How should I determine my Assignment Fee?

Bird Dogs, Wholesaling
1

I need to know what is way to determine my assignment fee?

2

Hi,

There has been statistical studies done on assignments which basicly indicate you should not exceed 6.5% of contract price, once you get beyond 6.5% buyers tend to go on to another deal as the cash paid for an assignment can not be added to the HUD 1 and can not be included in mortgage financing. It comes strictly out of pocket!

To offset this and increase your odds of selling your assignment ask your seller for a 3% closing cost credit as this offsets the 6.5% assignment fee and makes potential buyers more interested in the deal as there net out of pocket cost then is 3.5%

I hope this helps and good luck.

                  GR
3

You’re thinking about it the wrong way. Instead of thinking: What should I charge as my assignment fee? Think: What will this property sell for to a cash buyer? Run your comparables and make sure your sales price is the cheapest in the area (of subject property) Then, you work the deal from there. Ask the seller " whats the lowest you’'ll accept, if i pay all cash and close quickly? : Work the deal as low as possible from your sales price … this is your profit.

If this spread is larger than what a “typical” assignment fee may be in your area… then just double close on it. (hides the profit from your buyer)

A good closing agent can assist you with this.

4

Hi,

A cash sale is not an assignment of contract! They are in fact two very different things.


           GR
5

I am not sure I see much of an issue. The example involved figuring out what sort of margin exists if the end buyer was purchasing for all cash. Once you estimate that you compute the price and the implied profit. Your earlier post talked about marking up the deal by a specific amount so the end buyer could use financing and the payment would be disclosed on the HUD1.

Is there really a conflict in the advice?

6

Hi John,

       What was J Edwards original post requesting?

I think that say’s it all!

           GR
7

WOW…Thanks guys. As new wholesaler and doing my research some people told that if I negotiate a price Eample: Listing houses $70,000 and I negotiate down to $50,000 that $20,000 is my assignment fee.

I am still struggling with how to do a double closing. Can anyone explain?

8

Hi,

A double closing is two contracts, one is your primary A-B you purchasing the property from the seller and then your second contract is your sale from you to your end buyer!

This will require transactional funding for you to close your purchase from the original seller in the afternoon and then usually the following morning the sale from you to your end buyer.

A double closing let’s you make any profit above the percentage you could make doing an assignment, if you think you can make $20k then so be it, some deals you might make $50k.

Just remember if FMV is $70k you need to buy that property for $45k to $49k and I as an investor want my purchase to be at an average of 30% of FMV or $49k for a pristine updated great condition home with no defered maintence and requiring zero updating, rehab or remodeling.

When I wholesale I usually only make 5% to maybe 10% profit to a fellow investor, if I wholesale a property to an owner occupied end user I generally market to sell for not more than 90% of FMV minus rehab, however I might be making 15% to 20% of purchase price.

Remember as a wholesaler there is no reason you could not buy and sell 50, 100, 250, 500 or 1000 properties a year if you don’t get greedy, the trick is keep a good reputation, don’t try to get rich in one deal and be fair about your transactions with other people.

            GR
9

You should get as much as the market can bear by calucuting it when you make an offer according to your buyers criteria. For example, if a buyer buyers at 65% on the dollar and you pick up the deal for 55% that is a 10% fee you can collect.

10

Thanks for the advice Guys!