Assignment Fee

[Belinda D.]

Hi BP Family,

I believe in being open and honest with sellers about my assignment fee.
I have not done my 1st deal as yet. I plan on telling sellers that if the final sales price (to the investor or retail buyer) is higher than the sellers negotiated price (with me) then sellers will receive 50% of the excess amount minus my assignment fee (which will be capped at 10K)

My reasoning for doing this is because:
1. I don't want the sellers to think I am taking advantage of them.
2. someone told me that if I do receive a large assignment fee i.e. 20K-50K,
then sellers might sue me.
3. I think offering them 50% of the excess amt will give them the incentive to
sign the purchase and sales agreement

As far as I know double closings are not legal in Canada and again I want full disclosure with sellers. So how do I handle earning a large assignment fee without feeling guilty?

Belinda

[Bill Gulley]

I applaud you honesty, but not sure about your formula, that really depends on the price of the property, don't ya think? I'd say just because you could get a buyer to agree at 10K on 50K property, that might be a little strong, yet 10K on a 200K property might be a tad shy. Last time I did it I told the seller I'd take care of it for less than his listing at 6% and settlement fees. I just told him I knew people who would be interested and give me a couple weeks, it was all done in less time, he was thrilled. I'm really disappointed when I hear people ask what kind of script to use or how to hide a fee....there is no need at all for that stuff, glad to see you recognize that! :)

[Belinda D.]

Thanks for your input Bill!

My amounts were just hypothetical. However, not impossible because the market value in my neighborhood ranges from 400K to 1mill. I live on the boarder of 2 cities and these 2 cities + the city where I live a v. hot @ the moment. People are willing to pay full price for "tear downs" just to live in these cities. Agents even have clients on a "waiting list" to get into where I live, lol!

[Bill Gulley]

Where exactly do I need to move and do they allow yanks there?

LOL, Good luck...

[Belinda D.]

Pack your suitcase and come on over to Oakville/Burlington/Milton. All are welcome here.

Thanks!

[Tim G.]

If the deal will work for your buyer based on their investment criteria, the assignment fee charged is not important in my opinion.

This falls in line with asking too much for a deal, if the numbers don't work they will not buy. Again your fee does not matter, all that matters is the numbers do not work.

Anyone focused on anything besides the deal and if it meets their criteria is missing the point and probably a few good deals too.

[Jack Bobeck]

Belinda Duhaney The people who NEED to get rid of a property because it lurks like a boat anchor could care less about the assignment fee. Just as in all aspects of sales, those who NEED to act are the best deals out there, while the wants are the real tire kickers. If this is YOUR business, run it like a business.

[Belinda D.]

Tim Gordon,Jack Bobeck,Bill Gulley: Thanks for your input guys!
This is my 1st time using the "@" plug.
I know that if the deal is good and the spread is good for the buyer, he/should not have a problem with my high assignment fee

My concern is the seller's reaction/dissatisfaction to my high assignment fee. How do I justify it?

For example, If our negotiated price is 350K and a buyer is happy to pay 380K, how do I justify my 30K profit to the seller.? I was thinking that I would "cap" my fee @10K and split the excess amt of 20K with the seller.

What are your thoughts on the "potential" split?
Is this a good strategy to get sellers to sign the contract with me?
Is it a good strategy to show them that I am not taking advantage of them?

Thanks.

[Jon Holdman]

I think you're borrowing trouble. A $380K sale would have $23K in commissions here in the US. Not sure about Canada. If you can truly make $30K on such a deal, the seller is happy to be rid of it and the buyer is happy to buy it, don't worry. Take your fee to the bank. I say you're borrowing trouble because this is just hypothetical. That would be quite a good deal, and will likely be the exception and not the rule. So, if you get a home run once in a while - take it!

[Tim G.]

I'd worry about it once you have a deal. Its all speculation and everyone seems to think entirely too much before actually even having something.

[Belinda D.]

Jon Holdman,Tim Gordon, ok thanks!

[Bill Gulley]

I learned a long time ago not to count your chickens before they hatch!

In fact, when I started I'd get excited over a deal, that's bad to do. You don't think as clearly down the home stretch with dollar signs in your eyes. I learned to initially make the deal nowing I was in a good position, then I don't think of the money (or try not to very hard) until the check is in my hand walking out of closing. And you can't be grinning ear to ear at the closing table of walking out either, I just get the checks and glance at it to make sure it's correct, fold it over and put it my shirt pocket like it's a tickets to a ball game! When you're in your car and out of sight, on the way to the bank, then you can start celebrating, yelling yahoo and smiling real big.

Thinking of the money before things are done will take your eye off the ball, you'll swing and miss and you could strike out, so think about the game not the trophy!

In fact, I tell myself it's bad luck to do that.

The way you get good deals is by buying low, not selling high. A seller who agrees to sell is much less likely to come back on you if they agree to sell at a bargin price, Buyers are totally different, they are still there with the property, still in the area and if they realize they were taken by a smooth talking pitch guy cheating them, they are 3Xs (IMO) more likely to kick up dirt. Not only that but you're probably going to be working the same areas, you don't want buyers going around saying how this investor screwed them. Sellers are just more agreeable as they get past it and move on, buyers moved in and are there to stay.

What you don't want to do (as in should not do as I know some would want to) is to sell at a significantly higher price than the fair market value, that will bite you, it can legally, professionally and ethically and ding your reputation if nothing else. I'd say 10% is about tops as that is what many attorneys will charge to move a property and get it closed, the courts will not see that as grossly over doing it. 5,6,7% on a decent property is customary with agents, a thought would not be given to an assignment fee like that and it can be justified in that light.

Here's another issue; I did a deal with a young couple, kinda hippie like, well mannered and polite, but broke, newly married and first home. They got a good deal and I helped all I could to boot. Days later, I got a call from the circuit court office, the judge's secretary, wanting copies of everyting in that deal, title work, contracts, everyting taken to an attorney's office, immediately! I did. I showed up and met a guy who I didn't know and about got my tail reemed in the first two minutes. Then things calmed down, I showed an appraisal and had sold it about 2,500 below appraised value due some minor repairs, no big deal, but I knocked it off.

Turns out, the wife (co-buyer) was the ciruit judge's daughter! The kids were delighted with the place but they didn't tell daddy until they were moving in. He approved! I got into good graces with the family because I had been more than fair in the deal. Later, I served with the judge's wife on the board of a non-profit and she was great to work with.

So, to all those who think they can go out and charge anything they can get away with because it's in a contract, just know the ones you messed over are probably related or associated with other people and some of those other people can smash you, bust your business and run you out of town, some can even send you to jail for something if they try hard enough.

You never know who your buyers might be related to.

Make your money from the buy side up to the fair market area and you'll usually be just fine. :)

[James Hiddle]

The only time I ever get excited about a deal is if it overinflated my bank account.

[Belinda D.]

Bill Gulley, Thanks for the great advice and keeping it real. Sharing your experience made me see through the buyer's eyes. I was so concerned about the sellers thoughts that I totally ignored the buyer and the fact that he is a very important customer.

James Hiddle, Thanks for sharing.

[Bill Gulley]

Both parties are important. The only people that get away with screwing over one party in favor of another are attorneys, that's thier job, not ours. :)

[Jamaal Hunt]

Excellent point taken. Having strong character and integrity is the way to go. None of these "slick" buzzwords.