Assignment: very important issue

When a wholesaler signs a contract with a seller, the wholesaler has to leave a deposit to the seller.
Later, when the wholesaler ASSIGNS the contract to the end buyer, the buyer pays the wholesaler an assignment fee, to take over the contract.

Now that the wholesaler is out of the transaction, legally, how does the wholesaler get his deposit back?

  1. If the deposit equals to the assignment fee, no problem.
  2. What if the deposit is larger than the assignment fee.
  3. What if the buyer doesn’t close, for any reason, and the time for escape clauses is over. In this case the seller is in his right to keep the wholesaler’s deposit. And the wholesaler loses, EVEN THOUGH he is legally out of transaction.

I would appreciate the answer.

I’m not sure how this would work exactly, but I can tell you that if your deposit >= your assignment fee, you may want to reconsider how you’re structuring your deals.

For example, last week I signed a purchase agreement with the owner in which I gave her a $1 deposit for legal consideration of the contract. There was no earnest money involved. She fully understood what the dollar was for and had no interest in earnest money. In this kind of situation, the deposit is comepletely irrelevant. Now I can concentrate on my assignment fee without worrying about the deposit.

If you are dealing with a realtor, and earnest money is necessary, you should get a purchase price that assures that you can get a hefty assignment fee which makes the earnest money somewhat insignificant. For example, a $500 earnest money deposit to get a signed contract should get me a $5000 assignment fee for me to be comfortable. If you charge $500 for your fee then this probably isn’t worth the hassle. If you can assure yourself of the large fee up front in the purchase price, then you won’t have to worry about the deposit near as much.

That said, I would be interested to know how a deposit would be handled in an assignment of contract. It seems to me that the deposit is part of the contract so it would stay in place, and then you could raise your fee by the deposit amount if you want. Or maybe you could get the other person to write a new check for the realtor and then get yours back or cancel it.

This shouldn’t me much of an issue because you’re deposits should be anywhere from a dollar to maybe $20. You can probably get away with 10 bucks in most cases, and if you want this back then you probably aren’t making enough money in the first place.

I’m not sure if this just in Texas, but monetary consideration is not required for a contract to be valid in Texas. I don’t give deposits of any kind unless the property is listed with a realtor.

Also if you do give a deposit, you can just directly apply it to the purchase price on the contract.

Purchase price = $100,000
Deposit = $1000
Document that the contract price is $99,000
Assign it for $105,000
Assignment fee = $6,000

I would require atleast my deposit from the buyer. I used to buy from a wholesaler that required the entire assignment fee upfront (I usually could talk her down to half of it).

I agree with everyone in regards to the relevance of the deposit to the assignment,

Ryan that makes perfect sense, include the deposit in the assignment.

My question to you all, I am trying to evaluate which title company I am going to use. for wholesale transactions/double closings etc. what are some of the things I should be asking the title companies in order to find out who does these types of deals?

Also what contracts do you guys use for the assignments? do any of you have a sample? or you can direct me to them…(weblink etc…)

I would just ask the title agent if they do assignments and double closings. You might network with some experienced wholesalers at your local REI club and ask them who they use. This might save you the hassle of fishing through all the crappy title agents out there to find a good one.