Any tips on how to structure payment at closing (other than double/simultaneous closing)?
In Pennsylvania they have cracked down on assignment fees for wholesalers. They are considering that a property transfer and subject to the state’s 2% transfer tax. That’s 2% of the assessed value, so 2% on the “buying” side and another 2% on the 'selling" side. I know it’s not the end of the world to pay it (especially if the deal makes sense) but I have heard of others still using the old assignment fee, just calling it something else or whatever. Would be a way to make really thin deals work if need be. If it’s on the settlement statement the state knows about it and they want their money! Thank you in advance!
RES
Hi,
In order for you to legally have to pay a 2% transfer tax you would have to take legal title to the property!
A wholesale assignment does not require or have ownership you are simple selling your interests in a legal contract which is assigned to your buyer!
There is no way the state of Pennsylvania can assess a 2% transfer tax as you would have to own the property to transfer it, the assignment fee does not go on the HUD 1 so there is no record of payment through closing documents, there is a payout to you for any remaining balance but who knows why you received money at settlement? Were you a carpenter, painter, flooring installer, appliance repairman, plumber or HVAC tech? Who Knows.
Your assignment fee has to be paid in cash it can not be paid from borrowed money unless it’s from Hard / private money! If you need to go back to your seller after being paid and redo the contract with your buyer / investing partners name only on it! Tell the seller because my investment partner needs to borrow funds for closing we have to have his name on the contract, most sellers don’t care and won’t question as long as the terms, conditions and closing date does not change!
Since your assignment fee should be 7% or less for conventional financed property just ask your clients to pay in full when they receive assignment to your contract? The only time I use transactional funding is when I am normally selling to a retail buyer who can pay much more for the home than an investor!
I do take 10 or 12 percent on wholesale investor to investor property of less than $100k when the property has the ability to perform over and above the assignment fee!
GR