignment fees, and costs that would be paid to the wholesaler. In my eyes this would be a no brainer since you as a person that will be providing a service for that seller/buyer for that property should be rewarded for your efforts. You are bringing the seller a buyer, and the buyer a property that they want.

Here is an example of this as a real estate agent: If I as an agent told the clients of my listing that there was no money to be paid out to me at the end of the transaction and hide the information from them just to get the listing, it would still come up. They would eventually find out about it since they are signing the commission instructions for their home sale. This is dishonesty and is the reason the seller would get mad more than telling them that you are making a profit. (See the link to the Blog about Wholesaling and disclosing the contract amount to all parties).

https://www.biggerpockets.com/renewsblog/2016/07/0...

If the seller does not like that you are making money, then you are not the right person for that seller (the seller is not right for you). They should be happy that you are providing a solution to their problem, which in turn deserves a payment. If they get mad about that fee then move on and find someone else. Do not hide the fact that you are making money on the deal, make sure they know because they will talk to other people about the dishonesty they felt with you as the person finding someone to buy their home, and you’ll run into walls created buy the dishonesty.

Fact: hiding information or dishonesty will create a short road for a person in real estate in any realm.

Brandon Pettis · Answer

@Mike DeChristopher another bit of sound advice from a BP family member; I love it. Thanks so much for contributing to my understanding of how to approach this.

Brandon Pettis · Answer

@Adam Browning Wishing you much success with your first deal. I'm behind you in the sense that I haven't found a deal yet but hope to be in the mix soon.

Blessings to you Adam.

Adam Browning · Answer

@john monday can you send me the info you sent Brandon?  I'm working my first wholesale deal and need more educating before i move forward with it.

Thanks for the thread Brandon.

Brandon Pettis · Answer

@John Monday I feel blessed to have some many people chime in here. Honesty is definitely a theme here.

So far I'm still in the contract review stage. I've got several that I need to look at before making a decision on which one to edit to my taste.

How do you handle a seller's questions about your assignment fee

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