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What Is An Assignment Fee — The Complete Investors Guide

Justin dossey.

July 20, 2022

Whether you’re new to wholesaling , a real estate investor or agent looking to learn more about the “assignment business”, or even a homeowner asking…

… We want to give you a complete guide to understanding the assignment contract and fee from all angles.

Here’s a list of all the questions we’ll be covering:

What is an assignment fee?
Reasons to use an assignment?
How to assign a contract?
Is it legal?
Is it ethical?
How much should a fee be?
Who pays for it?
Does the seller or buyer see the fee?
Alternatives to an assignment?
Assignment fees and agents?
Where to get a contract?
How to increase your assignment fees?
How to find discounted properties to wholesale ?

1. What’s an assignment fee?

First and foremost we have to define the term.

An assignment fee is a payment from the “ assignor ” (wholesaler) to the “ assignee ” (cash buyer) when the assignee transfers their rights or interest of a property to the assignor during the close of a real estate transaction.

Most often, this term is used in the real estate investing strategy of “wholesaling”.

The business of a “wholesaler”, is grounded in the assignment fee: They negotiate to buy a property, then while in the close of escrow they find a cash buyer. They will then sell the rights to that contract to the cash buyer for a fee.

In practical terms, the “fee” is the difference between what you negotiated in price with the seller, and what you negotiated with the end buyer.

Real-life example:

You find a seller who’s willing to sell her property for $250,000 dollars to you, cash. While in escrow you find a cash buyer who’ll be willing to buy that property for $260,000 cash. When it closes, you make $10,000.

The contracts Typically, most real estate contracts are “assignable”, meaning they can be transferred to another party; you mind find it expressed as an “assignment clause” or simply stated: “This contract is assignable”.

You’ll often hear this term amongst wholesalers, but there are other practicable uses for it as well…

2. Reasons to use an assignment

We covered why wholesalers do it: to make money.

But there are other reasons someone might need to use their assignment provision.

For example…

Changing ownership title If the contract is in your own name… but then, while in escrow, you want to change the “owner” to a trust rather than your personal name, you can then use the “assignment” clause.

Finding a partner While in the closing process of buying a property, you might come across a partner who’d like to have his equity/investment protected as well. So in that case you and your partner create a new entity and assign the rights of the contract to the new entity.

3. How to assign a contract?

Assigning a contract and taking a fee is as simple as giving instructions to your escrow or closing attorney, as long as the contract allows for that provision of assignment.

But the hard part is getting the price right…

It’s not as simple as finding a property on the MLS, saying you’re a cash buyer, then finding a real cash buyer to buy it from you at a mark-up.

There has to be “meat on the bone” for everyone AND a price that’s good enough for the seller to say, ”YES!”.

Most cash buyers will not buy a property at full retail value. There needs to be a way for them to make money either in a flip or having some equity in it if they decide to rent it.

That means, you as the wholesaler—who’s collecting assignment fees—need to find good deals for these cash buyers; that’s essentially what your job is: to find discounted properties.

What seller in their right mind will sell at a discount?

Many do, and for all sorts of reasons.

Here at Ballpoint Marketing, we specialize in creating marketing material for off-market investors looking for properties at a discount. Some of the marketing material that wholesalers might purchase from us to find these good deals is our real handwritten door hangers that you can pick up for .45¢ a piece.

4. Is it legal?

“Wholesaling” is a hot topic on the web and a source of a lot of controversies.

However, assigning a contract for an assignment is not technically illegal as long as the contract and both parties agree to it. If a State makes “assigning” illegal, then that hurts other people who are using assignments to change the name of the buying entity or assign to their family and/or partners.

However, there are many states that are against wholesalers and creating laws against them. That’s why you should meet with a real estate attorney to find out what you can do, and what you can say when you’re a wholesaler collecting assignment fees, however, at the time of this writing they have not exactly made wholesaling “illegal” but place restrictions like for example:

Saying “ I have a property to sell ” when you actually don’t because it’s still in closing. Rather, You have a “contract” for sale.
Representing the buyer when you’re not a licensed real estate agent under a broker.

There’s a very fine line between what a wholesaler does and what agents do. You have to make sure what you say and do doesn’t cross those lines.

Here’s a great video on why wholesalers have a bad rep and what you can do differently:

5. Is it ethical

Now that we got the “ legal ” question out of the way…

What about “How ethical is it to wholesale”.

Type that into the web and you’ll get thrown into a black hole of comments and forums chatter you won’t ever be able to get out of.

Here’s the bottom line of why it gets so much controversy and what it has to do with assignment fees…

Wholesalers are going around marketing “We buy houses CASH” when in reality, they aren’t buying it cash… they’re assigning the contract for a fee.

This is where everyone gets their tights all tied up in a bunch (did I just make up a word?! Yes! I did). Because if you say you’re going to close it with cash, but you have to walk away from the seller because you can’t find a buyer… how would you feel leaving a seller (who seriously needed to close yesterday), hanging)?

Some with a conscious would feel pretty bad… others don’t care.

So it’s up to you how you feel about the ethics side of things.

Can you close the deal yourself if you can’t find a cash buyer , via a hard money lender or partner? Or will you feel comfortable walking away from the deal? Or will you be confident enough to go up to the seller and tell her the truth, that you intended on selling the contract to a cash buyer but it seems that your priced it too high, can we renegotiate?

The underlying problem with “walking away” from a buyer is not pricing it right.

If you have a good deal, cash buyers will be all over it and be HAPPY to pay you an assignment fee.

Here’s a video on ethical wholesaling:

6. How much should a fee be?

New wholesalers typically aren’t sure what they should charge. But it’s going to vary from deal-to-deal, and market to market.

A decent wholesaling fee can range from $10,000 to $30,000.

There are occasions when you hear about $100,000 assignment fees. And they do happen. It’s just a matter of negotiating a good deal.

While there isn’t a “set fee” that wholesalers should charge, it all depends on how good of a deal you can negotiate, and how high you can mark up the contract for an end buyer.

So there are two components that determine how much you can get paid for an assignment fee:

Seller’s price.
End buyers price.

Later, in another section, I talk about how you can increase your assignment fee… for now, let’s just cover how much your can charge.

Earlier I mentioned that your market might have an influence on how much you can charge. And that has more to do with how low of a discount, sellers are willing to take AND how competitive it is in your market.

Here’s an example:

If a seller talks to three wholesalers, one offers $200,000 while the others offer $180,000, she most likely will go with the higher offer. Well, now those wholesalers might enter into bidding wars in the market, by creeping up their MAOP (Max allowable offer price).

When wholesalers start raising their Max offers (because the market is demanding it), AND if the end buying price (what cash buyers are willing to pay for that deal) does move up with it…

Then you start seeing wholesalers’ assignment fees start shrinking down. We’ll go over later some techniques for helping with this natural occurrence in the market.

Here’s an example of a real wholesaler using our handwritten mailers, in a case study where he made anywhere from $4k fees to $22,500

Assignment fee examples from a case study

7. Who pays for it?

Typically, in a traditional real estate wholesaling model, the end buyer (the cash buyer) is paying for your assignment fee.

For example: You negotiate with the seller to buy the property for $100,000. And the end buyer agrees to buy this deal for $120,000. He enters into escrow and pays the $120,000. You get the difference between the seller price and the end buyer price.

8. Does the seller or buyer see the fee?

In a typical assignment transfer, yes your assignment fee will be inside the closing statements.

After a property closes escrow, every party involved will get “closing statements” that look might look like this (depending on your state and the companies you use):

One of the line items may show up as “Assignment Fee” (or something similar), and show the amount.

Buyers will see these, as well as sellers.

However, a cash buyer (usually) understands that wholesaling is A LOT of work and that you should get paid for it. A good cash buyer understands that.

Sellers, most likely, won’t understand what an “assignment fee” is when they see this doc (they most likely won’t even read it).

On the rare occasion that they actually do ask what that line item is, you can tell the truth like this: “We work with partners and lenders all the time, and sometimes we end up selling the property during escrow to these partners, instead of keeping it ourselves. In this case we ended up selling to them”.

There’s a way to circumvent this potential problem of an assignment fee showing up on the closing documents…

And that’s by doing a double close instead of an assignment.

Let me explain in the next section…

9. Alternatives to an assignment?

As mentioned in the previous section, an assignment fee can have some cons to it. The primary being that sellers AND buyers can see how much you’re getting paid.

However, there is another “tool” you can use that hides this from both parties, and that’s called the “double close” (sometimes referred to as a “simultaneous closing” or “back to back” closing. As the name implies, there are 2 separate closings, not 1 (like our assignment fee transaction).

Here’s an explanation:

The homeowner (party A) agrees to sell to a wholesaler (Party B) for $100,000
They enter escrow
While in escrow, Party B finds a cash buyer (Party C)
Party C agrees to buy that property for $150,000
They enter a second escrow agreement (different from the first)
Party C funds the escrow account to buy the property at $150,000
Party B uses those funds (minus his “assignment fee”) to pay the purchase from Party A

A little confusing?

Maybe this infographic helps:

We won’t go into too much detail about this as this is an article on the assignment fee… But just know that there is an alternative to hiding your fee but using a double close.

The con to this is that you pay a little more because you’re in fact doing 2 closes, not 1. So the times you might want to a double close vs an assignment fee is when you negotiated a very good deal and want to conceal the big check you’ll be getting.

10. Assignment fees and agents?

Anyone can get paid an assignment fee for this kind of “wholesaling” transaction. There’s no law that says agents can’t. However, that agent/broker needs to pay careful attention to their State RE commission laws as they’re put under serious scrutiny if they walk any fine lines.

For instance, if you’re buying the property and wholesaling it AND you’re licensed… in most states, you have to express to the seller that you are a licensed real estate agent but you are NOT representing them, and instead the principle of the transaction.

If you’re an agent wondering if you can (or should) do this, first contact your broker or RE Commission office to find out more.

Secondly, you might want to reconsider doing this as in some markets agent commission fees are higher than typical wholesaling fees. This is rare, but there are some hot markets where wholesalers have to keep raising their prices to win the deal, and therefore lower their assignment fee.

11. How to increase your assignment fees?

As mentioned in a previous section, your fee is greatly dependent on the kind of deal you negotiate.

So if you get a deal at $100,000 and another investor (cash buyer) is willing to pay $150,000 for it, you walk with a $50,000 assignment fee (assuming no closing costs are removed from this).

There are 4 factors to increasing your assignment fees…

Become a better marketer If you improve your knowledge and skill set in marketing, you can essentially get to motivated sellers before anyone else.In the next section, we cover how to find these properties, which has everything to do with marketing, but one way (that we specialize in) is using handwritten mail to gain the best response rates from sellers.
Become a better negotiator If you study and practice good salesmanship you can effectively win deals even if you’re offer is “low” . If you have no experience in sales, this will take time, but there are loads of resources available online (free and paid) that you can take advantage of. But, if you’re planning to stay in this entrepreneurship game for the long haul I HIGHLY suggest you study sales on a regular basis.
Know you numbers Getting better and better at knowing what your market demands in terms of prices, rehab costs , etc… will help determine a more accurate price at a faster rate. Why does this matter to getting paid a higher assignment fee? It’s 2 reasons: First, if you know that cash buyers are willing to pay X, you can raise your asking price from end buyers, or on the flip side of that if, you know that a house needs some major repairs you can use that negotiated a lower price with the seller…Secondly, if you are really good with numbers, you can give an offer faster than your competition who has to take 1-2 days to send an offer in. In competitive markets “ Speed to lead ” wins and the person who can act fastest is usually the one who takes the trophy.
Build a thriving buyers list The second component of the assignment fee and wholesaling business is selling the contract to a cash buyer.And, if you can build a list of buyers who will pay more for a good deal than most of the other “bottom of the barrel” buyers who demand very steep prices.Where do find buyers willing to pay more? It’s usually among high w-2 earners (doctors, lawyers, etc) who like to flip houses on the side. Or high-income business owners looking to park their cash somewhere to earn 15%+ annual ROI by doing so occasional flips.If you can find them, network with them, and add them to your list you can essentially raise your property raise to increase your assignment fee

12. How to find discounted properties to wholesale?

Finally our last section in this article which is probably at the top of some people’s minds:

“ Assignments sound great, but how do you FIND discounted properties!?!?”

Wholesaling is probably one of the toughest occupations in real estate.

You have to be well-rounded in almost every aspect of the industry. And you have to be top-notch in your selling and marketing capabilities.

But with that, there are foundational techniques to help you find these properties on your own. I’m going to give you 2 resources to start below.

First, is our article “ 8 ways to find 100 sellers for under $500”

Second is our eBook on Direct mail

You can get the Ebook for free by subscribing below to our newsletter, where we give lessons, stories, and value every week to real estate investors like you…

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What is an Assignment Fee? The Ultimate Wholesaler’s Guide

In real estate investing, an assignment fee is the fee paid by the end buyer to the real estate wholesaler at the time of closing.

What is an assignment fee?

How do you assign a real estate contract?

How can you increase your assignment fee as a real estate wholesaler?

Those are just some of the questions we're going to answer in this ultimate assignment fee guide.

Let's dive in!

Part 1. Answering Common Questions About Assignment Fees

To start, we're going to answer some of the most commonly asked questions about assignment fees.

In real estate investing, an assignment fee is the fee paid by the end buyer to the real estate wholesaler at the time of closing.

This is the part of the process where the real estate wholesaler makes their money -- after finding a great deal and getting the property under contract, they then flip (i.e. assign) that contract to a cash buyer for a profit.

How are assignment fees calculated?

Assignment fees are calculated by taking the difference between what the seller was promised and what the buyer is paying.

For example, if a wholesaler has a contract to purchase a property for $100,000 and they assign that contract to a cash buyer for $120,000, then their assignment fee would be $20,000.

Who pays the assignment fee?

The assignment fee is paid by the cash buyer at closing.

And, critically, you -- the wholesaler -- are the person who gets to decide what that assignment fee is... it's only a matter of getting the cash buyer to agree (assuming you're not doing a double closing; more on that later).

What is the average wholesaler’s assignment fee?

The average assignment fee for a real estate wholesaler is between $2000 and $7000.

Of course, this number will depend on the market you're in as well as the level of experience that you have.

Many wholesalers charge upwards of $10,000 or even $20,000 for their assignment fee. Later in this guide, we'll show you how to systematically increase your assignment fee.

REISift users, on average, pull more money per deal than non-members. Here are some testimonials from our members and Sift Dojo attendees.

Are assignment fees taxable?

Yes, assignment fees are considered taxable income.

Be sure to speak with your accountant or tax advisor about the specific rules in your state.

What is a real estate assignment contract?

A real estate assignment contract is the contract between the wholesaler and the cash buyer that assigns (or transfers) the rights of the original purchase agreement to the cash buyer.

This contract will include all of the terms of the original purchase agreement, including:

The price that was agreed to between the wholesaler and seller
The property address
The closing date
Any contingencies that were in the original contract (i.e. financing, inspections, etc.)

Once the assignment contract is signed by both parties, the cash buyer will take over all responsibilities under the original purchase agreement and will be responsible for closing on the property.

What is a double close?

A double close is a type of real estate transaction where the wholesaler sells the property to the cash buyer and then immediately purchases the property from the seller.

In other words, there are two closings -- one for the sale of the property from wholesaler to cash buyer and another for the purchase of the property from seller to wholesaler.

In terms of assignment fees, double closings are often used when the wholesaler wants to keep their assignment fee confidential.

Part 2. How To Assign a Real Estate Contract

Next, we're going to discuss the process for assigning a real estate contract -- from finding a great deal and building your buyers list to acquiring an assignment contract and collecting your assignment fee.

Step 1. Find a Great Deal

The first step in wholesaling real estate -- and thus assigning property contracts -- is finding a great real estate deal.

This is where your marketing efforts will come into play. You'll need to generate a steady stream of leads in order to find the best possible deals on properties that fit your criteria.

There are a number of ways to generate leads, but the most effective method is to use a combination of online and offline marketing.

This could include everything from direct mail campaigns and cold calling to driving for dollars and door knocking.

Check out our complete real estate investor marketing plan to learn more about this part of the process.

Step 2. Build Your Buyers List

A fundamental part of wholesaling real estate is flipping property contracts to cash buyers who have the funds to purchase your deals within just a couple of weeks.

A buyers list is a database of cash buyers (other real estate investors) who are interested in buying your deals.

You can find cash buyers by networking with other investors, attending real estate meetups and seminars, or searching online.

Here are 10 more ways to find cash buyers .

Step 3. Acquire an Assignment Contract

Once you've found a great real estate deal and got under contract with the seller, it's time to acquire an assignment contract.

You can do this by searching online for assignment contract templates or hiring a local lawyer to put the contract together for you. The assignment contract will pass the purchasing power and obligations from you to the new buyer.

Step 4. Collect Your Assignment Fee

After the new buyer has closed on the property, it's time for you to collect your assignment fee. This is typically done by wire transfer or check at the closing table via a title company.

And that's it! You've now successfully assigned a real estate contract and collected your assignment fee.

Part 3. The Pros & Cons of Assignment Contracts

Now let's take a moment to look at the pros and cons of assignment contracts.

It's Cheaper Than Double Closing: Double closings can be more expensive (in terms of both time and money) than assignment contracts.
It's Simple: Assignment contracts are relatively simple compared to other types of real estate transactions.
It's Fast: Assignment contracts can be completed in as little as a week or two.
It's Transparent: Unlike double closings, there is no need for two sets of escrow accounts, two sets of title insurance policies, or two sets of closing costs.
Your Assignment Fee is Visible: Because your assignment fee is paid at closing, it will be visible to everyone involved in the transaction.
It's Not Always Allowed: Some states have laws that prohibit or restrict the use of assignment contracts.

Part 4. 10 Ideas For Increasing Your Assignment Fee as a Wholesaler

To close out this guide, we're going to share 10 different ways that you -- the real estate wholesaler -- can increase your assignment fee.

1. Start With Great Deals

The better the deal, the higher your assignment fee will be.

This is why finding great deals -- and double-checking your math as well as your due diligence -- is absolutely critical to increasing your assignment fee.

So how do you find great real estate deals?

We have a detailed guide on finding great real estate deals over here .

2. Learn to Negotiate (With Sellers)

If you want to increase your assignment fee, you need to be able to negotiate with sellers.

The better you are at negotiating and sales — which in large part, just depends upon being an empathetic and helpful person — the better deals you’ll be able to get and the higher your assignment fee will be.

After all, if the seller agrees to a lower price, then that means you make a bigger profit.

The caveat here would be that you should always do right by your sellers. Don’t be afraid to negotiate (start lower than your max offer)... but also don’t try to screw anyone over.

3. Follow Up

It’s very rare that you’re going to turn someone from a lead into a deal with just a single phone call.

The nature of wholesaling real estate is that it requires a consistent and systematic follow-up process with seller leads to be successful.

Following up will help you close more deals… and closing more deals will give you the confidence, experience, and volume you need to increase your assignment fee.

4. Find Your Offer Min & Max

Good real estate deals are just a result of good due diligence and good math.

Determine how much money your cash buyer is going to want to pull, factor in your assignment fee, consider repair costs and holding costs… and calculate your max offer on the property.

Do this before you negotiate with the seller.

And make sure that when negotiations begin, you start well below your max offer so that you have room to adjust based on their response to your initial offer — this is your minimum offer.

You might find your max offer by using the popular 70% rule — which states that a real estate investor should pay no more than 70% of a property’s ARV (After Repair Value) — but you can find your starting offer by decreasing that to 50% or lower.

5. Qualify Your Cash Buyers

The amount of your assignment fee — as well as the efficiency with which your business operates — depends upon high-quality cash buyers.

Most wholesalers are a little over-eager to add email addresses to their cash buyer list.

But remember: quality over quantity.

You might have 500 cash buyers on your list… but only 20 or 30 of those are actually high-quality buyers.

Before adding buyers to your list, get proof of funds and make sure they’ve bought properties via assignment before.

Those buyers are going to move faster, pay the asking price for your properties, and return for more properties to buy.

6. Identify Cohorts of Cash Buyers

The instinct for most wholesalers is to send every deal to every cash buyer… but that actually wastes a lot of time.

It’s not in your interest to have to help every potential buyer determine whether or not they’re the right buyer for this deal.

It’s far more efficient to learn about your buyers upfront and determine what type of cash buyers they are — rehabbers, landlords, etc.

Using simple software, you can then create cohorts of cash buyers and send the right deal to the right people to get faster turn-around-times, less questions, and bigger assignment fees.

7. Text Your Buyers

Email is easy and popular… but it’s not necessarily the best channel when promoting deals to your list of cash buyers.

In fact, SMS or text messaging has some clear advantages.

Just consider these stats from ManyChat …

269 billion emails are sent every day with roughly 50% of them ending up in spam folders.
SMS has a click-through rate of 19% and email has a click-through rate of 3.2%

The point is, if you want to get the attention of your high-quality buyers, then it’s probably worth sending both emails and text messages.

The faster you reach the right buyer, the easier it’ll be to get the assignment fee you want.

8. Don’t Negotiate (With Buyers)

As the wholesaler, realize that you determine your assignment fee.

No one else gets to decide what your assignment fee is going to be — now if you can’t get the buyer to agree to pay it, then that’s another problem… but you can always walk away and find another buyer.

If you’re going to raise your assignment fee, then it’s important to understand that all you have to do is… well, raise it. And see what happens.

High-quality buyers aren’t going to care about how much you’re making so long as they’re also making a good chunk of money.

9. Work With Real Estate Agents

Real estate agents control a huge part of every real estate market.

So if you exclude working with real estate agents to find cash buyers, then you’re ignoring a huge portion of the market’s revenue and potential.

Plain and simple.

Good real estate agents who work with cash buyers will understand your business model and be more than willing to coordinate the deal for you.

You will have to pay a bit of commission — or at least, the buyer will — but you’ll get to remove all the drama from the equation by working with agents. They understand how assignments work, and they negotiate on the behalf of the cash buyer.

It might not drastically increase your assignment fee, but it will help you dispose of deals far more efficiently.

10. Require a Nonrefundable Fee

When it comes to wholesaling, time really is money — the faster you can find a high-quality cash buyer, the more likely you are to get the assignment fee you want.

And one of the worst things that can happen is that your buyer will back out of the deal and you’ll have to restart the entire process.

That’s why you should make the buyer have skin in the game.

Require a nonrefundable fee from cash buyers who are ready to take action — this fee should be upwards of $3,000 and it can contribute to your total assignment fee.

If a buyer refuses to pay this to secure the deal as they’re own, then you probably want to find a different buyer anyway.

Final Thoughts on Real Estate Assignment Fees

We hope this guide has helped clear up any confusion you had about assignment fees and how they work in wholesaling real estate.

Remember: if you want to increase your assignment fee, focus on finding (and negotiating) great deals, following up with leads, qualifying cash buyers, and being systematic in your business.

Do those things, and you’ll be well on your way to making more money per deal.

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What Is an Assignment Fee in Real Estate?

The real estate investment landscape requires a deep understanding of various terminologies and concepts and one term that frequently comes up, especially in wholesaling, is the "assignment fee."

This concept plays a critical role in the wholesaling transaction process and can significantly influence the profitability of deals.

To fully grasp its impact and effectively utilize it as a part of your real estate investing strategy, it's important to delve deeper into the nature of assignment fees and their role in real estate wholesaling. We’ll do just that in this blog, so keep reading!

What is an Assignment Contract?

An assignment contract in real estate is essentially an agreement that allows one party (the assignor) to transfer or assign the rights and obligations of a property purchase agreement to another party (the assignee). Contract assignments are typically used by real estate investors who have very little money or those who don't want to buy properties and put in an earnest money deposit.

To be more detailed, the property owner and the assignor (usually a real estate investor or wholesaler) enter into a purchase agreement. This real estate contract states that the assignor agrees to buy the property for a specific price within a certain time frame. The real estate contract details all the terms and conditions of the sale.

The assignor then decides they don't want to or cannot complete the purchase themselves. Instead, they find another interested party (the assignee) who wants to purchase the property.

The assignor enters into an assignment contract with the assignee. This real estate assignment contract effectively transfers all rights and obligations of the initial purchase agreement from the assignor to the assignee.

Once the assignment contract is signed, the assignee steps into the shoes of the assignor. They are now the ones who will buy the property, adhering to the terms and conditions of the original purchase agreement. The assignee will complete the purchase with the original property owner.

What is an Assignment Fee?

The assignment fee is the difference between the price the real estate wholesaler contracted with the original seller and the price the end buyers or cash buyers agree to pay. This fee is essentially the wholesaler's compensation for their role in finding the property, securing the real estate assignment contract, and linking the seller with a willing cash buyer.

For instance, if the real estate wholesaler got a property under a real estate assignment contract for $100,000 and found an end buyer willing to pay $120,000, the $20,000 difference would be the real estate assignment fee during the closing date. This is the wholesaler's profit for effectively linking up the seller and the buyer.

How Much is the Average Assignment Fee For a Real Estate Investor? (How Much Does a Real Estate Wholesaler Make?)

The average assignment fee for a real estate wholesaler can vary widely based on several factors, including the real estate market they're operating in, the specific property, and the details of the deal.

It's not uncommon to see assignment fees range anywhere from a few thousand dollars to $20,000 or even higher. Some wholesalers aim for a standard assignment fee, like $5,000 or $10,000 per deal, while others may aim to make a certain percentage of the property's price which may realistically cost 10 to 20%.

A significant factor that impacts the assignment fee is the potential profit in the deal. If a property is significantly undervalued and there's a large margin for profit on the closing date, the assignment fee could be higher. Similarly, if the deal is less profitable, the assignment fee might be on the lower end.

As the real estate market can fluctuate and change rapidly, always consult with a real estate professional or legal expert for the most current and accurate information.

What is the Average Assignment Fee for a Lot?

The average assignment fee for a lot, much like with a house or other types of real estate, can vary greatly based on numerous factors such as the location of the lot, its size, the demand in the area, zoning restrictions, and more.

There isn't a universally applicable average fee due to the wide array of factors at play. However, wholesalers might aim to earn a certain percentage of the lot's price as their assignment fee, typically somewhere around 10 to 20% , but it can go higher or lower depending on the specifics of the deal.

For example, in an area where vacant lots are in high demand for new construction, the assignment fee could be substantial. Conversely, in an area with lower demand or restrictive zoning, the assignment fee might be lower. This may also vary if you are double closing.

Who Pays the Assignment Fee?

In a real estate wholesaling transaction, the assignment fee is typically paid by the end buyer or assignee. This is because the assignment fee represents the wholesaler's profit for facilitating the deal, identifying the property, securing the original contract, and then assigning that real estate contract to the cash buyer.

The cash buyer pays the wholesaler the agreed-upon assignment fee, often at the closing date, in addition to the real estate purchase price that the wholesaler originally negotiated with the seller. The wholesaler makes their profit from the assignment fee, while the seller receives the originally agreed price. This may be a little different when double closing.

How are Assignment Fees Calculated?

The calculation of an assignment fee in real estate wholesaling is fairly straightforward. The assignment fee in an assignment of contract is typically the difference between the price that the wholesaler has agreed to pay the property seller and the price that the end buyer agrees to pay for the property.

Remember, while this is a common way to calculate assignment fees on real estate contracts, there can be variations based on the specific deal and local laws and regulations.

Are Assignment Fees Taxable?

Assignment fees in real estate wholesaling are generally taxable. They are considered income for the wholesaler and are subject to tax laws just like any other form of income.

When a wholesaler earns an assignment fee in an assignment of contract, this fee is essentially the profit they make from facilitating the real estate transaction. Therefore, it's considered as part of their taxable income for the year in which the fee was earned.

The specific tax rate can vary depending on several factors in an assignment of contract, including the total amount of income the wholesaler earns in a year, their filing status, and more. Additionally, the tax treatment can vary if the wholesaler operates as an individual or through a business entity, like an LLC or a corporation.

As always, tax laws can be complex and they can vary from place to place, so it's essential to consult with a tax professional or tax advisor to understand the implications and obligations in your specific situation.

It's crucial to keep accurate records of all real estate transactions or assignment of contract, including the earning of assignment fees and double close deals, to ensure you're prepared when it's time to file taxes.

Does the Assignment Fee Show Up on the HUD?

The HUD-1 Settlement Statement, often simply referred to as the HUD (implemented by the Department of Housing and Urban Development), is a standardized form that outlines the final details of a real estate transaction, including closing costs.

It itemizes all charges imposed on both the cash buyer and the seller and provides a full accounting of the transaction when flipping real estate contracts.

The assignment fee could show up on the HUD-1 Settlement Statement, but its placement would depend on the specific circumstances of the transaction.

In some cases, wholesalers prefer to keep the assignment fee off the HUD-1 to maintain privacy about their earnings from the transaction. Instead, they might use a separate assignment agreement with the end buyer or cash buyer that outlines the fee in the assignment contracts.

However, some transactions — especially those involving certain types of financing such as double close or those subject to specific local laws or regulations — may require all fees to be documented on the HUD-1. In such cases, the assignment fee might be listed as a line item on the form.

Can a Real Estate Agent Get an Assignment Fee?

In many cases, real estate agents are not typically involved in assignment fees because such fees are often associated with wholesaling transactions or assignment contracts , a practice that most agents don't engage in as they are representing sellers or cash buyers in a more traditional sales process.

However, it's technically possible for a real estate agent to earn an assignment fee if they're also operating as a wholesaler or are involved in a wholesale transaction, but there are some important things to consider.

First, the agent must fully disclose their intentions to all involved parties. If they have a property under contract and intend to assign that contract for a fee, they must let the seller, buyer, and any other relevant parties know about this.

Second, the agent should confirm that this practice is allowed under their brokerage's policies. Some brokerages may not allow their agents to engage in wholesaling or similar activities.

Lastly, the agent needs to ensure they're adhering to all local and national laws in an assignment of contract. This can vary greatly, so it's crucial to consult with a legal expert or a real estate attorney or closing attorney to ensure everything is being done legally and all contractual obligations are performed.

How to Increase Assignment Fees for Wholesale Real Estate Investors?

There are many strategies you can use to increase assignment fees in an assignment of contract, but they can vary in effectiveness based on your local market, real estate laws, and personal real estate investing strategy.

To help you start earning larger assignment fees, check out the following tips:

Double Closings

Double closing, also known as "simultaneous closing" in assignment contracts, involves two separate transactions that are linked at the same time. The wholesaler first purchases the property from the seller and then immediately sells it to the buyer.

By doing double closings, the wholesaler can often increase their assignment fee because the end buyer does not see the original real estate purchase or asking price , which allows the wholesaler to mark up the property's price more significantly.

Use the go-to formula or the 75% rule

If you don't want to do double closing, maybe the 75% rule will work for you. The 75% rule is a guideline that suggests that an investor should pay no more than 75% of the after repair value (ARV) of a property minus the repairs needed. Sticking to this rule in assignment contracts can ensure that the property is purchased at a price that allows room for a profitable assignment fee.

Be confident in negotiating

A strong negotiation can significantly increase assignment fees real estate. Wholesalers must be skilled in negotiating a lower price with the seller and a higher price with the buyer in the assignment of contract. This requires confidence, a good understanding of property values, and a knack for sales and communication.

Find high-quality cash buyers

Cash buyers are often willing to pay more for the convenience of a quick close , which can result in a higher assignment fee. Establishing a strong network of reliable cash buyers who are looking for investment opportunities can be very profitable for a wholesaler.

Implement a max allowable offer

This refers to setting a ceiling on the original purchase price that still allows for a profitable assignment fee. By calculating the max allowable offer (MAO), wholesalers can ensure they never overpay for a property and that there's always room for their assignment fee.

Don't waste time on unmotivated sellers

An unmotivated seller is unlikely to agree to a price that leaves room for a good assignment fee. Wholesalers should focus their time and energy on sellers who are motivated to sell quickly and willing to negotiate on price.

Find out what works for other wholesalers

Networking and learning from other successful wholesalers can provide valuable insights. Other wholesalers might share successful strategies, potential pitfalls to avoid, or even refer deals if they have too many.

Use the 80/20 rule

The 80/20 rule, or the Pareto Principle , states that 80% of effects come from 20% of causes. In wholesaling, this could mean that 80% of profits come from 20% of deals.

Identifying and focusing on the types of deals in assignment contracts that generate the most profit can help increase overall real estate assignment fees.

Steps in Wholesaling Real Estate

Now that you already understand what an assignment fee is, it’s time to start wholesaling real estate. To guide you, here are the detailed steps.

Step 1. Understand Local Wholesaling Regulations

Before embarking on any real estate venture, it's vital to understand the rules and regulations that govern the practice.

This includes both local and national laws relating to wholesaling. Be aware of the legalities involved in assigning contracts, necessary disclosures, and any license requirements in your area.

Step 2. Identify Potential Properties

The next step involves seeking out properties that are not listed on the market—these are often referred to as off-market properties.

These can be properties in need of repair, owned by motivated sellers, or those foreclosed upon property or real estate owned. Uncovering the property address of these opportunities often requires diligent research and networking.

Step 3. Evaluate the Property's Potential Value

Assess the property's After Repair Value (ARV). This is an estimate of what the property could be worth after paying for the repair costs.

This is a crucial step in determining whether the deal could be profitable and how much you should offer for the property. The typical repair cost can be expensive so you should really look into this before signing the sale agreement.

Step 4. Engage with the Property Owner

Once you've identified a promising property, the next step is to reach out to the seller to offer an assignment of contract. This could be through a direct mail campaign, a phone call, or even a door-to-door visit. The goal is to discuss their interest in selling the property for a contract assignment.

Step 5. Conduct Thorough Property Assessment

This involves investigating the property in detail. You'd want to look at the physical condition of the property, any title issues by contacting the title company, and any other factors that could affect the property's value or scalability before you get ready for a sales agreement and get the property sold. This process is often referred to as "due diligence."

Step 6. Secure the Property with a Purchase Contract

If the property passes your due diligence and the owner is willing to sell, the next step is to put the property under contract. This agreement for the property obtained should allow you to assign the contract to another buyer (unless local laws prohibit this).

Step 7. Locate a Potential Buyer

Now that you've secured the contract, you need to find an end buyer. This is often a real estate investor looking for a new project. You'll want to have a robust buyer's list that you can reach out to when you have a property available.

Step 8. Assign the Contract to the Buyer

Once you have a willing buyer, you'll assign them the rights to the purchase contract. This involves another contract, known as the assignment contract, in which you officially transfer your rights as the buyer to the new buyer.

Step 9. Receive Your Wholesaling Fee

After the assignment contracts reassigned and the new buyer purchases the property from the seller in the closing table, you can get the assignment fee paid.

This is your profit for facilitating the deal , and it's usually the difference between the price you contracted with the seller and the price the buyer agreed to pay for the original contract in case you do not double close.

Key Takeaways: What is an Assignment Fee in Real Estate?

Understanding the concept of an assignment fee in assignment contracts is crucial for anyone involved in real estate wholesaling. As discussed in this blog, an assignment fee is essentially the profit a wholesaler makes for facilitating a property transaction.

Various factors can influence the amount of this fee, such as the property's potential value, market demand, and the negotiation skills of the wholesaler.

If you feel like you are ready for your first wholesale deal, then check us out at Property Leads . We offer highly motivated seller leads perfect for wholesaling! We sell these leads exclusively to cut your competition.

Fill out our form below to start getting wholesaling leads and earning assignment fees.

PROPERTY LEADS

30 N Gould St Ste N Sheridan, WY 82801 (207) 309-3949 [email protected]

Now answering calls 24/7

Justin Dossey

8 ways to increase your assignment fee as a wholesaler.

April 11, 2023
, How to , Real Estate Investing Tips

What is an assignment fee in real estate?

What’s the difference between an assignment contract and a double close?

Most importantly, how can you increase your per-deal profitability as a wholesaler?

Those are the questions we’re answering in this guide!

What is an Assignment Fee in Real Estate?

An assignment fee is the money a real estate wholesaler makes when flipping a contract to a cash buyer.

Let’s walk through an example.

If you’re a real estate wholesaler , then your job is to find homes for good deals and flip them to cash buyers.

(Here’s our complete beginner guide to wholesaling )

Imagine that you find a property that the seller is willing to sell for $80,000. You determine that the ARV ( After Repair Value ) of the home is about $200,000 and, after crunching the numbers, determine that the deal is a profitable one even after the cost of repairs.

So you and the seller sign an assignment contract, which is basically your promise to purchase the home for $80,000 within a certain period of time.

But instead of purchasing the home, you flip this contract to a cash buyer (usually another real estate investor with cash on hand) for $90,000. Since your assignment contract with the seller was $80,000, you make an assignment fee of $10,000.

You can look at this as your fee for finding the deal for the cash buyer.

Assignment Contract or Double Close?

Now you might be thinking to yourself, “Why would a cash buyer be willing to pay $10,000 more for the home than they need to?”

First, if the cash buyer still stands to make a hefty profit after factoring in your assignment fee (which they should), then it’s not really a big deal to them.

In fact, high-quality cash buyers rarely care how much your profit is so long as they’re getting a good deal.

However, if you (the wholesaler) are still worried about the cash buyer rejecting your assignment fee, then you can instead double close. Double closing in real estate is when two transactions happen simultaneously (the seller sells to you and you sell to the cash buyer).

Here’s how RE Tipster explains it…

“A Double Closing (also known as a simultaneous closing) is a coordinated real estate transaction involving three parties: a seller, a real estate wholesaler (acting as a middle man) and an end-buyer. As the name implies, double closings involve two separate transactions that occur on the same day. The initial purchase and sale between the seller and the investor is the A-to-B transaction, and the purchase and sale between the investor and the end-buyer is the B-to-C transaction.”

In this case, it’s not necessary to disclose your assignment fee to your cash buyer.

How To Increase Your Assignment Fee as a Wholesaler

When Ryan Dossey — the founder of Call Porter — started wholesaling real estate, he was doing a lot of $3k and $4k deals.

His cost for acquiring those deals hovered between $1k and $2k… so he was barely breaking even.

Watching other wholesalers profit $10k, $20k, even $50k from a single deal, Ryan committed to doing things differently — learning from those with larger assignment fees and applying those lessons to his own business.

Now he regularly does wholesale deals that profit $16,000 or more.

Check out the video below!

1. Use The 75% Rule

The 75% rule states that investors should pay no more than 75% of the property’s ARV minus the cost of repairs. As a wholesaler, you also need to subtract out your assignment fee. Here’s how that formula works…

(ARV x .75) – Repair Costs – Assignment Fee = Max You Should Pay

Imagine that you found a property with an ARV of $250,000 and you expect repair costs to be about $20,000. Also, you want to make $10,000. Here’s how the math would work out…

($250,000 x .75) – $20,000 – $10,000 = $157,500

(For the cost of repairs, Ryan doesn’t just look at what needs to be fixed right now , but within the next 1-3 years… because this is what your buyers are going to care about)

This means that you should pay a max of $157,500 — that’s your max allowable offer (see the next section). This ensures that you and your buyer will make good money on the property.

2. Find Your Max Allowable Offer

One of the biggest game-changers for Ryan’s business is that he implemented a max allowable offer. After you’ve calculated the ARV of the home as well as your ideal offer using the 75% rule, set your MAO as a tangible number .

Then, when you negotiate with the seller, you’ll know the most amount of money that you’re willing to offer — this removes any guesswork from the equation and gives you permission to say, “No. I’m sorry. Our business just can’t afford to go any lower than XX.”

This is a tactic that salespeople use all the time… and it’s very effective.

When you have a clearcut offer that you can’t exceed, then it’s just business… and the seller can choose to accept or reject your offer.

Don’t sit down at the negotiation table without knowing your MAO… and make sure you have the willpower to stick to that number.

3. Learn To Negotiate

It’s a little funny. But the first time that Ryan reached out to his friend who’d been doing high-profit wholesale deals and asked, “How are you doing it?” Ryan’s friend responded and said…

“You know why you’re not making more money on your deals, Ryan? It’s because you’re a bitch.”

What he meant was that Ryan didn’t have the confidence to negotiate high-profit deals with sellers… and until he garnered that gusto, he’d continue to make less money than he desired.

That’s why knowing how to negotiate is so important.

Without the confidence (and math ) to say, “This is what my business can offer.” you’re going to make very little money on your deals.

Using the 75% rule and having a max allowable offer will help you negotiate more effectively with sellers. You’ll know what you can realistically afford and what you stand to make.

And then, you’ll increase how much money you’re making on each deal and how profitable your business is overall!

4. Double Close Bigger Deals

It’s possible that as your assignment fee increases, certain cash buyers will shy away from working with you… because they don’t like that you’re making so much money.

(Of course, high-quality cash buyers won’t if they’re getting a good deal — see the next tip)

If that happens — or even if you’re just worried about it — you can start double closing your deals, which makes it so that you don’t have to disclose the size of your assignment fee.

Find great deals, make sure they’re still profitable for your cash buyers, raise your assignment fee, and then double close.

Easy peasy.

5. Find High-Quality Cash Buyers

As I’ve mentioned before, high-quality cash buyers won’t care about how much your assignment fee is so long as you keep passing them good deals.

So it’s worth spending a bit of time to find these types of buyers.

Check out our full guide to finding cash buyers over here.

6. Stop Trying to Convince Every Prospect to Work With You

Not everyone wants to work with you.

There, I said it.

I know you’re an amazing sales person (it probably comes naturally to you). I know that you’ve convinced people in the past to do things that they weren’t prone to do.

But here’s the truth: those instances are the exception, not the rule.

More often than not, unmotivated sellers, or kinda motivated sellers aren’t going to work with you.

They’re just going to waste your time.

And the faster that you kick those time-wasters to the curb, the better.

But isn’t that just a part of the business? Isn’t it natural to win some and lose some?

Yes. Of course.

But it’s not natural (or healthy) to spend time with tire-kicking prospects when you could spend that same time with motivated sellers…

…people who are in a hurry to sell their home. They’re in a bind and they aren’t just thinking of working with you, but your very business is a god-send.

They need to work with you. They need to sell their home. They need a way out of their situation.

Why are those people more profitable?

For a few reasons:

They’re easier to convince to work with you in the first place (meaning you waste less time and money trying to convince them).
They’re less interested in arguing against your offer and more interested in escaping their current situation.

So, recognize time-wasting prospects faster, kick them to the curb, and spend more time on the phone with their motivated counterparts.

You’ll decrease time-and-money overhead and increase the profitability of each deal that you do.

Schedule a demo with us to find out how we can help you spend less time on the phone and more time closing high-profit deals.

7. Don’t Try to Be Different (Do What Works )

Be different.

Be special.

Be a lone wolf.

The entrepreneurial world is riddled with these messages. Go against the grain. Forge your own blade. Blaze a new trail.

That’s where success lies. And to follow the crowd is madness.

But here’s what’s easy for us entrepreneurs to forget: by building a business (or starting a side hustle), we’ve already gone against the grain.

(most people never start their own business)

And there is a point where fighting what works becomes a silly battle of the ego rather than a good business idea (think Google Glass or Google+ – sorry Larry and Sergey).

Point is, doing what you already know works is often more profitable than trying new things.

Know which marketing channel brings in leads? Do more of that. Know which sales script converts the most prospects? Use that. Know which zip codes provide the best ROI, increase your marketing budget for that area.

Sure. Trying new things is important when what you’re doing isn’t already working .

But as my pops always said, “If it ain’t broke, don’t fix it.”

Spend more resources on what works and cut resources on what doesn’t. Your per-deal profitability will naturally increase.

8. Use the 80/20 Rule

Just a few of the things that you do every day…

…are sustaining your business…

…growing your business…

and increasing your profitability.

While many of the things that you do are a complete and utter waste of time.

Maybe you spend too much time on the phone with people who don’t actually want to work with you.

Maybe you spend too much money trying to make marketing methods work for your business (even though they don’t) because they work for someone else’s business.

Whatever the case, remember this all-important rule: 20% of the work produces 80% of the results. And 80% of the work only produces 20% of the results.

This is true with everything in life.

It’s why going on just one date with your spouse makes you feel a million times closer.

It’s why many of the most profitable deals you’ve ever done were also some of the easiest to nail down.

It’s why some things just seem to work and other things don’t.

Fortunately, you can use the 80/20 rule to your advantage.

By focussing more resources on the 20% of work that produces 80% of the results and spending less or no time on the near-worthless 80%.

Do what works. Cut what doesn’t.

Final Thoughts on Increasing Your Assignment Fee

There are two ways to build your business.

You can increase the number of deals you do every month with similar profit margins ($5k-$10k, for instance) and you can work like a dog. You can wonder why your business isn’t providing you with the time freedom that you crave and why you’re less happy than you were even at your W-2.

Or you can work smarter, not harder.

You can increase the profit on each deal you do by focussing on higher-quality deals, spending less time on the phone with half-motivated sellers (who are just there to waste your time), and building a business that serves you.

One, even, that you can leave behind every now and again to go on vacation with your family…

Without stressing about the darn thing going under.

So use the above three tips to build a business that makes you more money with less work.

Choose to work smarter, not harder, and your average assignment fee will naturally increase.

All About Assignment Fee: The Only Guide You’ll Ever Need

In real estate, when a buyer and seller enter into a purchase contract, a buyer will on occasion decide to sell an assignment of the contract to another buyer. To facilitate this, there is generally an Assignment Fee charged to the new buyer.

What Constitutes An Assignment?

This is when someone has entered into a contract to purchase a property but decides to sell their interest in the property before they take possession, and before closing. The original buyer sells their contract to a new buyer but it should be noted, they are not actually selling the property since they do not yet own it.

They are really selling their agreement to purchase the property and the new buyer takes over the rights and obligations of the original buyer as contained in the original Purchase Agreement.

The original Purchase Agreement likely contains language regarding how an Assignment is to be handled and may include the need for the original seller to approve the Assignment to the new buyer. It should also detail the fee structure for the Assignment Fee, whether it is a flat fee or a percentage of either the original purchase price or the new purchase price agreed to between the original buyer and the new buyer.

How Do Assingment Fee Works?

Assignment fees are not all the same. If the property is a presale unit – one which has not yet been built – an assignment fee of between 2% and 5% of the sale price is fairly typical. This fee is payable to the developer.

In some instances, developers may also charge an Administration Fee to facilitate completion of the Assignment Agreement. This can be anywhere from a few hundred dollars to several thousand dollars.

If you are selling an Assignment of a resale unit, any profits generated above the original purchase price to the amount being paid by the new buyer may have to be split with the original seller. Always check the original purchase contract to see how this is be addressed and if there is any question, check with your lawyer.

If a profit is made on the sale of the Assignment, this income will most likely be taxed as income. Check with your accountant or financial advisor for the implications to your situation.

Real Estate Fee

If the property is listed for sale with a realtor, real estate fees and commissions will be an added expense impacting the overall profit to the original buyer. It should be noted, there may be restrictions on listing a property for sale, particularly in a presale situation, since the original developer/seller may limit how may units can be resold under Assignment Agreements.

Legal fees on Assignment Agreements can be higher than with a straightforward real estate transaction. This is due to the complexities of dealing with more than one agreement since both the original Purchase Contract and the Assignment Agreement need to be handled.

If you are contemplating either buying or selling an Assignment , it’s best to obtain professional advice and assistance before undertaking. Failing to understand how the transaction works, or the associated financial considerations are best avoided by utilizing experienced professionals to guide you through the process to successful completion.

Meghna Negi

One response to “All About Assignment Fee: The Only Guide You’ll Ever Need”

[…] are a number of costs associated with selling a presale unit. Speak with your realtor, accountant or financial advisor, and lawyer to ensure you understand the […]

Assignment of Contract – Assignable Contract Basics for Real Estate Investors

What is assignment of contract? Learn about this wholesaling strategy and why assignment agreements are the preferred solution for flipping real estate contracts.

Beginners to investing in real estate and wholesaling must navigate a complex landscape littered with confusing terms and strategies. One of the first concepts to understand before wholesaling is assignment of contract, also known as assignment of agreement or “flipping real estate contracts.”

An assignment contract is the most popular exit strategy for wholesalers, and it isn’t as complicated as it may seem. What does assignment of contract mean? How can it be used to get into wholesaling? Here’s what you need to know.

What Is Assignment of Contract?

How assignment of contract works in real estate wholesaling, what is an assignment fee in real estate, assignment of agreement pros & cons, assignable contract faqs.

Transactly Saves Time. Learn How Now!

Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer.

This strategy is also known as flipping real estate contracts because that’s essentially how it works:

The wholesaler finds a property that’s already discounted or represents a great deal and enters into a contract with the seller,
The contract contains an assignment clause that allows the wholesaler to assign the contract to someone else (if they choose to!), then
The wholesaler can assign the contract to another party and receive an assignment fee when the transaction closes.

Assignment of contract in real estate is a popular strategy for beginners in real estate investment because it requires very little or even no capital. As long as you can find an interested buyer, you do not need to come up with a large sum of money to buy and then resell the property – you are only selling your right to buy it .

An assignment contract passes along your purchase rights as well as your contract obligations. After the contract assignment, you are no longer involved in the transaction with no right to make claims or responsibilities to get the transaction to closing.

Until you assign contract to someone else, however, you are completely on the hook for all contract responsibilities and rights.

This means that you are in control of the deal until you decide to assign the contract, but if you aren’t able to get someone to take over the contract, you are legally obligated to follow through with the sale .

Assignment of Contract vs Double Closing

Double closing and assignment of agreement are the two main real estate wholesaling exit strategies. Unlike the double closing strategy, an assignment contract does not require the wholesaler to purchase the property.

Assignment of contract is usually the preferred option because it can be completed in hours and does not require you to fund the purchase . Double closings take twice as much work and require a great deal of coordination. They are also illegal in some states.

Ready to see how an assignment contract actually works? Even though it has a low barrier to entry for beginner investors, the challenges of completing an assignment of contract shouldn’t be underestimated. Here are the general steps involved in wholesaling.

Step #1. Find a seller/property

The process begins by finding a property that you think is a good deal or a good investment and entering into a purchase agreement with the seller. Of course, not just any property is suitable for this strategy. You need to find a motivated seller willing to accept an assignment agreement and a price that works with your strategy. Direct mail marketing, online marketing, and checking the county delinquent tax list are just a few possible lead generation strategies you can employ.

Step #2: Enter into an assignable contract

The contract with the seller will be almost the same as a standard purchase agreement except it will contain an assignment clause.

An important element in an assignable purchase contract is “ and/or assigns ” next to your name as the buyer . The term “assigns” is used here as a noun to refer to a potential assignee. This is a basic assignment clause authorizing you to transfer your position and rights in the contract to an assignee if you choose.

The contract must also follow local laws regulating contract language. In some jurisdictions, assignment of contract is not allowed. It’s becoming increasingly common for wholesalers to assign agreements to an LLC instead of an individual. In this case, the LLC would be under contract with the seller. This can potentially bypass lender objections and even anti-assignment clauses for distressed properties. Rather than assigning the contract to someone else, the investor can reassign their interest in the LLC through an “assignment of membership interest.”

Note: even the presence of an assignment clause can make some sellers nervous or unwilling to make a deal . The seller may be picky about whom they want to buy the property, or they may be suspicious or concerned about the concept of assigning a contract to an unknown third party who may or may not be able to complete the sale.

The assignment clause should always be disclosed and explained to the seller. If they are nervous, they can be assured that they will still get the agreed-upon amount.

Step #3. Submit the assignment contract for a title search

Once you are under contract, you must typically submit the contract to a title company to perform the title search. This ensures there are no liens attached to the property.

Step #4. Find an end buyer to assign the contract

Next is the most challenging step: finding a buyer who can fulfill the contract’s original terms including the closing date and purchase price.

Successful wholesalers build buyers lists and employ marketing campaigns, social media, and networking to find a good match for an assignable contract.

Once you locate an end buyer, your contract should include earnest money the buyer must pay upfront. This gives you some protection if the buyer breaches the contract and, potentially, causes you to breach your contract with the seller. With a non-refundable deposit, you can be sure your earnest money to the seller will be covered in a worst-case scenario.

You can see an assignment of contract example here between an assignor and assignee.

Step #5. Receive your assignment fee

The final step is receiving your assignment fee. This fee is your profit from the transaction, and it’s usually paid when the transaction closes.

The assignment fee is how the wholesaler makes money through an assignment contract. This fee is paid by the end buyer when they purchase the right to buy the property as compensation for being connected to the original seller. Assignment contracts should clearly spell out the assignment fee and how it will be paid.

An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer.

The standard real estate assignment fee is $5,000 . However, it varies by transaction and calculating the assignment fee may be higher or lower depending on whether the buyer is buying and holding the property or rehabbing and flipping.

The assignment fee is not always a flat amount. The difference between the agreed-upon price with the seller and the end buyer is the profit you stand to earn as the assignor. If you agreed to purchase the property for $150,000 from the seller and assign the contract to a buyer for $200,000, your assignment fee or profit would be $50,000.

In most cases, an investor receives a deposit when the Assignment of Purchase and Sale Agreement is signed with the rest paid at closing.

Be aware that assignment agreements can have a bad reputation . This is usually the case when the end buyer and seller are unsatisfied, realizing they could have sold higher or bought lower and essentially paid thousands to an investor who never even wanted to buy the property.

Opting for the standard, flat assignment fee is much more readily accepted by sellers and buyers as it’s comparable to a real estate agent’s commission or even much lower and the parties can avoid working with an agent.

Real estate investors enjoy many benefits of an assignment of contract:

This strategy requires little or no capital which makes it a popular entry to wholesaling as investors learn the ropes.
Investors are not added to the title chain and never own the property which reduces costs and the amount of time the deal takes.
An assignment of agreement is easier and faster than double closing which requires two separate closings and two sets of fees and disclosures.
Wholesaling can be a great tool to expand an investor’s network for future opportunities.

As with most things, there are important drawbacks to consider. Before jumping into wholesaling and flipping real estate contracts, consider the downsides .

It can be difficult to work with sellers and buyers who are not familiar with wholesaling or assignment agreements.
Some sellers avoid or decline assignment of contract offers because they are suspicious of the arrangement, think it is too risky, or want to know who they are selling to.
There is a limited time to find an end buyer. Without a reliable buyer’s list, it can be very challenging to find a viable end buyer before the closing date.
The end buyer may back out at the last minute. This may happen if they do not have owner’s rights until the contract is assigned or they do not want to pay an assignment fee.
Not all properties are eligible for wholesaling like HUD and REO properties. There may be anti-assignment clauses or other hurdles. It is possible to get around this by purchasing the property with an LLC which can then be sold, but this is a level of complication that many wholesalers want to avoid.
Assignors do not have owner’s rights. When the property is under contract, investors cannot make repairs or improvements. This makes it harder to assign a contract for a distressed property in poor condition.
It can be hard to confirm an end buyer is qualified. The end buyer is responsible for paying the agreed upon price set by the seller and assignor. Many lenders do not handle assignment agreements which usually means turning to all-cash end buyers. Depending on the market, they can be hard to find.

In the worst-case scenario, if a wholesaling deal falls through because the end buyer backs out, the investor or assignor is still responsible for buying the property and must follow through with the purchase agreement. If you do not, you are in breach of contract and lose the earnest money you put down.

To avoid this worst-case scenario, be prepared with a good buyer’s list. You should only put properties under contract that you consider a good deal and you can market to other investors or homeowners. You may be able to get more time by asking for an extension to the assignment of contract while you find another buyer or even turn to other wholesalers to see if they have someone who would be a good fit.

What is the difference between assignor vs assignee?

In an assignment clause, the assignor is the buyer who then assigns the contract to an assignee. The assignee is the end buyer or final buyer who becomes the owner when the transaction closes. After the assignment, contract rights and obligations are transferred from the assignor to the assignee.

What Is an assignable contract?

An assignable contract in real estate is a purchase agreement that allows the buyer to assign their rights and obligations to another party before the contract expires. The assignee then becomes obligated to meet the terms of the contract and, at closing, get title to the property.

Is Assignment of Agreement Legal?

Assignment of contract is legal as long as state regulations are followed and it’s an assignable contract. The terms of your agreement with the seller must allow for the contract to be assumed. To be legal and enforceable, the following general requirements must be met.

The assignment does not violate state law or public policy. In some states and jurisdictions, contract assignments are prohibited.
There is no assignment clause prohibiting assignment.
There is written consent between all parties.
The property does not have restrictions prohibiting assignment. Some properties have deed restrictions or anti-assignment clauses prohibiting assignment of contract within a specific period of time. This includes HUD properties, short sales, and REO properties which usually prohibit a property from being resold for 90 days. There is potentially a way around these non-assignable contracts using an LLC.

Can a non-assignable contract still be assigned?

Even an non-assignable contract can become an assignable contract in some cases. A common approach is creating an agreement with an LLC or trust as the purchaser. The investor can then assign the entity to someone else because the contractual rights and obligations are the entity’s.

Assignment agreements are not as complicated as they may sound, and they offer an excellent entry into real estate investing without significant capital. A transaction coordinator at Transactly can be an invaluable solution, no matter your volume, to keep your wholesaling business on track and facilitate every step of the transaction to closing – and your assignment fee!

Adam Valley

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How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

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Understanding the Concept of an Assignment Fee in Real Estate

Navigating the realm of real estate transactions can often feel like deciphering a complex puzzle, especially for those who are early on their property journey. A concept that can confuse professionals and individuals involved in transactions alike is the idea of an assignment fee in real estate—something that comes into play in various scenarios. In the context of real estate, an assignment fee is an essential concept to grasp, bridging the gap between creative financing and the traditional purchase and sale of properties.

What is Assignment in Real Estate?

To understand an assignment fee in real estate, you first have to understand what an assignment is. An assignment contract is essentially the document that gives someone the right to purchase a property. The assignment fee refers to the payment made to an individual, generally known as an assignor, for transferring their rights and obligations under a pre-existing real estate assignment contract to another party, known as the assignee.

This transaction is particularly prevalent in the practice of real estate wholesaling . In these transactions, an individual will secure a contract to purchase a property and then assign that same contract to an end buyer, charging a fee for the convenience and the opportunity they present.

A contract assignment fee is a strategic tool for those looking to leverage lucrative opportunities within the market without needing a significant capital investment. It allows for flexibility in the investment realm, enabling professionals to generate income from real estate deals without the traditional barriers of entry. This means people can make headway in their careers without having to obtain mortgage loans or conduct extensive renovations.

In essence, the assignment fee is the financial reflection of the value that the assignor brings to the table in a transaction. The assignor is a useful party for both buyers and sellers, helping the process along by identifying a potentially profitable deal, negotiating terms, and then passing on the right to execute the deal to a suitable party. Understanding this concept is crucial for real estate investors at all stages of their careers, especially those interested in using wholesale strategies and creative financing options.

What is an Assignment Fee in Real Estate?

The assignment fee in real estate is a concept rooted in the overarching principle of a contractual rights transfer. It represents the price that an assignee, someone interested in purchasing property, pays to the assignor for the rights to acquire said property under the terms the assignor has already negotiated with the seller. To make sure you get the right fee for the assignment of a contact, you need to understand the mechanics of how they work.

This section expands on how assignment fees function in real estate transactions and delves into the factors that influence their amounts.

Explanation of How Assignment Fees Work in Real Estate

When an investor or a wholesaler, known in this case as the assignor, enters into a purchase agreement with a property seller, they acquire the legal right to buy the property at some negotiated, agreed-upon terms. However, instead of completing the purchase themselves, the assignor then finds another buyer, known as the assignee, who is interested in taking over the contract to eventually own the property. This is when assignment fees come into play.

The assignee must pay an assignment fee to the assignor for the right to purchase the property. Only once this fee is paid can the assignee step into the shoes of the original buyer, then proceed to close the deal with the seller. The original contract to buy is thus “assigned” from the assignor to the assignee, who from then on becomes responsible for fulfilling its terms.

Factors That Determine the Amount of Assignment Fees

The amount, or monetary value, of the assignment fee can vary greatly from deal to deal, being influenced by a range of factors, which we’ve broken down below:

Property Value and Equity: Appropriately, the value and equity of the property will inform the assignment fee. A property with high value or substantial equity typically commands a higher assignment fee and vice versa.

Market Demand: Consider overarching market trends when ascertaining an appropriate assignment fee. For example, in a seller’s market with higher demand for properties, assignment fees can increase because of plentiful competition among buyers.

Deal Profitability: Even in the cases of lower-value properties, the nature of the deal itself will impact the assignment fee. This means that the more profitable a deal appears to be, the higher the fee that an assignor can command.

Negotiation Skills: In a similar vein to the impact that profitability can have, negotiation skills can also change the shape of an assignment fee. The ability of the assignor to negotiate deals on both ends can directly impact their fee amount, with skilled negotiators often being able to secure higher fees.

Timeframe: Time is money, and in the case of a wholesale assignment contract, this can be especially true. If the assignor negotiates the situation and closes the deal quickly, they might be able to command a higher fee for the increased convenience of a speedy transaction.

Comparison of Assignment Fees with Other Real Estate Transaction Costs

Assignment fees differ from the costs associated with various other real estate transactions in a variety of ways:

Earnest Money vs. Assignment Fee: Earnest money is a kind of deposit made to demonstrate the buyer’s seriousness about acquiring a property. This fee can typically be refunded under certain conditions or applied to the purchase at closing. On the other hand, an assignment fee is a non-refundable payment made to the assignor, specifically for the right to take over the contract.

Closing Costs vs. Assignment Fee: Closing costs can encompass a variety of fees that buyers and sellers pay at the end of a real estate transaction. These fees can include things such as those associated with title searches, real estate attorney’s fees, and credit report charges. Assignment fees are separate from these, only ever being paid to the assignor for the contract rights.

Commission vs. Assignment Fee: Real estate agents earn their living through commissions based on the property’s sale price, paid by the seller, generally from their earnings through making the sale. In contrast, an assignment fee is paid by the assignee to the assignor and is not related to the sale price or commission.

Understanding the nature of assignment fees, such as when they’re applicable, how they are calculated in relation to a transaction, and how they compare to other common transaction costs, is essential for anyone involved in real estate investing. This level of understanding is particularly vital in strategies such as wholesaling, where such fees are part and parcel of the process.

Pros and Cons of Assignment Fees

Assignment fees in real estate can be positive elements of transactions for sellers and investors while posing some notable challenges depending on the perspective of all parties involved, including the buyer. Below, we explore the advantages and disadvantages for the enactors of these transactions, as well as the risks and challenges that come with assignment fees.

Advantages for Sellers and Investors

For sellers:.

Quick Sales: Sellers benefit from the existence of assignment fees as they can do wonders for speeding up the transaction. Wholesaling and the assignment fees that come with it are especially viable solutions when a seller wants to shift their asset quickly. Investors or fellow wholesalers who offer to pay these fees often aim to close deals rapidly.

Fewer Hurdles: Sellers might avoid some traditional selling hurdles when embracing the nature of wholesaling and assignment fees. In the standard selling cycle, sellers might have to go through various stages, such as multiple showings or a buyer’s own financial approval process. These processes can be skipped altogether when dealing with investors ready to pay an assignment fee.

For Investors:

Profitability: Investors or wholesalers can use assignment fees as their primary source of income. As it sidesteps the traditional processes of investing and reselling properties, wholesalers stand to make a profit through the assignment fee without having to close on the property themselves. By embracing this system, they also avoid closing costs and the need for financing.

Less Capital: Wholesaling is a great method for generating income, without needing the same level of seed investment. Since the investor doesn’t need to purchase the property outright, they generally just have to pay a small (often refundable) deposit for the contract; there is less capital required upfront compared to traditional real estate investments.

Flexibility: Because of the nature of deals that use assignment fees, investors can back out of a particular deal at any time. This can be achieved by offering and assigning the contract to another, more suitable buyer if the deal doesn’t fit their investment strategy or if they cannot secure financing.

Disadvantages for Buyers and Sellers

For buyers:.

Increased Cost: Assignment fees do often increase the overall cost for the end buyer, as it becomes their responsibility to cover both the property’s agreed-upon price and the assignment fee. In some cases, the assignment fee can be taken from the overall sale price, but this isn’t common, meaning the speedier sale usually comes with an inflated price tag.

Transparency Issues: Buyers in these situations can often find it challenging to get full transparency regarding the property’s conditions or the original contract terms if not properly disclosed by the assignor. This shouldn’t be an issue, as long as the wholesaler or assignor does their job properly, but buyers should make sure to vet any collaborators carefully.

Potential for Overextension: Sellers may encounter issues if they work with the wrong wholesaler or investor. In some cases, an inexperienced investor can overextend and find it difficult to find a buyer to whom they can assign the contract, slowing down the transaction process and possibly reversing it.

Market Misrepresentation: Sellers could face the challenges of market misrepresentation if the assignor markets the property incorrectly or unethically, leading to potential legal challenges. For example, if the assignor lies about the property’s amenities, uses unrealistic photography , or overvalues it, buyers might respond with legal action.

Potential Risks and Challenges with Assignment Fees

Legal and Ethical Considerations: The legality of assignment fees, much like many other aspects of the real estate market, varies from region to region . Along with the legal side of things, there may also be ethical considerations to consider if parties are not fully informed of the contract terms and fees involved.

Market Fluctuations: Market conditions can change rapidly—need we remind you of what happened to the housing market in 2008? This means that if the property value decreases or interest rates increase, it will likely become more challenging for the assignor to find a buyer willing to pay the fee on top of the existing property price.

Contractual Risks: If the assignee fails to close the deal, the assignor might end up legally obligated to purchase the property under the original contract terms. Considering the reasons that most investors choose to embrace wholesaling and assignment fees, this could pose a significant financial risk that they’re not ready to incur.

Reputational Risks: Assignors who consistently charge unnecessarily high assignment fees might gain a negative reputation in the real estate community among potential clients and fellow professionals alike. It’s important to consider what a fair, mutually beneficial fee should be to avoid potentially negatively affecting future business.

Complexity in Transactions: Assignment fees add a level of complexity to real estate transactions, which are already fairly complicated at the best of times. There may be misunderstandings or disputes between the involved parties over the terms of the contract, the condition of the property, or the responsibilities each party has.

Both sellers and investors involved in wholesaling and assignment in real estate need to weigh the potential for quick and profitable transactions against the complexities and risks assignment fees introduce. It is crucial for every party involved to conduct suitable due diligence, operate transparently, and possibly seek professional legal counsel to ensure the process is conducted legally and ethically.

Legal and Ethical Considerations

The use of assignment fees in real estate transactions is full of potential, being a viable part of a strategic investment plan. However, while assignment fees and the deals they’re attached to can be highly lucrative, they also come with the potential for legal and ethical quandaries. Here, we delve into the legal regulations and ethical considerations that assignors should consider, highlighting potential issues that could arise from the misuse of assignment fees.

Legal Regulations and Requirements

Regulatory landscape:.

Disclosure Requirements: Many jurisdictions require the full disclosure of an assignment fee to all parties involved in a transaction, ensuring no one feels like they’ve missed out on any vital information. Failure to clearly express the assignment fee to the buyer can often lead to legal penalties or complications.

Contractual Rights: There are some contractual points to consider when handling an assignment fee in real estate. The original purchase agreement must expressly allow for the assignment of the contract without the need for repeat consent of the seller, or the investor must obtain written permission from the seller to assign the contract.

Licensing Laws: Some regions may require an individual enacting a wholesale deal or receiving an assignment fee to have a professional real estate license, as the transaction could be considered as engaging in real estate brokerage without a license. This is worth considering if you want to pursue a career as a wholesaler or investor in general.

State and Local Laws: Both assignment fee legality and the ability to assign a contract can vary greatly between the different states and localities of the US. It’s crucial to understand the specific regulations of the area where you’re working and or where the property is located. It’s always important to tailor your approach to real estate for the area that you operate within.

Ethical Considerations:

Fairness to All Parties: Ethically, the fee should always reflect the value that’s actually been added by the assignor in finding the deal and should not be exploitative. If you’re working as a real estate wholesaler or receiving an assignment fee in any other way, make sure that you’re offering real value without overstating your contribution to the transaction.

Transparency: Assignors must be totally transparent about the property’s condition, the original contract terms, and the assignment fee’s size at every stage of the transaction. Remember, you’re not just trying to avoid legal implications with your honesty; you’re looking to build positive professional relationships built on trust.

Conflict of Interest: Ethically, an assignor should avoid any conflicts of interest in all transactions and should not misrepresent the potential value or investment benefits to the assignee. For example, if the assignor knows that an area is losing steam in the market, they should make that clear to their assignee.

Examples of Potential Legal and Ethical Issues

Non-Disclosure: Failing to disclose one’s assignment fee openly and clearly to the end buyer or seller can lead to lawsuits, as it may be considered a fraudulent practice. It’s absolutely essential that a wholesaler makes it clear what they stand to gain from a deal so everyone understands the transaction from top to bottom.

Predatory Practices: Charging exorbitant assignment fees, especially in distressed markets or from vulnerable sellers, which are often hubs for real estate wholesaling, can be seen as unethical and might lead to legal challenges. This is why offering real value and making your fees reasonable is crucial.

Misrepresentation: An assignor could face serious legal action if they misrepresent the terms of the original contract or the property’s condition for the purpose of securing a higher fee. It goes hand in hand with all of the other aspects of transparency—assignors must be clear and honest at every stage to avoid legal and ethical complications.

Violation of Licensing Laws: If an assignor acts as a de facto real estate broker by frequently assigning contracts for fees without a professional license, they might face legal penalties, including fines and injunctions. These laws vary from state to state, meaning it’s best to have a license in place, ensuring you can work in as many areas as possible.

Breach of Contract: If the original contract does not allow for the assignment of the property and the assignor proceeds without consent, they are highly likely to be sued for breach of contract. It should go without saying, but every real estate transaction needs to be enacted with the utmost professionalism, ensuring every party is fully aware of its nature.

It’s essential for every party involved in the assignment of real estate contracts to be aware of the legal and ethical implications. The complex nature of these transactions often warrants the involvement of a dedicated legal professional to navigate the potential minefield of legal regulations and ethical considerations. Moreover, maintaining transparency and integrity throughout the process not only helps assignors avoid legal troubles but also builds a reputation that can lead to more successful deals in the future.

In this exploration of assignment fees in real estate, we’ve navigated their many complexities and nuances. From definition to application, assignment fees are a pivotal mechanism for investors, particularly in the realm of wholesaling.

There are many advantages and disadvantages associated with assignment fees. For sellers and investors, they can represent an expedient route to liquidity and profit. Conversely, for buyers, they can often introduce additional layers of cost and complexity.

The discussion of legal and ethical considerations illuminated the tightrope walked by those who engage in these transactions. The importance of adhering to disclosure norms, maintaining transparency, and aligning practices with the legal stipulations of the local and state jurisdictions cannot be overstated in this particular vein of real estate.

While the concept of assignment fees may appear straightforward, its application is often fraught with potential legal and ethical pitfalls. Those involved in real estate transactions must have a clear understanding of these fees and the corresponding regulations that govern their use.

By engaging in thorough research and due diligence and enlisting expert guidance, navigating the complex world of real estate can be achieved with confidence. The strategic use of assignment fees can indeed unlock opportunities and foster successful transactions, but only when managed with suitable care and consideration of all the variables at play.

For more insightful pieces about the real estate industry, visit our blog today .

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What is an Assignment Fee in Real Estate?

It’s common to have lots of questions when reviewing the final settlement sheet of a real estate transaction. Whether you’re buying or selling a house , there are plenty of fees that aren’t straight forward. Have you ever asked yourself what an assignment fee in real estate is? This line item can come as a surprise to buyers and sellers preparing to close on a property – especially to those who didn’t know a wholesaler was involved in their deal.

Let’s uncover all that you’ll need to know about what an assignment fee in a real estate transaction is.

Definition of a Real Estate Assignment Fee

A real estate assignment fee is the difference between the original contracted price of an off-market transaction and the final sale price. An assignor – typically a real estate wholesaler – connects a seller and buyer, both at different prices. Once the deal closes, the assignment fee is the wholesaler’s cut for helping facilitate the transaction.

How Does an Assignment Fee Work?

An investor (let’s call them Investor A ) agrees to buy a property at a particular price. Then they find another buyer ( Investor B ) willing to purchase it at a higher price before the original sale closes. The difference, or the ‘assignment fee,’ is what Investor A pockets. It’s like being a matchmaker but for houses and profits.

Example of an Assignment Fee

Investor A gets a property under contract to buy for $100,000 . He (or she) then contacts Investor B about the deal because Investor A knows that Investor B loves these types of properties. Investor B agrees to pay $105,000 for the property. Investor A assigns the rights of the original purchase agreement (contract) to Investor B before closing. Then, Investor A gets paid $5,000 as the assignment fee once it closes and Investor B gets the property.

Difference Between Assignment Fees and Commissions

An assignment fee is essentially a finder’s fee for an off-market real estate deal. It’s common to see these fees when someone is trying to wholesale a house . What is the main difference? The wholesaler isn’t really representing anyone besides themself. Their goal is to get the seller to agree to one price, and then find a buyer that will agree on a slightly higher price.

These are different than real estate agent commissions . A deal that involves an assignment fee takes place outside of the MLS (off-market). It’s common to see these on fixer-upper properties that are being purchased by real estate investors.

The Role of an Assignment Fee

Picture property flipping as a relay race. The assignment fee is the baton. The baton is passed from the property from the original buyer (who might have cold feet or a change of heart) to a new buyer, ready to sprint to the finish line.

Assignment fees in real estate are most commonly seen when investors buy distressed properties. For example, a company that buys houses as-is will likely target fixer-uppers. They will work directly with wholesalers, who will try to find them these types of homes.

Wholesalers Role in Assigning Properties

Wholesalers then reach out directly to homeowners, seeing if they’re interested in selling. Oftentimes, when a property suffers from serious damage and is hardly livable, listing it on the market isn’t the best option. Traditional buyers will try to purchase it using a mortgage and the loan will get denied because of the condition of the house. That’s why it’s more common to see fixer-upper properties sold off-market by wholesalers who take an assignment fee once they connect the dots.

Who Pays the Assignment Fee?

In the dance of real estate, the one who takes the final bow (the end buyer, or Investor B) pays the assignment fee. Think of it as a finder’s fee for finding a good deal. Real estate investors are willing to pay more for a property knowing that there’s an assignment fee baked into the price if that means securing a solid deal. Especially in competitive real estate markets where good deals are hard to come by, assignment fees paid by real estate investors are common.

Average Wholesaler Assignment Fee

Talking numbers, assignment fees can vary drastically. They range from a few thousand bucks to the price of a luxury car, depending on the deal’s size and the property’s value. On average, an assignment fee can range between $5,000 and $10,000 per deal.

In smaller cities where home values are low, assignment fees will be lower. On the flip side, larger cities like San Diego CA will experience larger assignment fees (and realtor commissions) because of the home prices. For example, if someone is wholesaling a large countryside home in California, the assignment fee could be as big as the land itself.

Are Assignment Fees Taxable?

Ah, taxes—the plot twist no one likes. Yes, assignment fees are taxable. They’re income, after all. Uncle Sam considers these fees as earnings, so they must be reported. Similar to real estate commissions, taxes must be paid on these.

Strategies for Negotiating Assignment Fees with Investors

Negotiating assignment fees is part art, part science, and all hustle. It’s like haggling at a flea market—you want the best deal without scaring off the seller. Start by knowing your worth and the property’s value.

Be transparent but firm, and always, always be ready to walk away. Remember, the goal is to find a win-win where both you and the investor skip away happy. Sometimes, throwing in a sweetener, like offering to handle some paperwork, can seal the deal.

Real Estate Assignment Fees

In conclusion, assignment fees are the secret sauce in many real estate deals . These fees offer a way for investors to profit without getting their hands dirty. Understanding how they work, who pays them, and how to negotiate them can turn you from a real estate newbie into a savvy investor. From the investor’s perspective, it can be worth paying an assignment fee to secure a great piece of real estate.

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Real Estate Assignment Fee: Your Guide to Earning Profit

Are you looking for a profitable investment opportunity in the real estate industry? If so, then real estate assignment fees may be worth exploring. This investment strategy involves assigning one’s rights to purchase a property to another buyer for a fee. With the right approach and knowledge, investors can earn a significant profit through real estate assignments.

To be successful in this field, it is important to have a solid understanding of real estate transactions, investing, and contracts. In this article, we will provide an overview of real estate assignment fees and how they work. We will also outline the steps an investor needs to take to maximize profit and mitigate potential risks.

0.1 Key takeaways:
1.1 How Real Estate Assignment Fees Work
1.2 The Risks and Challenges of Real Estate Assignment Fees
2 Steps to Earning Profit from Real Estate Assignment Fees
3 Maximizing Profit through Effective Real Estate Contracts
4.1 Conducting Thorough Market Research
4.2 Building a Network of Reliable Professionals
4.3 Staying Prepared for Potential Issues
5 Conclusion
6.1 Q: What is a real estate assignment fee?
6.2 Q: How does a real estate assignment fee work?
6.3 Q: What are the advantages of real estate assignment fees?
6.4 Q: What are the potential risks associated with real estate assignment fees?
6.5 Q: How can I earn profit from real estate assignment fees?
6.6 Q: What should I include in a real estate contract to maximize profit from assignment fees?
6.7 Q: How can I mitigate risks and challenges associated with real estate assignment fees?

Key takeaways:

Real estate assignment fees involve assigning one’s rights to purchase a property to another buyer for a fee.
A solid understanding of real estate transactions, investing, and contracts is crucial to success in this field.
To maximize profit, investors need to find motivated sellers, analyze potential deals, negotiate contracts, and market the assignment opportunity to potential buyers.
Effective real estate contracts can help investors protect their interests and ensure a smooth transaction.
Investors should be aware of potential risks and challenges and take steps to mitigate them.

Understanding Real Estate Assignment Fees

If you’re looking to make a profit in real estate investing, it’s essential to understand the concept of real estate assignment fees. Simply put, an assignment fee in real estate refers to the fee charged by an investor to assign a contract for a property to another buyer . This strategy is commonly used in wholesaling real estate transactions.

Wholesaling real estate involves finding motivated sellers who are willing to sell their properties quickly and at a discount. The investor then enters into a contract to buy the property at a reduced price and assigns the contract to another buyer for a higher price, earning a profit through the assignment fee.

One of the advantages of real estate assignment fees is that they require less upfront capital compared to other real estate investing strategies. However, as with any investment, there are potential risks involved. It’s crucial to have a solid understanding of the process and the potential challenges to make informed decisions.

How Real Estate Assignment Fees Work

Real estate assignment fees work by allowing investors to essentially sell their contracts to other buyers. The process typically starts with the investor finding a motivated seller who is willing to sell their property at a discount. The investor then enters into a contract to buy the property at the agreed-upon price.

Once the contract is signed, the investor can then market the property to potential buyers and assign the contract to another buyer at a higher price, collecting the assignment fee. This fee is typically a percentage of the sale price or a flat fee agreed upon in the contract.

It’s important to note that real estate assignment fees are legal in most states, but it’s essential to check local regulations and laws before proceeding with this strategy. Some states have specific rules and requirements to follow, such as obtaining a real estate license or adhering to specific disclosure requirements.

The Risks and Challenges of Real Estate Assignment Fees

While real estate assignment fees can be a profitable strategy, there are potential risks and challenges that investors should be aware of. One of the biggest risks is the possibility of the buyer backing out of the deal, leaving the investor with the property and no buyer to assign the contract to.

Additionally, the investor may encounter challenges in finding a buyer willing to pay the assigned price, which could lead to decreased profits or even losses. It’s crucial to conduct proper due diligence and market research to mitigate these risks and ensure a successful transaction.

In the next section, we’ll discuss the steps to earning a profit from real estate assignment fees, including finding motivated sellers, analyzing potential deals, and negotiating contracts.

Steps to Earning Profit from Real Estate Assignment Fees

If you’re looking to earn profit through real estate assignment fees, here are some steps to guide you through the process:

Finding motivated sellers: Look for distressed or motivated sellers who need to sell their properties quickly. This could include homeowners facing foreclosure, probate sales, or owners relocating for work.
Analyzing potential deals: Once you’ve identified a potential seller, conduct market research to determine the property’s value and estimate the costs of any necessary repairs or renovations. Make sure the property is worth the investment.
Negotiating contracts: Negotiate with the seller for a purchase contract with an assignment clause. This will allow you to assign the contract to another buyer for a fee.
Marketing the assignment opportunity: Once you have the contract, market the assignment opportunity to potential buyers, such as other investors or homebuyers looking for a good deal. Be sure to explain the benefits of the property and the potential profit to be made.

It’s important to conduct due diligence throughout this process to ensure that the deal is worth the investment. Always make sure to have proper documentation and legal representation to protect your interests.

Maximizing Profit through Effective Real Estate Contracts

Real estate contracts play a crucial role in ensuring a smooth transaction and protecting the investor’s interests when dealing with assignment fees. To maximize profit, it is important to include key clauses and provisions in the contract that promote favorable terms and conditions. Here are some tips:

Include an escape clause: This clause allows the investor to back out of the contract if they are unable to find a suitable buyer within a certain timeframe.
Specify the assignment fee: Clearly define the fee that the investor will receive upon assignment, and ensure that it is fair and reasonable for the services provided.
Include a non-compete clause: This clause prevents the seller from continuing to market the property while the investor is attempting to assign the contract, ensuring that the investor has exclusive rights to the deal.
Ensure proper documentation: All contracts should be in writing and signed by all parties involved, and any agreements should be documented with written correspondence.
Negotiate favorable terms: Work with a lawyer or real estate professional to negotiate terms that protect your interests and minimize risk.

By following these tips, investors can ensure that their contracts are effective and maximize profit potential in real estate assignment fees.

Mitigating Risks and Challenges in Real Estate Assignment Fees

While real estate assignment fees can be a profitable investment strategy, there are also potential risks and challenges that investors should be aware of. By taking proactive measures, however, investors can minimize these risks and maximize their profits.

Conducting Thorough Market Research

One of the most important steps in mitigating risk is to conduct thorough market research. This involves analyzing market trends, property values, and other local factors that can affect the success of real estate assignments. Investors should also keep up-to-date with changing regulations that may impact their investments.

Building a Network of Reliable Professionals

Another important strategy for mitigating risk is to build a network of reliable professionals, such as attorneys, real estate agents, and contractors. These professionals can provide valuable advice and support, helping to ensure that assignments are successful and profitable.

Staying Prepared for Potential Issues

Despite careful planning and diligence, issues may arise during the assignment process. Investors can prepare for these potential issues by having contingency plans in place, such as backup buyers or alternative funding sources. It is also important to maintain clear and open communication with all parties involved in the transaction.

By taking these proactive measures, investors can mitigate the risks and challenges associated with real estate assignment fees, while maximizing their chances for success.

Real estate assignment fees can be a profitable investment strategy for those who are willing to put in the effort. With a solid understanding of real estate transactions, investing, and contracts, investors can earn significant profit by wholesaling properties and earning assignment fees.

Remember to conduct thorough due diligence, build a network of reliable professionals, and stay updated on local regulations to mitigate the risks associated with real estate assignment fees. By maximizing profit through effective real estate contracts and managing potential challenges, investors can create a successful real estate investing business.

If you’re interested in exploring this investment strategy further, don’t hesitate to take action and start your journey towards earning profit through real estate assignment fees.

Q: What is a real estate assignment fee?

A: A real estate assignment fee is a fee that an investor earns by assigning their rights to purchase a property to another buyer . It is a common practice in wholesaling real estate, where investors enter into contracts to buy properties and then assign those contracts to another buyer for a fee.

Q: How does a real estate assignment fee work?

A: To earn a real estate assignment fee, an investor typically finds a motivated seller, negotiates a contract to purchase the property, and then finds a buyer who is willing to pay a higher price. The investor assigns their contract to the buyer , who then proceeds with the purchase. The difference between the purchase price in the original contract and the price paid by the buyer becomes the assignment fee for the investor.

Q: What are the advantages of real estate assignment fees?

A: Real estate assignment fees offer several advantages for investors. They provide an opportunity to earn profit without the need for substantial capital or extensive renovations. Real estate assignment fees also allow investors to leverage their negotiation skills and market knowledge to secure favorable deals. Additionally, this strategy enables investors to participate in multiple transactions and diversify their investment portfolio.

Q: What are the potential risks associated with real estate assignment fees?

A: While real estate assignment fees can be lucrative, they do come with potential risks. One risk is the possibility of not finding a buyer for the assigned contract within the agreed-upon timeframe, which could result in the investor being responsible for purchasing the property themselves. Another risk is encountering legal complexities or disputes related to contract assignments. It is crucial for investors to conduct proper due diligence, consult legal professionals, and have a thorough understanding of local regulations to mitigate these risks.

Q: How can I earn profit from real estate assignment fees?

A: To earn profit from real estate assignment fees, you need to follow a few key steps. These include finding motivated sellers who are open to selling their properties at a discounted price, analyzing potential deals to ensure they are profitable, negotiating contracts that allow for assignment, and marketing the assignment opportunity to potential buyers. It is essential to conduct thorough due diligence, build a network of reliable professionals, and document the transaction properly to maximize your profit.

Q: What should I include in a real estate contract to maximize profit from assignment fees?

A: When drafting a real estate contract for assignment purposes, there are key clauses and provisions that can help maximize your profit. These may include provisions that protect your right to assign the contract, specify the assignment fee, outline the timeline for finding a buyer , and address potential contingencies. It is recommended to seek legal advice and negotiate favorable terms and conditions to protect your interests and ensure a smooth transaction.

Q: How can I mitigate risks and challenges associated with real estate assignment fees?

A: Mitigating risks and challenges in real estate assignment fees requires careful planning and research. Conduct thorough market research to understand the local market dynamics and demand for assigned contracts. Build a network of reliable professionals, such as real estate agents, attorneys, and contractors, who can provide guidance and support. Stay updated on local regulations to ensure compliance and manage any potential issues that may arise during the assignment process.

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Lesson 5 – Contract Assignment 101: What it Takes to Wholesale a Property

Considering real estate investing but not sure, exactly, where to start? Dig into WHOLESALING. Done right, wholesaling is the simplest and fastest way to generate four- and five-figure paydays without laying down a dime. As a wholesaler, your role is simple:

Find the deal
Run the numbers and assess the deal
Get the deal under contract
Assign that contract to a cash buyer—usually a rehabber or fellow investor

Because you never personally close on the property, you won’t have to worry about a down payment or about securing funding for the deal. All you’ll have to do is lock it down for a good price—a price that still leaves a healthy profit margin for the “real” buyer.

Understanding Contract Assignments

That last piece—assigning the contract to a rehabber, real estate investor or retail buyer—is often misunderstood and, often, what keeps high-potential wholesalers out of the game. The good news, though? Once you understand the assignment process, it’s very simple and straightforward. As you build your business and your cash buyer lead list, the assignment process gets even easier. After a while, you’ll know exactly who you can assign this deal or that deal to and, with a quick email or two, can assign virtually any property you get under contract.

Sounds pretty good, doesn’t it?

But, first, back to the real question: what IS a contract assignment? It’s actually exactly what it sounds like. You get a property under contract and you ASSIGN that contract to the rehabber or other end buyer. For your powerhouse negotiation skills and ability to lock down a great deal, you get an assignment feed—think of it as a finder’s fee. That fee is baked into the price you present the buyer.

So let’s back up and use a real-world example—this is a recent wholesale deal we got into contract:

ARV (After Repair Value): $225,000
Estimated Repairs: $28,950
Contract Price: $110,800

We got this particular property under contract for $110,800, estimating the ARV at $225,000 based on the comps and $28,950 in repairs. We then flipped the contract to a rehabber for $120,050, including our $8,550 assignment fee. For us, it was a great deal—we made $8,550 with just about two hours worth of work. And the rehabber was more than happy to pay. Even paying a five-figure assignment fee left him with a 30% profit margin—less his 5% to 10% closing costs, he’s still looking at a solid profit once the work is done.

What Assigning MEANS—and What it Doesn’t

The good thing about assignments is that they don’t require much. Once you have a cash buyer on the hook, you simply assign the contract to them as is. In other words, they’re assuming everything you and the seller agreed to—the price, the terms, the contingencies, the close dates and anything else layered into your contract. They’re also accepting your assignment fee, which you dictate.

For some wholesalers, that’s the challenge. They might have good cash buyers standing by, but the terms they’ve negotiated with the seller don’t sync with the buyer’s expectations. Maybe the repairs are more extensive than the wholesalers budgeted for or the deal they negotiated doesn’t leave enough wiggle room for the end buyer. Whatever the situation is, it ultimately leaves the wholesaler holding the contract—and that can be a real challenge.

However, if you’re smart, strategic and think like a rehabber or cash buyer, you WILL find someone to assign your contract to. In virtually every market, there are real estate investors hunting for great deals. If you have one—or, better yet, lots —you’ll be in high demand.

The Simple Steps to Assigning a Contract

With all of that info under your belt, the next step is to wholesale a property— and that means assigning a contract. Here’s what the process looks like: STEP 1: FIND A SELLER

As always, focus on MOTIVATED sellers. These sellers have a property and want—or, often, NEED—to sell. This puts you in a good position to lock down a great deal with very few contingencies. If you can show a motivated seller the value you bring to the table—you’ll buy as-is, you’ll paying closing costs, you’ll move FAST—then, often, they’re more than willing to play ball.

Motivated sellers are out there—you just need to find them. Work with your real estate agent, scour Craigslist, post bandit signs and NETWORK, all with an eye on finding motivated sellers. When you find them, ACT FAST. If you’ve engaged them, chances are other wholesalers and rehabbers aren’t far behind.

STEP 2: GET IT UNDER CONTRACT

This is the most important part. When you find a good deal—confirmed by your comps and your calculations, of course— get into contract. And do it NOW.

There are plenty of simple contract templates floating around online. Download one and bring it with you for your walk-throughs. Once you’ve agreed on a price, SIGN then start searching for a cash buyer. One final note: be sure your agreement has a clear “and/or assigns” mention in it. This will give you the power to assign that contract to a new buyer before close.

STEP 3: SUBMIT TO THE TITLE COMPANY

Depending on your market, a closing attorney or title company will conduct a title search at this stage. This search will confirm this person CAN sell the property, and that there are no outstanding liens tied to it. You want a CLEAR title before moving forward. If there are issues, consult with your attorney—it may not be worth pushing ahead.

STEP 4: FIND A CASH BUYER

Again, you’ll need to find a cash buyer to jump in and take over the contract. This is the person you’re assigning the contract to and the person whose name you’ll include on the “and/or assigns” line of the agreement.

Like motivated sellers, cash buyers are EVERYWHERE. Your real estate agent, closing attorney, title company and other industry contacts will, no doubt, know plenty of rehabbers and investors looking for deals. You can also strike out on your own and put up bandit signs, check Craigslist and scope out local events like REIA meetings and industry workshops. Here, you’ll find fellow real estate investors looking for a deal—and looking for a great wholesaler like you.

As you meet more and more buyers, be sure to get a sense of what they’re looking for and what they invest in. In the future, you’ll be able to better connect the dots and simply reach out to a targeted buyer when you have a relevant deal on the books.

In this case, once you have a cash buyer, assign the contract. We often tell the seller that we’re working with an “associate” to close the deal and that they, technically, will be buying the property. It’s important to be transparent but also to assure the seller that nothing has changed. They’re still getting the cash you agreed to with the same terms and closing schedule.

STEP 5: CLOSE—AND GET PAID!

At close, you, the seller and the end buyer will sign on the line and close the deal. Typically, the wholesaler gets their assignment fee at close.

In most cases, you’ll simply assign the contract and the end buyer will deal with the nitty-gritty of close, but there are instances where “double closes” are required. In these, you WILL close on the deal and then flip the property to the end buyer. Be careful with these double closes. Some may allow the end buyer to fund the deal. Others, though, require a gap between the closings which could leave you, the wholesaler, on the hook for the full payment amount. Granted, there are “gap loans” that cover these kinds of transactions for a short period of time—usually 24 to 48 hours. But if you don’t have to go down that road, don’t. It’s easier, cleaner and less stressful.

Ultimately, though, that’s it. That’s what it takes to assign a contract and flip a wholesale deal. Sounds pretty simple, right? Exactly.

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What Is an Assignment Fee?

by Denise Sullivan

Published on 26 Sep 2017

If you assign cash, property or other assets to another party, an assignment fee may be required to complete the transaction. The assignment fee compensates the assignor for the rights he is giving up in the agreement. The amount of the fee will vary based on the type and value of the property involved in the agreement. Before executing an assignment agreement, check any previous contracts related to the assigned property. Some contracts include a nonassignment clause that automatically invalidates the entire contract if violated.

Requirements for a Legally Binding Assignment

Assignments do not have to be in writing to be legally binding. Verbal assignment agreements also are valid, but can be more difficult to prove if there is a dispute. In the absence of a written agreement, the assignor will be held liable for any damages resulting from the assignment. Assignment agreements that are set to take place in the future are not legally binding.

Negotiating the Assignment Fee

Some states have laws limiting the amount of the assignment fee that may be charged per transaction. As long as the legal requirements are met, the parties to the assignment are free to negotiate the fee amongst themselves. Once the fee has been set, include the amount and terms of payment in the assignment agreement to prevent future disputes.

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How to Calculate the Maximum Allowable Offer (MAO) for Real Estate Wholesalers

I will be blunt here because I can't think of any other way to say this... Just because you put a house under contract doesn't make it a wholesale real estate deal.

It happens all the time to people new to the business. They start looking at houses listed on Craigslist and Zillow, or they may have spotted a house driving down the street and set an appointment to see it. They have a good rapport with the seller and ask what the price is, the seller responds with their number, and the wholesaler says I'LL TAKE IT!

Then three weeks later, when there are only days left until the closing is supposed to take place and the wholesaler has a pit in their stomach because they have no buyer lined up, they can't figure out what went wrong... Now they have to call the seller and tell them that they need more time, the deal is falling through, or they need a price reduction, and chances are the seller will be VERY UNHAPPY.

Now that I've painted that ugly picture, I'll tell you how to significantly lower the chance of this happening by showing you how to calculate a wholesale offer on the property, starting with the most common method... The 70% Rule.

The 70% Rule

It's straightforward, as a professional real estate wholesaler, you need to develop incredible negotiating skills to get houses under contract substantially below market value. The 70% rule will help you achieve this by making you aware of the maximum allowable offer you can make on any property. Remember, I just said "Maximum Allowable Offer," and that doesn't mean you shouldn't try to contract it for less.

I remember when I first started learning about the wholesaling business, and someone said if you're not scared to tell the seller your offer, then it's too high... In other words, when making your offer, you need to start low so you have room to negotiate and still get the house for a wholesale price.

Using the 70% rule is relatively straightforward: take your After Repair Value on the property, subtract 30%, and then subtract the estimated repairs and your assignment fee. Let's do a quick example below to show you how this all looks on paper...

First, take the value of the house and calculate what 70% would be...

After Repair Value $150,000 X .70 = $105,000

Then take the 70% number and subtract your rehab costs...

$105,000 - $18,000 Rehab = $87,000

Then you take the after-rehab number and subtract the amount you want for an assignment fee...

$87,000 - $4,000 = $83,000

And that's the secret sauce on how to calculate the maximum allowable offer, nothing else to it.

(These numbers are for example only, you need to calculate the ARV, Rehab Costs & Assignment Fee on each property individually)

The "All In Number"

Everyone always talks about the 70% rule, but there is another way that I determine my maximum allowable offer on many properties. Some of my investors have an "All In" number they use on any property they purchase for rental properties and fix & flip deals, and it looks something like this...

Let's say one of my buyers has an "All In" number of $45,000 on any properties he buys; that means the purchase price + repairs need to be equal to or less than $45,000. So If I'm looking at a property that needs $10,000 worth of work, and I want to make at least $2,500 for an assignment fee, my offer can't exceed $32,500.

Knowing that I'll often go in with my first offer around the mid-'20s and negotiate a deal on the property, hopefully, lower than the "All In" number.

$45,000 Investors All In Number

- $10,000 Rehab Estimate

- $2,500 Assignment Fee

= $32,500 Maximum Allowable Offer

(Yes, sadly, in my primary market, some home values are this low and sometimes even lower)

This is an excellent example of why knowing your investor's buying criteria is essential. Armed with the knowledge of what they pay for houses, you can look at properties, ballpark a rehab price, and come up with a number on the spot without having to go back to your desk and calculate an After Repair Value.

That's it, short and sweet...

Now you know how to determine what you should offer on a wholesale real estate deal.

Importance of knowing how to calculate the MAO
Investor's ALL-IN Number

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estate wholesaling

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Wholesaling made simple a comprehensive guide to assigning contracts.

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REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

For several years, my real estate investing business followed a simple model that worked extremely well about 80% of the time.

I would find boatloads of motivated sellers , make deeply discounted offers to them, and when I found a seller willing to accept, I could buy their property outright and pay cash for it.

Once I owned a property, I could list it for sale (usually within 24 hours) and flip it for a MUCH higher price than I paid.

In a lot of cases, the process worked perfectly . Going through these motions, I could squeeze a lot of free equity out of each property. In the best-case scenario, I could move through the entire process in just a few weeks.

The Problem With a Cash Business

Even though this business model was pretty effective, I found it had some limitations.

It was surprisingly easy for me to find cheap properties and buy them free and clear with the cash I had, but the real challenge was getting these properties sold quickly .

After my first dozen deals, I learned that some properties were MUCH harder to sell than others, and I didn't always have the foresight to know which properties would take significantly longer to sell .

This was a big problem for two reasons:

1. I had a limited supply of cash to work with.

Even if I knew how to get every property on earth for 20% of market value, I didn't have enough money to buy them all . At some point, I had to be smart about which properties to pour my limited resources into.

2. It was hard to know when a property would sell.

One of the unpredictable elements of land investing is that some properties will sell quickly, and some will sit on the market for months on end, and the situation usually ISN'T obvious until you list the property for sale and see how the market responds.

Of course, a few indications can give off some warning signs, and some markets are known for selling faster than others, but when you're working in an unfamiliar territory (like I was most of the time), this can be a tough nut to crack.

RELATED: How to Find the Perfect Market for Flipping Vacant Land

Once I started pushing up against the limitations of my finite supply of cash AND my inability to predict the future, I started thinking to myself,

“There MUST be a better way to monetize these deals without tying up my cash!”

I kept seeing deal after deal hit my desk – and they were great deals – but they just weren't great enough to justify investing my own money .

Buying a property for 60% of market value is great for the average investor, but if I couldn't get a property for a next-to-nothing price tag, it just wasn't “risk-free” enough to tie up my limited funds!

Wholesaling Through Assignments

Around this time, I started exploring how to assign contracts (i.e. – wholesaling, arbitrage, etc.).

Rather than signing a purchase agreement and buying each property outright, I had heard other real estate investors talking about this ingenious way of signing a purchase agreement and selling that contract to another investor so that THEY could close on the deal – with me just acting as a middleman and collecting an assignment fee in the process.

In short, I would effectively be selling a piece of paper because that paper (i.e. – the purchase agreement) represented a TON of valuable real estate equity that would go to whoever closed on the deal and took ownership of the property.

In some ways, assigning a contract wasn't all that different from acting as a real estate agent because I would be wearing many of the same hats and doing some of the same things an agent would do for their client.

The difference was that I had a signed purchase agreement between myself and the seller, giving me an equitable interest in the property. I wasn't selling a property on behalf of someone else, I was selling a contract that entitled me to close on the deal and could be assigned to any other investor who wanted to jump into my shoes.

This contract was like a paper asset I could sell to a third party and get paid an “assignment fee” without owning the property myself.

Legal Disclaimer: In some states, this process of assigning a contract is considered synonymous with working as a real estate agent. Even though it's technically a different type of agreement, some jurisdictions don't distinguish between the two. If you decide to pursue this strategy, check with the laws in your area to make sure you aren't required to have a real estate license to complete this process. If a license is required, you don't want to attempt this without your real estate license.

This presented a few obvious benefits:

I didn't need to put up any of my own cash.
I didn't need to shoulder any liability as a property owner.
I didn't need to stress out if I couldn't find a buyer immediately (because once the purchase agreement expired, I was free to walk away from the deal).

As I became increasingly strapped for cash (all while the opportunities continued to pour in faster than I could handle), this whole “Assignment” business sounded like the PERFECT solution to my problem.

The Mechanics of Assigning a Contract

Now, the idea of assigning contracts (aka – “wholesaling”) always sounds great on paper – but let me tell you, I struggled for YEARS to understand the mechanics of how this process really worked.

I understood the “20,000-foot-high” concept of assignments, but when it came down to figuring out the real, nitty-gritty details (for example)…

What kind of Purchase Agreement was I supposed to use?
What kind of Assignment Agreement needed to be signed?
How was I supposed to get the deal closed?
Where could I find the right closing agent to work with me?
When would I get paid in the process?
What if the buyer went behind my back and talked to the seller?
What if I couldn't find a buyer before the original contract expired?

…I had heard so many different opinions from so many different people about how the process was supposed to work. All the advice I saw on the various real estate forums and blogs would constantly contradict each other, making it even harder for me to nail down the “correct” way to move through this process.

Since I struggled with it for a long time, I will save you a ton of hassle and confusion by laying it all out below.

The 4 Stages of Assigning Contracts

Assigning a contract is (in theory) a pretty simple concept.

When an investor (we'll call this the ‘middleman') finds a great real estate deal and signs a Purchase Agreement with the Seller, they have the option ( if their Purchase Agreement contains the right language ) to “assign” (aka – sell) this piece of paper to an outside investor.

When the wholesaler/middleman assigns the Purchase Agreement to the outside investor, they can do it with a simple, 1-page document called an Assignment Agreement . This document legally transfers the original buyer's rights (as written in the original Purchase Agreement) to the new buyer. It also releases the original buyer (i.e. – the “Assignor”) from any liability or obligation and substitutes the new buyer (“Assignee”) in their place.

Essentially, the outside investor is jumping into the shoes of the wholesaler and can purchase the property directly from the Seller, at the same price, at the same terms, with the same deadlines, exactly as the terms were stated in the original Purchase Agreement. The only difference is that it now applies to the new buyer (Assignee) instead of the original buyer (Assignor).

I always find that visual aids are helpful, so here's my best attempt at showing you another representation of how the process works:

Stage 1: Contract Signed between Wholesaler and Seller

Stage 2: Wholesaler Finds an Outside Investor to Buy Under the Terms of the Original Purchase Agreement

Stage 3: Wholesaler Assigns the Contract to the Outside Investor and Gets Paid a Deposit

Stage 4: Seller, Wholesaler, and Outside Investor Close. The Wholesaler is Paid the Balance of the Assignment Fee at Closing.

As you can see, the Wholesaler (Original Buyer or Assignor) is acting as the “middleman” (or middlewoman, in this case), getting paid in the form of an Assignment Fee from the Outside Investor (Assignee).

In the process I follow (which I'm about to explain further), a portion of this payment is made when the Assignment Agreement is signed by both parties (Stage 3 – above), and the remainder is paid when the deal is closed, and the property officially changes hands (Stage 4 – above).

How the Process Works

Over the years, I have heard numerous explanations (all of which were different) about how the wholesaling process is supposed to work.

Most of these explanations only got me 80% there . They never closed the loop on how to get through the closing process, abide by the law, get paid, AND not be a scumbag .

The process outlined below seems to check all of these boxes and get the job done.

Finding the Motivated Seller

I've already thoroughly explained these techniques in several articles throughout this blog. If you aren't sure where to start, you can reference these posts below:

How I Find Motivated Sellers – Step 1 , Step 2 , Step 3
How to Create a Buying Website
Million Dollar Postcard Templates That Work
How Much Should You Offer For That Property?
How To Write Offers That Get Accepted (With 3 Simple Pages)
Everything You Need To Know About Getting Your County's Delinquent Tax List
The Ultimate Negotiation Technique That Nobody Talks About
How to Avoid the Guilt Trip When Sending Low Offers
Understanding the Motivated Seller
Getting People To Say Yes

Explain Your Intent & Get the Contract Signed (IMPORTANT)

When you start making offers to motivated sellers, your offer must be accompanied by a thorough explanation of what you intend to do .

Assigning a contract is very different than buying a property outright with a traditional closing. The Seller needs to know what you plan to do (because by itself, your Purchase Agreement doesn't imply your intent to assign the contract, it just says that you CAN assign it… and that's not enough guidance for the seller).

If you don't explain your intentions to the Seller, any rational person will get confused (and probably upset) when they see what happens.

It doesn't need to be this way. All it takes is a clear explanation from you so they understand what to expect.

There are a few key points your Seller needs to be aware of:

You're not planning to buy their property yourself.
You plan to sell the contract to someone else, and then THEY will buy the property from the Seller.
You will communicate with the Seller throughout the process (they won't ever be left in the dark), so they know what's happening.
If you can't find an outside buyer for the property, the contract will expire, and the transaction won't happen .

Given that a wholesale transaction involves a couple of additional steps, it might be tempting to over-complicate this explanation as you're trying to explain things to the Seller. I had this problem when I started wholesaling with assignments.

Avoid Information Overload

It's important to explain all the basics to the seller, but you don't want to bombard them with the information they don't need to know.

Nobody likes to feel confused. Rather than being made to feel stupid, most confused people will just say “No” to save their pride ( even if this arrangement is in their best interests ).

When I explain the process to a potential Seller, it looks something like this:

“Thanks for contacting us! A fter reviewing the details of your property, we would be interested in marketing your property to our nationwide network of real estate investors. For the next 180 days, we would be willing to invest our time and resources to find a cash buyer at no cost to you. If we are able to find a buyer, we will coordinate with you and the buyer to schedule a closing and ensure you are paid the full amount listed in this purchase agreement. You will not incur any costs in this process . We will be compensated by the buyer (which we will find) and when the transaction is closed, you will receive the full sale price stated in the attached purchase agreement. In order to start the process, we will need a signed copy of the attached purchase agreement. In this contract, our company will be listed as the Buyer and our intent will be to assign this contract to another cash buyer in our network.”

To assign your purchase agreement (as explained above), you need to ensure your contract contains an “Assignment” clause, allowing you the right to assign the contract to a third party. Without this clause, you will be the only one allowed to close on the purchase, and the rest of this process won't work.

There are many different ways to state this in your contract, but if you need an example, this is what my Assignment clause looks like:

ASSIGNMENT : Buyer has an unqualified right to assign its rights under this contract to a third party. No notice to the Seller of an assignment is necessary. Such an assignment will create a novation and release the original Buyer from this contract and substitute the assignee in its place.

Reminder: Whatever documentation or language you use, you'll want to make sure you run it by an attorney in your area to ensure it's valid and abides by your local, state, and federal laws.

Due Diligence & Property Prospectus Report

Since you're not the actual end-buyer, you don't need to learn every intricate detail about the property you have under contract.

However, you need to know the basic, relevant details about it because you're going to market this thing to the public, to your buyers list (if you have one), and to anyone else who may be a potential cash buyer.

So how much do you need to know?

As a general rule, I try to uncover any potential disasters that would kill a deal if I were buying it outright ( i.e. – what kinds of things would make ME turn and run the other direction? ). I also try to gather enough information to complete a property prospectus report .

What is a property prospectus report? Mine looks something like this…

It's just a single page that lists all of the basic details about the property:

Listing Price
Property Address
Parcel Number
Legal Description
Property Size
Terrain & Surroundings
Road & Utility Access
On-Site Photo(s)
Breakdown of Costs
Comparable Listings (to give a basis for my asking price)

…and that's pretty much it. Here's a video overview of how I fill it out:

Also see: One Weird Trick to Find the Size, Shape, Location & Dimensions of Your Property and The Fastest Way to Research Any Property in the United States

The goal of this document isn't to inform my cash buyers of every last detail about the property. The point is to give them just enough information to make it obvious that the deal has great potential and huge value (if it's a good deal, this shouldn't be difficult).

That being said, if I do find any big problems in my due diligence process, I'll either walk away from the deal (if I don't think I'll be able to sell it for a profit) or at the very least, I'll be sure to disclose any “Other Issues” that I'm aware of at the bottom of the report.

(Note: If you want a copy of my Prospectus Report template, you can get it at the bottom of this blog post.)

Find the Buyer, Assign the Contract, Collect the Deposit

When you start getting calls and emails from interested buyers, you'll likely find that there are A LOT of tire-kickers out there. People will get your hopes up, only to go AWOL when it's time to sign on the dotted line.

People are extremely flakey , so if someone wants you to take their offer seriously, they'll have to agree to it in writing AND put their money where their mouth is.

When I find an interested buyer, this is how I would communicate the next steps to them:

“ Thanks for your interest in this property! If you'd like to move forward with this purchase, I'll need two things from you: 1. Please sign the attached Assignment Agreement and fax, email, or text it back by 5:00pm today . 2. Please send us a $______ deposit by 5:00pm today via wire transfer. Note: This property will not be reserved until both items are received. Once both items are received, the property will be reserved in your name and we will contact <<Title Company Name & Location>> to begin the closing process. They will contact you in the next few days and will send you the closing documents and preliminary title report for your review and approval. Our tentative goal is to close this transaction by <<30 days later>>. This means you will need to submit your funds and all the required paperwork to <<Title Company Name>> by (or before) that time. “

When it comes to the earnest deposit , when the total purchase price is $10K – $30K, I'll usually ask for approximately 10% of the total purchase price, and I round it to the nearest $1,000. If the sale price is less than $10K, then $500 is usually sufficient. The idea is just to collect something to show that the buyer is serious and not blowing smoke.

If you're closing with a title company or attorney, this money should be sent to your closing agent, who will disperse it appropriately when the deal closes (or if it falls apart). Your end buyer can either send the funds directly to your closing agent, or they can send the funds to you, and YOU can give it to your closing agent.

Unfortunately, all kinds of obstacles can get in the way of closing ( clouds on title , funding issues, inspection issues, you name it), so you don't want to get too excited about this money until the deal is closed.

Note Regarding the Assignment Agreement

You might find that some people (buyers, sellers, closing agents, etc.) tend to overthink this document simply because they don't have experience with assignments and aren't familiar with how they work.

As I explained above, this is a relatively simple document that takes your rights as the original “Buyer” of the property and transfers them to a third-party (i.e., the new person or entity that has the cash and desire to jump into your shoes and become the actual end buyer of the property).

This video offers a straightforward explanation if you ever encounter an individual who just doesn't get it.

Deliver Documentation to Title Company, Close, Get Paid

Once you have both the Assignment Agreement and the funds required for your deposit, you'll need to deliver the following documentation to your Closing Agent (i.e., Title Company or Closing Attorney):

A copy of the fully executed Purchase Agreement.
A copy of the fully executed Assignment Agreement.
The funds from the end buyer's earnest deposit.

This should be everything they need to prepare the necessary paperwork for all parties to sign and move forward with closing the transaction.

Given that this is a cash deal (with no mortgages or outside financing involved), this shouldn't be a complicated transaction for your closing agent to pull off. That said, I should warn you that not all closing agents are created equal .

When I started trying to assign contracts, I found that some title companies had no idea what they were doing. They acted like I was asking them to move heaven and earth or do something illegal. I found that MANY title companies were particularly incompetent with assigning contracts, which threw a huge wrench in my progress for a long time.

If you run into this dilemma, keep calling around to various title companies or closing attorneys in your area until you find someone who understands what you're talking about. Don't let their ignorance act as an obstacle to your business.

Advantages to Assigning Contracts

When I look back on all the properties I've listed and sold on my behalf, most sold in 6 months or less (assuming they were desirable, usable , priced right , and I was marketing them consistently ).

Whenever a property took longer than six months to sell, it was usually because of one or two issues:

My assumption about the property's market value was WAY off (and I didn't have the profit margin I thought I would).
Something was fundamentally wrong with the property (e.g., it didn't perc , it wasn't buildable, the location was terrible, etc.).

As you can imagine – neither of these issues is fun to realize, but whatever the case may have been, I found that when a property sat on the market for more than six months and the sale still hadn't occurred , something big needed to change .

This is one of the huge benefits of assigning a contract. By the time I realized I had made a pricing or due diligence mistake with one of my properties, it was clear that if I could do it all over again, I wouldn't have bought this property at the price I paid for it .

It would have been far better for me to get it under contract and then assign the purchase agreement (if I even could) rather than buy it outright.

As you can imagine, if there's ever something wrong with a property, this problem should stay in the seller's lap instead of mine.

Here are some issues that make me consider wholesaling through an assignment rather than buying a property outright:

When I'm not very confident about the property's true market value.
When there are potential problems with the property that I can't get resolved.
If I don't have the money to invest and buy the property outright.
The seller isn't willing to lower their asking price to my liking (but it's still a good deal, with enough profit margin to be a good deal for someone else).
The property isn't local, and I don't want to take on the liability of ownership.

It's important to remember that even when you have money to buy a property, it doesn't necessarily mean you should.

All kinds of menacing issues can come up with any property – and in some cases, these issues can become MAJOR obstacles to selling it.

For many investors, this uncertainty is more than enough reason to stick to wholesaling them with an assignment exclusively.

Drawbacks to Assigning Contracts

While there are a lot of benefits that can come with assigning contracts, there are a few drawbacks you should be aware of as well.

When you intend to assign a contract, you'll have to deal with a few limitations (which may or may not be a problem – depending on what you're trying to do). For example:

You won't be able to improve the property (because you don't own it, and it's not yours to improve).
You won't be able to offer seller financing (because you're not the owner, and it's not yours to finance).
You'll have a shorter window of time to finish the deal (because your contract won't last forever).
The closing process will require more attention to detail than the simplicity of a cash closing.
Your buyer MUST be able to pay all cash (because most mortgage lenders aren't willing to deal with the complexities of an assigned contract).

It's also worth noting that some states (like Ohio , for instance) have laws and statutes that essentially make it illegal to market a property you don't own in your name. It's considered the “brokering of real estate,” if you don't have a real estate license in that state, you could get fined and/or charged with a misdemeanor for working outside of this box.

Even in states where the legality of assigning contracts isn't an issue, it's still a good practice to make it abundantly clear in your listing that you are selling a CONTRACT to purchase the property, not the property itself .

For example, you could include a short paragraph in your listing that reads something like this…

“ This property is available via our Assignment Program. We have entered into a purchase contract with the current owner to buy the property for $________ (this price includes payment to the owner and all associated fees and estimated closing costs) and for an assignment fee of $_______, we will sell our rights in this contract to a third party. A reputable title company and/or attorney will be enlisted to handle the closing and transfer of title.”

With this kind of statement included in your listing, it should be clear to interested parties that you are not the current owner . You are simply selling a piece of paper that gives you (and, ultimately, your end buyer) the right to purchase the property for a certain price.

When you decide to buy a property outright and flip it (i.e., the old-fashioned way), there are a lot of freedoms you'll have that simply aren't available when you choose to assign the contract.

So, before you swear off buying properties outright, remember that every deal has different considerations you need to think about. Depending on your end goals, these issues may or may not make the property an ideal fit for wholesaling with an assignment.

It's An Ongoing Education

I'll be completely honest; I still don't consider myself an “expert” in wholesaling via assigning contracts because it isn't been my primary strategy.

On the same coin, I can say that I've been through enough wholesale assignment transactions to know that this process works .

Wholesaling is a great way to make money in real estate, but assigning contracts isn't my primary technique for handling most deals.

That being said, wholesaling is an extremely helpful sidearm at my disposal when I come across deals that don't fit perfectly inside the “cookie-cutter mold” that I like to see (and as you can probably imagine, this happens pretty frequently).

I think it's great for any real estate investor to be familiar and comfortable with this strategy because there are PLENTY of scenarios where assigning the contract is a much better fit than buying a property outright.

Want Access to My Wholesaling Toolbox?

As I mentioned earlier, I spent YEARS of my life trying to nail down the right process and documentation for wholesaling real estate. The ability to pull some huge profits out of properties I didn't even own was a major revelation, and it could be a big deal for you too.

If you want to try your hand at assigning contracts… I've got something I think will help:

A copy of my Assignment Agreement template
A copy of my Purchase Agreement (which is fully assignable)
A copy of my Property Prospectus Report template
A copy of my Wholesaling Checklist (to walk you through each step of the process)
Detailed Video Tutorials explaining how to use each document

Again, there's no “magic” to the documents I use. You can easily call up your local attorney, and I'm sure they'd be happy to charge you $600/hour to give you a similar set of documents and instructions.

Go ahead and call them… I'll wait.

It took me a long time and a lot of tedious conversations with various legal pros to fine-tune this product. These docs were designed to be both simple and user-friendly, all while including all of the pertinent details I needed to see in my wholesale deals.

My goal was to AVOID confusing Buyers, Sellers, and Closing Agents about how this process works and to give myself the freedom I needed to feel comfortable doing these types of transactions. Over time, I've found that these attributes went a long way in getting these deals done. If you’re serious about adding wholesaling to your growing repertoire of real estate investing strategies – the opportunity is sitting right in front of you.

When you consider how many more deals you'll be able to do, the risk you'll be able to avoid, and the amount of money you'll be able to make here (all while investing none of your cash), this information is easily worth 50x than the price tag I'm putting on it – I'm not exaggerating .

Note: When you sign up as an REtipster Email Subscriber , I’ll send you an instant $20 off “Discount Code” for this item, and if you enroll in the Land Investing Masterclass , you'll get access to this item for FREE. There's no pressure – I just want to make sure you're aware.

About the author

Seth Williams

Seth Williams is the Founder of REtipster.com - an online community that offers real-world guidance for real estate investors.

015: maggie found early success with house wholesaling – how did she do it, 098: how luis mastered assignments and double closings on land deals, 085: how the modern rules of house wholesaling have changed, 054: karl made six figures last year as a land investor assigning contracts. here’s how he did it…, discover the retipster club.

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Wholesaling Closing Methods – Assignments vs Double Closings

Cody sperber.

Both of these approaches can help you close a transaction and get paid, and both have advantages and disadvantages.

Look, as a newbie real estate investor or someone who is new to the wholesaling game, there are two proven methods that work for closing wholesale deals and you need to know how to use them.

Let’s jump in and learn about the different closing methods used for wholesale deals!

Wholesale Deals Closing Methods

The assignment method.

What It Is: In this method, you’ll simply “assign” your role in the distressed seller’s contract over to your cash buyer. Here’s the trick: because you’re a principal in the transaction, you do not need a Realtor’s license to wholesale properties this way, so you are allowed to charge an “assignment fee” (which is similar to the commission that a real estate agent would earn). And boom! Money in your pocket; deal is done.

Find a cash buyer.
Fill-out a one-page assignment form that “assigns” your rights in the original contract over to your cash buyer.
Collect your “assignment fee” when the deal closes.
This method is cheap , requiring only one set of closing costs (paid by your cash buyer).

Privacy goes out the window. Due to the requirement of the assignment contract, all players involved will see how much money you’re making on the deal . It can get a little dicey if you’re profiting a large amount. Why? Well, because you’re basically making bank for doing nothing and not taking any risk. I’d suggest you do what I do regarding this method… only use the Assignment method if you’re making $10,000 or less in profit.

The Double Close Method

What It Is: It’s really two transactions, commonly referred to as the “A-B & B-C” strategy. A is the distressed seller, B is you, and C is your cash buyer. In the A-B transaction, you buy the property from the distressed seller. In the secondary B-C transaction, you sell the property to your cash buyer. And now you know your ABCs!

Privacy remains intact. No one but you sees how much profit you’re bringing in from the deal. Again, I’d suggest you do what I do… always use this method when making more than $10,000 – or if the other parties involved seem to be super uncomfortable about it.
Since there are technically two transactions, you’ll have to work with two different sets of closing costs. Annoying, but this shouldn’t be a reason not to use this method.

What Do You Need For An Assignment Contract?

You simply need “and/or assignee” terminology in your contract. Generally, there are five terms that should be agreed to in the assignment contract:

Close of Escrow Date
Earnest Deposit
Inspection/Escape Clause
Closing Agent Named

I can’t stress enough how important it is to establish a solid working relationship with an investor-friendly title company that understands both the Assignment and Double Close methods.

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REAL DEAL: My Biggest Assignment Fee in 17 Years of Wholesaling Houses

Table of Contents

What are REAL DEALS by the MOB? Real deals are actual real estate transactions being conducted by Tracy Caywood. You can visit the posts to get updates as they progress. They won’t all have a happy ending, but you can see for the first time what REALLY happens in the business. This is real shit right here.

This could be my favorite post that I ever make to the REAL DEAL category of the MOB website.

It's kinda hard to get me excited these days about a wholesale deal. I mean after seeing 600 of them, they all sorta run together. But this one stands out in a category by itself.

Keep reading and you'll understand why.....

Where This Lead Came From : My Website (Organic Search) for "We Buy Houses Jacksonville

Why This Person Was Selling: Hoarding and deferred maintenance

After Repaired Value: $1.1 Million

Seller's Asking Price: $450,000

It was February 26, 2015.

So there I was, thinking it was an ordinary day in Starbucks in Freakville Beach. I was drinking my Iced Grande Salted Caramel Mocha. It's my favorite! I wish I could have one every day, but I can't take the calories. Well I can, but my waist can't. Makes me wanna scream.

Anyway, it was around 8:30 am. The lead came in through Zoho CRM. I happened to see it in my email inbox, and I saw a truly motivated seller who was willing to sell the house for 50% of market value. And this wasn't just any house. It was an oceanfront house in Ponte Vedra Beach, FL.

I jumped off my stool ( I was sitting at the barista bar that day) and called the seller. He willingly told me enough information to know that I needed to get this deal under contract today. There was urgency in his voice. Here was the situation:

He bought the house several years ago, and he lived there with his wife until they got divorced. Only the wife lives there now. There has never been any maintenance done to the property, and he wants to get her a new place to live. She's a hoarder. The house is full of "stuff" and you can hardly walk in there. He told me that he was well aware that the house was wroth over 1 million dollars, and he knew there was money to be made for an investor. He knew that he could never sell this house to the "public".

He was in town for only 1 day, which was that day, and said if I wanted to see it, I had to come TODAY between 2 and 3 pm. I quickly agreed and confirmed that I would be there.

As I was listening to him talk, I quickly checked out the comps using my hot comparable sales link from my CRM, and confirmed that the house was worth at least $950,000. This is a hot one!

I printed a contract, gave it to Dan, told him where to be at 2 pm, and told him to give the seller his asking price. and NOT to leave without it.

The contract was processed, and it was ready to start marketing it the next day. Dan and I are training our 21 year old son, who served 4 years in the U.S. Army, right out of high school. He's learning to work with the buyers first, since it's a bit less challenging than working with sellers. He's in charge of contacting people on our V.I.P. Buyers list, and letting them know when we have a new house for sale that meets their criteria.

It didn't take too many calls to know that this was going to go fast. People were making offers without even going to look at it in person (like just from our photos).

So Yeah, this is a photo of Derek when he signed the contract with his buyer.

Within 24 hours, Derek had the house sold for $550,000 with a $2500 Non Refundable Binder Deposit. He wanted an inspection contingency, but we don't typically allow that. So he agreed to put up the $2500 until he could get his (private) lender to look at the house. So yeah, that's a photo of Derek when he first got the contract signed with his buyer and the Non refundable EMD collected.

I got the text message from Dan. It was the signed contract from the seller (and his wife) for $450,000.00! VICTORY.

Here's a Few Photos of the House and the Inside

The weekend passed, with buyers chomping at the bit about this house. Monday rolled around, and Derek met the buyer and the buyer's (private) lender at the house.

They went through the house with a fine tooth comb.

They were there about 30 minutes.

Later that afternoon, Derek got the call from the buyer stating that the lender didn't agree to loan on this house. He thought that the repair cost was too high.

The deal went dead. The buyer forfeited his earnest money deposit. (We explained to him that he would lose his EMD if we tied the house up over the weekend). Derek started making calls to buyers again, letting them know that the contract fell through and it was available.

Within 48 hours we had a new contract signed from a cash buyer. One that we do business with all the time.

Because of the nature of this type of deal, and the "luxury home" category, he was unsure what the final value of the house would bring, so he didn't want to get in over his head on the purchase price. I felt pretty certain about the value of this house, so I wasn't budging off of $550,000 purchase price. Then, something magical happened.....

Together, between me and Dan and the buyer, we came up with some very creative terms that everyone was happy with.

The purchase price with the buyer is $525,000.00. There are a few stipulations, however.

If the final sales price of the house is greater than $950,000 then the buyer will pay us an additional $30,000 within 48 hours after they close with their retail buyer.

If the final sales price of the house is greater than $1,000,000, then the Buyer will pay us an additional $50,000 within 48 hours after they close with their retail buyer. USUALLY, we have a general rule of thumb if we're making an assignment fee of $15,000 or more, that we'll do a double closing (2 HUDS). But I'm overcoming that "fear". I'm realizing a few things:

Sellers don't stalk the buyers side of the HUD (and this is where the assignment fee is shown).
If the seller is motivated, and you've created a win win situation, then it doesn't matter how much money you make.

Of course, there are going to be those special circumstances where you just feel like you don't want either the buyer or seller knowing how much money you're making on the deal. In that case, do the double. For this closing, I made the decision to put the $75,000 assignment fee on the HUD and do 1 closing. I had no worries whatsoever that either the buyer or the seller would have a problem with this.

I was right.

The transaction closed without a hitch and we brought home a check for $75,000.00 There's also a possibility that we might have $30,000 - $50,000 additional check coming in the next few months. I feel pretty certain that the house will sell for at LEAST $950,000.00, especially with the plans that this buyer has for this property. Do you know why this is the best story of my entire career? Because this is the biggest check/assignment fee that we've ever made on a house. I'm pretty excited about it.

Deals like this don't come along every day, but since this I've added a new marketing campaign / targeting to my bag of tricks.

I know everyone likes Proof, so Here's the copy of the check and the HUD showing the matching assignment fee. YIPEE!!

REAL DEAL: Tales from the Crypt

Date of Initial Contact by the Seller: September 5, 2013

Where This Lead Came From : Probate Mailing

What is the Seller's Situation: The screenshot says it ALL

Action Plan: It was about 9:00 pm when I got this lead, so I sent the seller an email letting him know I would call him at 9 am. in the morning. And that's exactly what I did. I called him at Sept 6, 2013 at 9:00 am Sharp. He immediately went into the story. So here's the rundown. His brother died in the bathtub (with water in it) and was in the house for a month (in the water) before anyone found him. His brother was also a hoarder. We agreed to meet at the house at 10:30 am on Saturday, Sept 7, 2013 to take a look. He said that he found a DOUBLE FILTER mask that will keep the smell from gagging us, so he'll bring us one! I can't wait! This is an awesome story for REAL DEALS whether I end up getting the deal or not. I'm going to take photos and see if I get an ORBS!!!

Saturday, Set 7 update (after seeing the house): I arrived at the house at 10:30 am and the seller was sitting in the front yard waiting for me. He warned me that the smell started at the threshold of the garage. So I avoided that area for as long as I could. If a breeze blew, I could catch a stench of death. it was pretty damn creepy. He walked me around the perimeter of the house, pointing out every detail of repair that the house needed. Then he offered me the mask, and we went inside. Remarkably, the mask didn't allow any smell of death to seep in. He gave me a tip that if I started to smell anything, to pinch the top of the mask where my nose is, and that would keep the smell out. He kept referring everything inside as "biohazard". To sum up the repairs, the house needs one of everything. Not only has the smell of death seeped into the carpet, walls, and counter-tops, but there's also deferred maintenance. There's a slab leak, it needs a new roof, needs a new kitchen....just imagine a full rehab on a 1750 SF house.

He revealed that there's a HELOC loan on the house for $135,000.00 and that him and his siblings prefer to sell the house to an investor to make a "coin", and move on from this problem. They have no interest in rehabbing the house themselves. I told him that I would get him an offer in writing today, and send it to him by email.

Offer Made to the Seller: After researching the comps in detail, I've determined that the ARV on this house is about $205,000.00. The rehab is pretty extensive. due to the biohazard material, and to rid the house of any odor of decomposition, it needs one of everything. This smell has seeped into the walls and anything porous. So I have the estimated repairs at $40,000.00. My offer to the seller right now is $95,000.00. I made the offer knowing that he owes $135k on a HELOC loan. In this event, it would be a short sale. He made some comments that maybe some other investors would see things differently than I did and would be able to get repairs done for less than me. So he's definitely shopping this around. And with all of the newbs coming into the business right now, there's a good chance that I'll get outbid on this one because of the location (Jax Beach).

I'm going to follow up with the seller on this, but odds aren't looking in my favor. He wants to make some money on this house when he sells it, which I cant see him doing - no matter which exit strategy he takes. The probate isn't quite complete yet, so he's not in a "hurry" to make a decision. Time and circumstances will change everything with this seller. FOLLOW Up, Follow Up, Follow up. An investor is his ONLY option, in my opinion.

Response from Seller: I received a reply to my offer. It's no deal. They don't all work out, even in situations like this. I don't blame the seller for not wanting to do a short sale. There's really nothing in it for him. See photo of email below:

Lesson from the Real Deal: Every seller and every transaction is a unique experience. Embrace each one.

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REAL DEAL: How to Wholesale a Meth Lab

Here's a photo of the Meth Lab Beauty: (not so bad looking on the outside). I never did get a chance to see the inside of this property, so I have no idea how it looks on the inside. I don't think the buyer saw the inside, either! LOL

Where This Lead Came From: My Website ! I Love website leads. They don't cost me anything, and they're usually HIGHLY qualified. Some of my highest profit deals are made from the website. This

I wanted to share this story with you, not because it's the biggest of checks, but because it's the first time I've ever flipped a meth lab. It was quite interesting to learn the story of the meth lab, and more interesting to learn that I could sell it. So hell yeah to METH LABS!! Bring on another one.

Here's the check from the closing:

REAL DEAL: Down to the Very Last Minute

Date of Initial Contact by the Seller: July 6, 2013

Where This Lead Came From:

This seller came from a QUIT CLAIM DEED Postcard Mailing.

What was the Seller’s Situation:

His mother signed over a quit claim deed to him, as she was tired of being a landlord. Him and his sister (they've agreed to split the money) aren't interested in keeping the house. The house is currently rented for $350 by a tenant who has been there for 3 years. The tenant pays the rent on time and keeps reasonable care of the house. THe house hasn't been updated in quite some time, but there is nothing that needs immediate attention. The seller is a REALTOR. (Not even kidding)

The house is located in a SOMEWHAT ghetto neighborhood, but it's not in one of those zip codes that make me cringe. The area does stink a bit since there is a Glidden paint factory nearby. Kinda smells like fart. I think the neighborhood residents are used to the smell.

Initial Offer: July 6, 2013

I didn’t visit the property in person. Instead, I looked on Google Maps to see what the house looked like. I called him on the phone and told him that I would be in the range of $6,000 - $10,000.00 to buy the house for cash. He agreed to $6,000 right away, and I sent him the contract via HelloSign .

Accepted Offer: July 9, 2013

It took him a few days, but he finally signed the contract on July 9, 2013.

Marketing the Property:

We ran into some issues right out of the gate. The seller didn't want the tenants"bothered" by showings, which was one of the reasons he sold it for quick cash instead of listing the property on the MLS himself. So it was a bit challenging showing the house with a tenant in there and keeping the wish of the seller. We did run some ads on Craigslist and put out some bandit signs, but no bites. So Dan listed the house on eBay - on a 7 day auction. He received numerous inquiries, 1200 Page views and 120+ watchers. But in the end, not a single bid.

At this point, I'm a little surprised because this is literally a smoking hot deal. Our asking price was $9,900 for a house that was rented for $350!! How can you go wrong there? Uhh I don't know. It's nearing our closing date, and Dan or I just can't let this one go. It's just too good of a deal.

I made an offer to a MOBSTER who I knew was watching the eBay auction, and he agreed to go 50/50 on the deal with us. Our plan was to collect the rent until the house sells for $12k - $15k. (that's what the 2/1 houses are going for in this area). We were to buy the house in a Land Trust, with each of our corps a 50% partner. Then, something came up with him, and he told me he was unable to move forward with the deal.

Renegotiations: August 14, 2013 (The Power of Leverage)

I called the seller and let him know that we weren't going to be able to close on the house at the current terms, but that I had another offer that might work for him. I presented an owner financing deal with the following terms: $6,000 Purchase Price (same as before). I will give him $2,000 as a Down payment, and the balance to be paid over the next 18 months. My monthly payment will be $222.18 (I offered ZERO interest). I told him that we could close whenever he's ready. The rents, of course, will cover the payment to the seller, and leave us with some positive cash flow. After 18 months, the entire rents will be positive cash flow and we'll own the house free and clear.

The seller didn't give me any objections. He told me to write a new contract and email it to him. He would "present it" (he's a Realtor, remember) to his sister, and let her know what's going on. He said that they were using the cash to pay for some pre-paid funeral expenses for the mom.

New Contract sent to seller: August 15, 2013 at 8:32 a.m.

I'm waiting on a response or a signature via HelloSign.

Response from Seller: August 15, 2013 3:23 PM EST (Via Email) He responded with:

I must decline the new offer. I appreciate your interest in the property but the new offer just doesn't work for me.

Well, this kinda sucks. Ok so I'm now thinking I need to just let it go. I'm running out of time. My contract expires on the 20th of August, and I have no buyer. But I'm not giving up yet. I still have 5 days left. The seller sent me a text and said he was just going to list the property and see what comes up. I said NOT YET, I have until the 20th. He disputed it at first, until he got out his copy of the contract and read it. Then he agreed and said "OK , keep me posted".

Update August 16, 2013 - So last night I got an offer on another one of my properties, and the guy was telling me that he was buying up a heap of houses. His business model was to buy them super cheap, do light rehab, and then rent them out and sell them to another investor as a cash flow. He makes $8,000 - $10,000 on each deal (that's his goal anyway). So I told him about this deal and I sent him some pictures. I told him that we HAVE to close by Tuesday, August 20 since that's when my contract expires. This morning he emailed me and said it's a "go ahead" and asked me to send him the assignment of contract! I sent it to him. I'm waiting on the signed docs back now.

August 20, 2013 Today my contract expires with the seller, and the communication from the buyer isn't that great. He just doesn't have the same sense of urgency that I do when it comes to closing a deal. He says everything is fine...we're closing today at 4:30 pm. Well, that's the same time that my Yoga class starts, so I won't be around to answer the phone if shit hits the fan. The shit USUALLY doesn't hit the fan, but JUST IN CASE.

4:00 pm The seller called me and told me that he was on his way to closing. He told me he didn't have any keys. I told him it's no biggie.

6:00 p.m. No news is good news and there's noone at the title company to confirm this deal closed. I'll send her an email and ask her so that she can reply first thing in the morning.

August 21, 2013

Conclusion: The deal closed. It was down to the WIRE of a last minute. But we pulled it off. Here's the HUD-1 with the assignment fee. I'll be picking up the check this afternoon and I'll post a copy of it.

And Finally, The Check: The amount of the check sucks, but it's better than no check at all!

REAL DEAL: How to Do A Wholetail Deal

Here's the details to the REAL WHOLETAIL DEAL

October 3, 2013 - Update. The deal closed on Monday, October 1. Due to a hangup with the electrical inspection being turned in to the lender, it took an additional 2 days to fund. But it's a done deal today.

Real Deal: The One That Took 100 Years

Date of Initial Contact by the Seller: April 13, 2012

Where This Lead Came From: "Tracy Buys Houses" Bandit Sign

What was the Seller’s Situation: The property was rented to a family member, and they are planning on moving out. He lives out of town, and cant manage the property (and don't want to) long distance.

Initial Offer: April 13, 2012 When I went to see the property initially on April 13, 2012, the tenants were still living in the house. I had a long conversation with the tenant. He was super cool. He said they were moving because the family was growing and the house wasn't big enough any more. The house is rent ready, and doesn't need any work for a rental. I offered the seller $15,000 Cash for the house and asked him to reply by April 15, 2012.

Counter Offer from Seller: April 18, 2012 The seller countered my offer at $27,000 and said he wouldn't sell it for less than that. He said he was going to give it 2-3 more weeks and see if he could sell it for more. So we left it at that.

Contact Made By The Seller: January 29, 2013 The seller sent me an email that read:

"Hi Tracy - I have not sold the house and want to do business with you but April is probably the best window to discuss this matter. I have your contact info and will definitely be in touch. Thanks for your interest."

So I let him brew.

Contact Made by the Seller: March 18, 2013 - He said that he was ready to sell for $25k (which means he came down $2k) I went to see the house for a second time. I contacted him and said that I would have to stay firm at my maximum offer of $22,500.00.

Seller Accepted My Offer (I thought) March 28, 2013 The seller emailed me and said he would accept my offer and asked me to send him the contract. So my VA prepared the contract via HelloSign and sent the request to him for signatures. He never signed it.

Seller Goes into Email Autoresponder : June 28, 2013- I added the seller to my email autoresponder series that sends him an email every 30 days for 6 months. Its very simple. It asks him if he sold the house yet, and lets him know that I'm still interested. At this point, I gave up hope on this guy. He's been stringing me along for months now, but I don't want to mark him as "dead" because he DOES want to sell. I'm just not sure what's keeping him from doing it.

I didn't get a response from my first email. But I did get a response on my second email.

The seller never signed my damn contract!! He got me all excited for nothing. What a tease this seller is.

FORGET HIM. This guy can't make his mind up (that's what I was thinking).

The Beauty of Automation : So even though I think this guy is VERY indecisive, I didn't remove him from the autoresponder campaign. He continues to get emails from me.

GUESS WHO's BACK? August 26, 2013. I received a text message from the seller asking me if I was still interested. (HERE WE GO AGAIN).

So guess what I did? I had my VA prepare another contract and send it to him via HelloSign. This is like the 4th time (I've lost count).

HE FREAKIN SIGNED IT!! August 26, 2013 at 8:23 P.M. Pics or it aint real. See Below. I'm meeting him in the morning at 10:00 a.m. to put a lockbox on the house. Woot Woooooot. I'm still a little hesitant about this. He was so reluctant to sign. What made him change his mind? I'm going to ask him tomorrow. I might even ask him for a photo!!

REAL DEAL: $6,108 Made in 17 Days With an Unexpected Call

And here's a copy of the check (minus the $1000 Binder deposit that I collected from the buyer when she signed the contract - I didn't take a photo of that. My buyers write the check out directly to my company)

CLOSED: March 3, 2014

REAL DEAL: How to Make $23k in 16 Days

Date of Initial Contact by Seller: October 16, 2013

Where This Lead Came From: Website - he filled out the seller information form, AND went ahead and scheduled his own appointment for me to come out and look at the house using ScheduleOnce (which I have enabled on the seller website). I immediately sent the seller my credibility kit via email and confirmed the appointment.

What Was The Seller's Situation: The seller inherited the house many years ago from his parents. He bought the interest from his siblings, and the house has been rented for 15 years to the same person. The tenant died 2 months ago, and he just found out (no, they didn't die in the house). This seller lives in Maryland, and just wanted to sell the house quickly.

Initial Offer: October 18, 2013 - Before I went to see the house, I called the seller on the phone just to feel him out a little more. I asked him "if I paid you all cash and could close whenever you wanted what is the least you'd accept for the house?" He said "$170k. I asked him "what do you think it would appraise for if I had it appraised right now"? He answered "$230k. I confirmed that with some quick research on comps, and immediately I knew that this seller was willing to give up alot of equity. It's time to talk to him in person.

The house is in a very nice, gated golf course community. It's one of the more modest homes in this subdivision. but still very desirable. I knew it would be a quick sale if I could get it for the right price. Upon walking in, my first reaction was that the house was completely outdated, with original carpet ,original cabinets, original bathrooms, etc. It needs about $25k - $30k in rehab. I already can't pay $170k for this. Time to get out my negotiating stick.

Negotiating: There wasn't a whole lot of negotiating that went on. I made the seller 2 offers:

1. All Cash, close in 30 days for $120k. (Exit strategy - wholesale)

2. All Cash, close in 120 days. (Exit strategy - wholetail)

*The house was in good enough condition to qualify for financing, although it was outdated, and in a great location. So I could sell the house either way.

Without blinking an eye, he said "I'll take the $120,000 - lets sign the contract".

The contract: (Signed on October 18, 2013)I got the contract ready using my iPadMini. The seller signed. I asked him for a key to the house. He gave it to me. then off he went to catch a plane to head back to Maryland.

And the House is SOLD to an investor within 2 hours for $140,000.00. We're closing on Nov 1, 2013.

The Nibbling Technique: Just for shits and giggles, I contacted the seller and asked him if we closed earlier than planned, would he sell the house to me for $115,000 He said yes. He signed my amendment via HelloSign. Bam! Another $5k just for asking.

When this closes (Check back Nov 2, 2013) - I'll post up the check. We're doing a double HUD closing on this one (which will cost us a little bit). One of the fastest $23k ever made.

November 1, 2013 - The Deal Closed without a hitch in sight. It was a double HUD closing, and I walked off with a check today for $23,050.00. Bought it for $115,000 - sold it for $140,000 - had to pay for a double closing and. Here's a copy of the check:

They're not ALL this easy, but when they are.....it makes you wanna drink a very large bottle of wine to celebrate!! So that's what I'm going to do tonight. (and yes, I still celebrate after 15 years of closing deals) CHEERS!

November 3, 2013 : Testimonial Came in From Seller via HelloSign. This email automatically goes out to the seller after closing using my Godfather CRM "post closing" workflow. Its a request for them to fill out a testimonial form via HelloSign. I'll then put it on the seller website and in my credibility kit. Here's the testimonial that came in today from this seller.

REAL DEAL: The White Knotty Pine House

I thought you guys would like to read some real life examples of deals that I'm working on and/or closed. So I've created a category called "REAL DEALS" and I'm going to put it out there for MOB exploitation. Hopefully you can read these examples of real deals and find some motivation to get some of your own deals done, or to come up with a creative solution for your sellers that you may not have otherwise thought of. I'll do all of the updating on each individual post, so you'll need to come back to the specific deal pages to get updates. Not all of these will have a happy ending....... since I'm updating these in real time, I don't even know the outcome of them until it happens.

Date of Initial Contact by the Seller: August 12, 2013 at 9:28 a.m. EST

This seller came from a ZIP CODE Mailing List. He received a postcard in the mail and then went to the website and filled out the Seller Lead Information sheet. He lives in another city - about an hour and a half from the property.

What was the Seller's Situation:

The seller has rented this property for $1025, and he's just tired of renting it. He also owns 2 other houses. He said he just painted the inside of the house in March 2013, but it still needs a little bit of cosmetic work. The house is currently vacant.It's a 6 bedroom 3 bath house. (has a mother in law suite). I checked the MLS and the property listing expired on August 4, 2013 after being listed for 4 months at $150,000.00

Initial Offer: August 12, 2013 at 2:35 PM EST

I didn't visit the property in person. Instead, I looked on Google Maps to see what the house looked like. Also, I was able to see some photos of the house on Zillow where the property was previously listed on the MLS. I think this would be a pretty easy sale using one of many strategies. The ARV is $169,000. I called him on the phone and reviewed 3 different offers with him. Then he asked me to send it to him in an email so he could review it with his wife. Here is the email I sent to him.

Dear Henry, Hi! It was nice talking to you. Please use the link below to find attached information about our company Real Results Unlimited, Inc. There are also some nice letters from sellers who we've helped. Please review this information to understand our company.

Per our discussion, here are the offers that I'd like to present:

OFFER #1 --- $89,000 Cash 30 Day closing. Buyer pays all closing costs OFFER #2 --- $110,000 Cash - 120 Day closing Buyer pays all closing costs OFFER $3 --- $900 Per Month with 3 year Option at $130,000 - Seller and Buyer Split Closing Costs at the time of closing.

Please review these with your wife, and let me know as soon as you can which one works the best for you. Thank you so much.

Thank You ,

Tracy Caywood - Acquisition Manager

The seller said that he would talk to his wife and get back with me ASAP. So I'm now waiting.

1st Follow Up: August 13, 2013 at 11:30 am - I called the seller to follow up on the offer. Had to leave him a message.

2nd Follow Up: August 14, 2013 10:13 am - I called the seller and talked to him. I asked him if he had talked to his wife about the offers that I made. He said yes, he did. He has "another company" that is coming out to look at the house on August 20, 2013. So he wanted to see what they had to say first. I told him that I would follow up with him on August 20. Looks like I have competition. Doesn't scare me.

2nd Follow Up: October 7, 2013 (Im a little late on this one). I called to follow up. They were happy to hear from me. They lost my phone number and didnt know how to find me. The husband got on the phone and said that they preferred my second offer (the one for $110,000 NET to the seller / close in 120 days). Ok COOL!

This has suddenly turned into a wholetail deal. I explained to the seller what they could expect from me, and that I would need a key to show the property to people. He told me to email him the contract for review, and that they would be in town October 16 for some doctor appointments (they live about 1.5 hr away). he said we would meet in person then to sign the contract. I agreed.

My VA prepared the contract and emailed it to the sellers on October 7, 2013. He called me to confirm that he got it, and confirmed our appointment for the 16th.

Contract Signing Appointment: I met the sellers at the house, as this was the first time I've ever seen the property. I was pleasantly surprised. The only repairs that it really needs is carpet. It's a 2600 Square foot 4 BR house with a 2 BR mother in-law suite/garage apartment. They asked me a few questions about how the process works, and they signed my contract for $110,000 NET. Now It's time for me to get busy.

That's my seller signing the contract ------------------------------------------------->

Marketing Plan: October 17, 2013 - we begin the marketing plan for this property. I've determined that the ARV is about $180k, but for a really quick sale, I'm pricing his at $144,900. I'm turning this listing over to our Realtor (he gets it), and he's going to stick it int he MLS. We'll also do our own efforts to get the property sold. I'll make a trip downtown on Monday, Oct 21 to record my affidavit and memorandum.

Affidavit and Memorandum: Recorded on October 23, 2013

Offer to Purchase from New Buyer: October 24, 2013 Our Realtor presented us with an offer on the house. We have the house listed at $144,900. The VA buyers offered $138,000. We countered at $141,000. We're paying $3k of the buyers closing costs. We all accepted. So what I have to do now is get the seller to sign this NEW contract. This is a wholetail deal, so the contract will be between my seller and the new buyer.

Sellers Signed New Contract: October 28, 2013 After sweating all weekend, I received the signed contract back from the sellers this morning. I also learned something over the weekend when I got a call from Alex Joungblood (THANKS, ALEX!) VA loans don't have any title seasoning issues, so I didn't HAVE to get the signatures from the seller on this contract. I could've done a double closing, using transactional funding, and the sellers would've never seen the contract with the buyer. I'm relatively new to the wholetail deals, so I'm pretty excited to learn this! I didn't have any problems from the seller, but I could see where (even though I explained everything to them) they could have a problem with me making that much money and refuse to sign.

So in the future, if the buyer is conventional or VA funding, I'll do a double closing. If they're FHA, well, then I think I'll have to take the same approach as I did on this deal.

November 1, 2013 : Buyers asked for a Seller's Disclosure to be completed. I emailed it to the sellers. They'll have it back to me on Saturday, Nov 2. Buyers want to do inspection before they go out of town on Nov 8.

November 10, 2013: The buyers backed out of the deal. They said that the house needed $40,000 in rehab, and that was more than they were willing to put into the property. The buyer is active military, and may only be here for 3 years. No big deal. It happens. We put the house back into ACTIVE status, and will make a price reduction soon.

February 21, 2014 - Yes, my friends. It has been 3 months since I made an update on this real deal. But now I have to , since this deal closed yesterday. I'll fill you in on what's been going on. After the home inspection that the buyers had done, the sellers agreed to accept $80,000 NET for the house. I thought that was fair, considering the work that the house needed.

So I continued to market this property. I had SO MANY people claiming that they wanted to make an offer, but noone ever came through. Our contract with the seller EXPIRED on February 17, 2014, and I had written it off as a loss. However, a buyer contacted Dan ON FEB 17th!! and made an offer of $70,000.00. He'd seen it on our website, and was interested in buying another one of our properties. I told Dan to counter at $85,000.00 - with the buyer paying all of the closing costs. The buyer agreed, and he met Dan at Starbucks to sign the contract and give the $1000 Non Refundable Binder Deposit. He closed 2 days later.

MORAL OF THE REAL DEAL: Don't give up on your deal OR on your seller. Work that shit till the bitter end. You never know when the buyer is going to come along and be ready to pull the trigger. Theres a buyer for every property, at the right price, and at the right time.

10 comments on “REAL DEAL: My Biggest Assignment Fee in 17 Years of Wholesaling Houses”

my biggest assignment fee to date was 80k. I you said these types of deals don't happen everyday and if and when they do they are game changing.

Congrats on this deal.

Did you double close of assign?

We double closed. 🙂

Wow, what a great story, most definitely motivational. I guess I need to be working a little harder to get a check like that. Congrats.

Fantastic! I've been wholesaling full time for almost 2 years, best deal I've ever had was for $15,000. Do I need to move to FL to get deals like this?! Man, I'd do about anything to make this happen, wow!

That’s awesome! Congrats. Do you know a great real estate attorney who specializes in wholesaling in the state of Florida,

What city in florida?

Your blog is very informative. I would recommend this blog in my friend circle. Thanks for Sharing!

Wow! Wholesaling can be very lucrative especially with little skin in the game other than some time! I recommend everyone start with this to build up cash to buy and hold! Great post!

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Determining wholesaler assignment fee

I really need your help BP, I am fairly new at wholesaling properties even though I quite a few under my belt. Recently another wholesaler told me I was selling myself short on assignment fees. He (the other wholesaler) said you can assignment however much you want. Just for reference, he has wholesaled over 80 properties. I use the formulas of 10-15% of the contract price or a standard 5k assignment fee. I feel assignment 10k on a 20k contract is just greedy in that case I would use the 10-15% route. Keep in mind I'm trying to build a successful real estate investing career, not just grab some quick cash. I feel like at the end of the contract when people are feeling the 'Did I just get robbed" feeling, they less likely to refer me to someone else or come back and have me find another property for them but if I give them a fair deal, then referrals and repeat business will come naturally. On the same note, I don't want to sell myself short.

So my question is how are the more seasoned wholesalers determining their assignment fees?

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What Is An Assignment Fee? A Guide For New Wholesalers
An assignment fee is a wholesaler's compensation for their pivotal role as a contract flipper. In its simplest form, an assignment fee is the money the wholesaler receives for facilitating the transfer of contractual rights from the original seller to the end buyer. In many ways, an assignment fee is the antithesis of its rehabbing counterpart ...
What Is An Assignment Fee
An assignment fee is a payment from the " assignor " (wholesaler) to the " assignee " (cash buyer) when the assignee transfers their rights or interest of a property to the assignor during the close of a real estate transaction. Most often, this term is used in the real estate investing strategy of "wholesaling".
What is an Assignment Fee? The Ultimate Wholesaler's Guide
The average assignment fee for a real estate wholesaler is between $2000 and $7000. Of course, this number will depend on the market you're in as well as the level of experience that you have. Many wholesalers charge upwards of $10,000 or even $20,000 for their assignment fee.
What Is an Assignment Fee in Real Estate?
The average assignment fee for a real estate wholesaler can vary widely based on several factors, including the real estate market they're operating in, the specific property, and the details of the deal.. It's not uncommon to see assignment fees range anywhere from a few thousand dollars to $20,000 or even higher.Some wholesalers aim for a standard assignment fee, like $5,000 or $10,000 per ...
8 Ways to Increase Your Assignment Fee as a Wholesaler
As a wholesaler, you also need to subtract out your assignment fee. Here's how that formula works…. (ARV x .75) - Repair Costs - Assignment Fee = Max You Should Pay. Imagine that you found a property with an ARV of $250,000 and you expect repair costs to be about $20,000. Also, you want to make $10,000.
All About Assignment Fee: The Only Guide You'll Ever Need
Assignment fees are not all the same. If the property is a presale unit - one which has not yet been built - an assignment fee of between 2% and 5% of the sale price is fairly typical. This fee is payable to the developer. the Assignment Agreement. This can be anywhere from a few hundred dollars to several thousand dollars.
Assignment of Contract
Assignment contracts should clearly spell out the assignment fee and how it will be paid. An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer. The standard real estate assignment fee is $5,000.
What Is an Assignment in Real Estate?
In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won't take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it's compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an ...
Assignment of Contract In Real Estate Made Simple
An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract. The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly ...
How Wholesalers Use Assignment of Contract
The buyer agrees to the assignment fee and you have a one page form called an assignment of beneficial interest form or assignment of contract form (use an attorney to draw up this form), which states that you are giving up all rights to purchase this property and assigning it to the new buyer in exchange for an assignment fee of $5,000.
Understanding an Assignment Fee in Real Estate
An assignment contract is essentially the document that gives someone the right to purchase a property. The assignment fee refers to the payment made to an individual, generally known as an assignor, for transferring their rights and obligations under a pre-existing real estate assignment contract to another party, known as the assignee.
Real Estate Assignment Contract: What Investors Need to Know
Learn what a real estate assignment contract is, how to use it, and what the benefits are. Discover how you can leverage assignment contracts to make a profit.
What is an Assignment Fee in Real Estate?
A real estate assignment fee is the difference between the original contracted price of an off-market transaction and the final sale price. An assignor - typically a real estate wholesaler - connects a seller and buyer, both at different prices. Once the deal closes, the assignment fee is the wholesaler's cut for helping facilitate the ...
Real Estate Assignment Fee: Your Guide to Earning Profit
2 Steps to Earning Profit from Real Estate Assignment Fees. 3 Maximizing Profit through Effective Real Estate Contracts. 4 Mitigating Risks and Challenges in Real Estate Assignment Fees. 4.1 Conducting Thorough Market Research. 4.2 Building a Network of Reliable Professionals. 4.3 Staying Prepared for Potential Issues.
Lesson 5
Contract Price: $110,800. We got this particular property under contract for $110,800, estimating the ARV at $225,000 based on the comps and $28,950 in repairs. We then flipped the contract to a rehabber for $120,050, including our $8,550 assignment fee. For us, it was a great deal—we made $8,550 with just about two hours worth of work.
Assigning Deals Safely With a Wholesale Assignment Contract
One key thing to include is a copy of the original wholesale real estate contract. This document will include all the sale agreements including the closing date, sale price, state of the property, and its legal description or address. You should also detail your terms and conditions. These include the deposit you expect on the assignment fee ...
What Is an Assignment Fee?
What Is an Assignment Fee? If you assign cash, property or other assets to another party, an assignment fee may be required to complete the transaction. The assignment fee compensates the assignor for the rights he is giving up in the agreement. The amount of the fee will vary based on the type and value of the property involved in the agreement.
How to Calculate the Maximum Allowable Offer (MAO) for Real Estate
Then take the 70% number and subtract your rehab costs... $105,000 - $18,000 Rehab = $87,000. Then you take the after-rehab number and subtract the amount you want for an assignment fee... $87,000 - $4,000 = $83,000. And that's the secret sauce on how to calculate the maximum allowable offer, nothing else to it.
Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts
The 4 Stages of Assigning Contracts. How the Process Works. Finding the Motivated Seller. Explain Your Intent & Get the Contract Signed (IMPORTANT) Due Diligence & Property Prospectus Report. Find the Buyer, Assign the Contract, Collect the Deposit. Deliver Documentation to Title Company, Close, Get Paid.
Wholesaling Closing Methods
The Assignment Method. What It Is: In this method, you'll simply "assign" your role in the distressed seller's contract over to your cash buyer. Here's the trick: because you're a principal in the transaction, you do not need a Realtor's license to wholesale properties this way, so you are allowed to charge an "assignment fee ...
REAL DEAL: My Biggest Assignment Fee in 17 Years of ...
If the final sales price of the house is greater than $1,000,000, then the Buyer will pay us an additional $50,000 within 48 hours after they close with their retail buyer. USUALLY, we have a general rule of thumb if we're making an assignment fee of $15,000 or more, that we'll do a double closing (2 HUDS).
Determining wholesaler assignment fee
He (the other wholesaler) said you can assignment however much you want. Just for reference, he has wholesaled over 80 properties. I use the formulas of 10-15% of the contract price or a standard 5k assignment fee. I feel assignment 10k on a 20k contract is just greedy in that case I would use the 10-15% route.
Kenyans to Pay Mandatory Ksh5,600 to Visit Zanzibar Under New Rules
Beginning September 1, Kenyans visiting Zanzibar will have to pay $44 (Ksh5,600) at the border. According to the government of Zanzibar, the fee will serve as a medical insurance. Zanzibar ...
Assignment Fee
An assignment fee may also refer to a fee that a dealership or car salesperson charges to transfer the ownership of a vehicle from the current owner to the new owner (buyer). This fee is typically paid by the new owner, in addition to the purchase price of the vehicle.
Create assignments
Project type: You can choose up to five formats for a given assignment, giving students options to choose a blank format for completing the assignment. Template from Your stuff: Students will be directed to create a specific project (for example, a video). Select Save Draft or Assign.

What Is An Assignment Fee — The Complete Investors Guide

1. What’s an assignment fee?

2. Reasons to use an assignment

3. How to assign a contract?

4. Is it legal?

5. Is it ethical

6. How much should a fee be?

7. Who pays for it?

8. Does the seller or buyer see the fee?

9. Alternatives to an assignment?

10. Assignment fees and agents?

11. How to increase your assignment fees?

12. How to find discounted properties to wholesale?

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What is an Assignment Fee? The Ultimate Wholesaler’s Guide

What is an assignment fee?

Part 1. Answering Common Questions About Assignment Fees

How are assignment fees calculated?

Who pays the assignment fee?

What is the average wholesaler’s assignment fee?

Are assignment fees taxable?

What is a real estate assignment contract?

What is a double close?

Part 2. How To Assign a Real Estate Contract

Step 1. Find a Great Deal

Step 2. Build Your Buyers List

Step 3. Acquire an Assignment Contract

Step 4. Collect Your Assignment Fee

Part 3. The Pros & Cons of Assignment Contracts

Part 4. 10 Ideas For Increasing Your Assignment Fee as a Wholesaler

1. Start With Great Deals

2. Learn to Negotiate (With Sellers)

3. Follow Up

4. Find Your Offer Min & Max

5. Qualify Your Cash Buyers

6. Identify Cohorts of Cash Buyers

7. Text Your Buyers

8. Don’t Negotiate (With Buyers)

9. Work With Real Estate Agents

10. Require a Nonrefundable Fee

Final Thoughts on Real Estate Assignment Fees

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Ready for more?

What Is an Assignment Fee in Real Estate?

What is an Assignment Contract?

What is an Assignment Fee?

How Much is the Average Assignment Fee For a Real Estate Investor? (How Much Does a Real Estate Wholesaler Make?)

What is the Average Assignment Fee for a Lot?

Who Pays the Assignment Fee?

How are Assignment Fees Calculated?

Are Assignment Fees Taxable?

Does the Assignment Fee Show Up on the HUD?

Can a Real Estate Agent Get an Assignment Fee?

How to Increase Assignment Fees for Wholesale Real Estate Investors?

Double Closings

Use the go-to formula or the 75% rule

Be confident in negotiating

Find high-quality cash buyers

Implement a max allowable offer

Don't waste time on unmotivated sellers

Find out what works for other wholesalers

Use the 80/20 rule

Steps in Wholesaling Real Estate

Step 1. Understand Local Wholesaling Regulations

Step 2. Identify Potential Properties

Step 3. Evaluate the Property's Potential Value

Step 4. Engage with the Property Owner

Step 5. Conduct Thorough Property Assessment

Step 6. Secure the Property with a Purchase Contract

Step 7. Locate a Potential Buyer

Step 8. Assign the Contract to the Buyer

Step 9. Receive Your Wholesaling Fee

Key Takeaways: What is an Assignment Fee in Real Estate?

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Justin Dossey

What is an Assignment Fee in Real Estate?

Assignment Contract or Double Close?