Does assignment fee have to go on Hud?

Question

Ok, so I haven't done one of these in a really long time and for some reason the hud is missing in the file of the last one i did so I assume the fee never went on the hud or I'd have a copy of it.

I have a deal signed up for $25k and now have a cash buyer for $35k the attorney I'm in touch with thinks that the sale price on the hud has to show $35k because of transfer tax reason's. He thinks the state will come after him/seller if  they find out their was more money involved in the deal? I didn't think that this was the case because a assignment fee is just that, a "fee" and not part of the $25k purchase price of the original contract that is being assigned. Thoughts?

Dean Letfus · Answer

Not sure about your state but I do both.  Having it on the HUD ensures you get paid at closing but if you don't want the fee disclosed then it does not have to be on there. It is a fee you invoice to the person taking over the contract, that's what an assignment is.  If I don't know the buyer and I am worried about getting paid I get it added to the HUD.  If I know the buyer I invoice them and they pay it at closing outside of the sale.

Jeb Z. · Answer

Right on. We have addendum's on both sides of the deal to CYA but figured if I don't have to list it why complicate matters? Should end up being fine regardless as the sellers are making money and we have a back-up buyer if this one balks. Thanks.

Sam Craven · Answer

Jeb, You either double close or disclose your assignment fee long before closing.

I always disclose to other investors, even when its above $10k, a good investor will be OK with you making money if the numbers make sense.  I have no problem buying from a wholesaler that is making money as long as there is plenty of upside left for me.  Dont sweat it.

Wayne Brooks · Answer

Jeb,
10k IS a 40% fee/mark up on a 25k purchase.  Just a math observation.

Jeb Z. · Answer

Not sure what the heck your going on about here?

For one you have no clue about my local market conditions so speaking about price is pretty much pointless. We market our properties for the price we feel they will sell for and not what may or may not be morally correct, this is a business. If my buyer is going to eventually sell the place for $185k than is he taking advantage of me for only paying $35k? Also, your math is wrong. $10k is < 30% of $35k and even if we were making a 40% profit so what?

Bill Gulley · Answer

Assigning an LLC still triggers the transfer tax, at least in PA.

I agree with your attorney, it is the cost of acquiring the property.

The only way the total cost of acquisition won't be seen by your seller is with two transactions, the sale price must be the same on the Buyer's and Seller's side but other costs don't have to appear on the HUD.

Perhaps you need an agreement with your buyer that might explain the value you are adding to the property, like some repairs? I wonder about your buyer too, are they so inept and being unrepresented that this even falls within good faith expectations? I can see maybe 5k on 25k, but 40% on an assignment?

Just because I can or could put it to someone doesn't mean I do or would, in fact I haven't nor would I.   :)

William D. · Answer

I am not completely clear on your facts but you could do the following: Seller convey to your LLC for 25K. Deed is recorded with a purchase price of 25K and transfer taxes paid on the 25K. You then convey 100% interest in the LLC for 10K. I haven't thought it completely through down to the last detail but it is potentially a way to avoid the assignment fee on the HUD.

Jeb Z. · Answer

Agreed. Just trying to see if anyone else has been in this particular situation before and whether they had to list it or not? Thanks.

Josh R. · Answer

Looks like you will just have to put it on there and if they balk they balk...if its truly a great deal and makes sense for them they shouldnt care what you make as an assignment fee. Are they going to walk away from a good deal just because you will also make money?? not likely

Jeb Z. · Answer

It's possible but a lot easier to do a assignment. Some of these attorney's here in CT can be real jack's. The town is foreclosing on back tax's and some of these attorney's will want everything released before allowing the 2nd closing which can be a few days and I wouldn't want to insure the place or leave it uninsured for that time.

Does assignment fee have to go on Hud?

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