definition assignment fee

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

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.

Download Assignment Fee Template

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’s an assignment fee — The wholesalers guide

Assignment fee:

The real estate wholesalers’ primary method of getting paid. It’s calculated by taking the difference between what the seller agreed on, and what the end buyer is paying for the house

For example:

Let’s call him Jim.

Jim is a wholesaler. Jim finds a seller who’ll sell her house to Jim for $100,000 CASH. Jim puts it under contract and takes it to closing. Jim then finds another cash buyer during the closing process. This new cash buyer will purchase the contract from Jim for $120,000. Jim then ASSIGNS the contract to the new end buyer. The new-end buyer closes on the property with his funds, and Jim pockets $20,000.

An assignment fee is a real estate wholesaler’s staple.

There are other ways to get paid as a wholesaler of course (which we’ll cover in this article).

But if you’re new into the whole world of assignment fees, wholesaling, and real estate, we’re going to give you a deep dive into this article.

Starting with …

Why use an assignment fee

Ever wonder why so many aspiring real estate gurus dive headfirst into wholesaling? Well, the allure of the assignment fee is undeniable. Imagine getting a slice of the real estate pie without having to fork out heaps of your own money to close a deal.

That’s the magic of assignment fees. Essentially, you’re not selling the house; you’re selling the contract to the house.

It’s like holding a golden ticket to a property and then offering that ticket to someone else for a higher price. And the best part? You don’t even need your own cash stack ready to go. You just need a savvy cash buyer with pockets ready to buy that golden ticket off you.

So, with an assignment fee, not only do you sidestep the heavy lifting of traditional real estate deals, but you also make a pretty penny without emptying your own. Clever, isn’t it?

NOTE: If you want to see how much flippers make check out his article.

Are assignments for wholesalers legal?

So, you’ve heard about this whole assignment fee thing, and it sounds pretty tempting, right? But you might be scratching your head wondering, “Is this even legal?” First off, if you’re thinking of jumping into the world of wholesaling, it’s a must to consult with a real estate attorney in your state. The landscape of real estate regulations can be as complex as a plot twist in a best-selling novel. Some states might give you the side-eye if you’re wholesaling without a real estate license. Why? Because in those states, you might be viewed as engaging in the business of real estate.

However, here’s the twist.

When you’re wholesaling or assigning contracts, you’re not truly the central character in this real estate story. You’re not the principle of the transaction. Rather, you’re like the supporting actor, selling the contract to the main star, the principal. But be wary of those gray clouds on the horizon. The industry has its share of posers—those who claim to be cash buyers but may lack the bankroll to close on a property if a real end buyer doesn’t emerge from the wings. It’s like holding a ticket to an exclusive show, only to find out it might be a no-show. So, while the allure of wholesaling is undeniable, ensure you’re on solid ground.

It’s always better to have a clear script before stepping onto the stage.

Do all states allow assignments?

Navigating the world of real estate assignments can sometimes feel like trying to complete a tricky jigsaw puzzle. So, you might be wondering, do all states even allow these nifty little things called assignments? While I’d love to give you a simple “yes” or “no”, the truth is, it’s a bit more intricate. Most states do permit assignments. In fact, if you peek into many real estate contracts, you’ll often spot a little line that reads: “this contract is assignable”. But, like any good mystery, there are twists.

Consider this scenario:

Jim, our wholesaler friend from earlier, isn’t looking to pocket a cool $20,000. Instead, he’s decided to buy a property under his name. But halfway through, he has an “Aha!” moment and realizes he’d rather have his trusty LLC purchase it. So, Jim goes ahead and assigns the contract to his LLC, changing the player in the game without altering the core deal. It’s not always about making a quick buck; sometimes it’s about strategy and structure.

But before you channel your inner Jim or dream up any other creative real estate ventures, it’s wise to sit down with a real estate attorney. Remember, while assignments are a powerful tool in the world of wholesaling, you want to ensure you’re building on solid ground and not about to stumble into any legal pitfalls. It’s all about playing the game smartly.

How to wholesale for assignment fees

(NOTE: we have a wholesaling guide here )

Wholesaling for assignment fees is like mastering a captivating dance, requiring both rhythm and skill. If you’re considering dipping your toes into this arena, understanding the core skills required is essential. Think of it as the choreography of a profitable dance. So, what steps does a successful wholesaler need to know? Let’s break it down.

1. Marketing: The cornerstone of wholesaling is finding those diamond-in-the-rough properties that aren’t on everyone’s radar. The ability to unearth these off-market deals means mastering various marketing strategies. From direct mail campaigns, cold calling, and digital ads, to networking at local real estate events – your marketing game needs to be top-notch. The goal? To get property owners considering selling to ring you up before they even think of listing their property.

2. Analyzing Deals: Not every property you come across will be a goldmine. Being able to evaluate the potential of a deal is pivotal. This means understanding local real estate trends, comparable sales, and having an innate sense of whether a deal is lukewarm or sizzling hot.

3. Estimating Repairs : The hidden costs in wholesaling often come in the form of repairs. Being able to walk through a property and estimate repair costs almost instinctively can be the difference between a lucrative deal and a dud. Whether it’s recognizing that a roof needs replacing, or knowing the ins and outs of foundation issues, your estimates can make or break a deal.

4. Negotiations: Ah, the art of negotiation. This is where you get to put on your diplomat hat. Striking a balance between securing a deal that’s favorable for you, while ensuring the seller feels they’re getting value is an art form. It’s not just about numbers; it’s about understanding motivations, reading situations, and sometimes, knowing when to walk away.

5. Sales: Now, once you’ve got that property under contract, it’s showtime. The sales process in wholesaling isn’t about selling the property itself but selling the idea of the deal. You need to convince cash buyers that your deal is their next big opportunity. Crafting a compelling pitch, building rapport, and understanding what your buyer is looking for are key components here.

In essence, being a successful wholesaler is like being a maestro conducting an orchestra, ensuring each section plays harmoniously. And with each mastered skill, the melody of your success in wholesaling for assignment fees becomes that much clearer.

Wholesalers toolbox for assignment fees

Navigating the world of wholesaling can seem like a maze, especially when you’re just starting out. The good news? There’s a toolkit for that. Just like a craftsman wouldn’t go to work without his tools, a real estate wholesaler needs specific tools and software to operate efficiently. Let’s dive into some essential tools that can help pave the path to your wholesaling success.

1. CRM (Customer Relationship Management)

Recommended CRM: RealEflow (see our review).

Think of CRM as your virtual assistant, keeping track of leads, deals, and interactions. RealEflow is a popular CRM tool tailored for real estate wholesalers. It organizes your contacts, reminds you of follow-ups, and ensures no potential deal falls through the cracks. Why is it essential? Because in the whirlwind of daily operations, a solid CRM ensures you stay on track, prioritizing relationships and fostering potential leads.

Here’s the top ten list of CRMs for wholesalers

Recommended and r eviewed website builder: Carrot

In today’s digital age, your online presence speaks volumes. Investor Carrot offers tailor-made websites for real estate investors. These sites are not only aesthetically pleasing but are optimized for lead generation. It’s your digital business card, your portfolio, and your first impression rolled into one.

See our top list of website builders for investors

3. Data Provider

Recommended and reviewed data platform: PropStream.

Ever heard the saying, “Knowledge is power”? In wholesaling, it’s more like “Data is King.” PropStream provides you with a rich database of potential sellers. From foreclosures to probates, this tool can be a treasure trove of off-market deals waiting to be discovered.

4. Direct Mail

Recommended and reviewed direct mail company: Ballpoint Marketing

In an age of e-mails and instant messages, you’d be surprised at the power of a good ol’ fashioned letter. Ballpoint Marketing specializes in direct mail campaigns tailored for real estate. Their handwritten-style mailers stand out and often get opened, connecting you with potential sellers in a personalized way.

5. Cold Calling

Recommended and reviewed cold calling dialer: Batch Dialer

While it may sound old school, cold calling remains an effective strategy. Batch Dialer streamlines the process, allowing you to reach out to potential leads efficiently. It’s all about numbers; the more calls you make, the closer you are to landing that next deal.

6. Skip Tracing

Recommended and reviewed skip tracing tool: SkipForce

There’s a certain thrill in uncovering hard-to-find information. Skip Force helps you locate those elusive property owners who might just be your next seller. Think of it as your detective tool, unearthing potential goldmines.

See our top list of skiptracing tools and strategies for investors

7. Driving for Dollars

Recommended and reviewed app for driving for dollars: Deal Machine

When funds are tight, there’s one marketing technique that only requires some gas and keen eyes: Driving for Dollars. Simply put, you drive around, looking for distressed properties. And with the Deal Machine app, you can instantly gather details about a property, snap photos, and even send a postcard to the homeowner. It’s grassroots marketing at its finest.

Here’s another tool that works as a “driving for dollars” tool plus CRM: ReSimpli. 

Remember, while tools can aid your journey, it’s your drive, passion, and dedication that will shape your wholesaling future. With the right tools in your arsenal, the maze of wholesaling becomes a well-marked path, leading straight to success. Happy wholesaling!

Avoid risks of Wholesaling

Whoelsaling does come with some risk.

And that’s NOT finding a buyer.

Then you have to either renegotiate or worse walk away from the seller in shame

There’s a strategy to reverse some risks. It’s called Reverse Wholesaling which you can read about it here .

Alternatives to Assignment Fees

Stepping into the world of wholesaling might feel a tad overwhelming, especially when you’re just finding your footing. Sure, we’ve talked about the assignment fee and the story of Jim, our savvy wholesaler. But here’s the catch: assignment isn’t the only dance in town. There are other strategies at play, and understanding them can open up a variety of options for your real estate deals. Let’s explore one major alternative: the double close.

Double Close Explained: Imagine a sandwich. The double close, often called a “simultaneous close” or “back-to-back close,” is pretty much like that sandwich. Instead of assigning a contract, the wholesaler essentially has two closings almost back to back. First, they close the deal with the seller. Then, shortly after, they close with their end buyer. Unlike an assignment, the end buyer never sees what the original purchase price was, adding a layer of confidentiality to the transaction.

Pros and Cons to Assignment Fees:

Pros : 1. Simplicity: No need to go through two closings. Once you find a buyer, you assign the contract and collect your fee.

2. Transparency : Both the seller and the buyer are fully aware of the agreed prices and the wholesaler’s profit.

3. Low Costs : Since there’s only one closing, you generally have fewer costs to worry about.

Cons: 1. Profit Exposure: Because the end buyer sees the original contract price, they’ll know your profit. This might lead to some hard questions or even renegotiation attempts.

2. Buyer Restrictions: Some end buyers, especially institutional ones, might not be comfortable with assignment deals.

3. Limited Earnings: Your earnings are capped at the assignment fee. You can’t benefit from potential increases in property value.

Pros and Cons to Double Close:

Pros: 1. Privacy : The end buyer doesn’t see what you originally contracted the property for. This keeps your profit margin concealed.

2. Higher Profit Potential: If the property value increases between your two closings, you could make more than just your anticipated spread.

3. More Flexibility : Without the constraints of assignment, you can be more flexible in your terms, especially with end buyers who may be wary of assignment deals.

Cons: 1. Complexity: Juggling two closings can be intricate and requires meticulous planning.

2. Higher Costs: With two separate closings, you’ll have more fees to take care of, which could eat into your profits.

3. Funding Needs : You might need transactional funding to cover the first closing, especially if there’s a gap between the two closings.

In conclusion, while the assignment fee strategy is straightforward and popular, it’s not the only method in a wholesaler’s playbook.

Whether you opt for the assignment route like our friend Jim or decide to venture into the double close territory, what’s important is understanding the nuances of each and picking the strategy that aligns best with your goals and comfort level. And as always, a piece of golden advice: always stay informed and never stop learning.

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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]

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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.

Click the banner below to take a 90-minute online training class and get started learning how to invest in today’s real estate market!

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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

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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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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.

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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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Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

Table of Contents

• What Is an Assignment?
• What is an Assignment in Real Estate?
• What Does it Mean to Assign a Contract in Real Estate?
• How Does a Contract Assignment Work?
• Pros and Cons of Assigning Contracts

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.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

• Find the right property.
• Get a purchase agreement signed.
• Find an end buyer.
• Assign the contract.
• Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

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 original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

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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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• Options and Derivatives
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Assignment: Definition in Finance, How It Works, and Examples

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

What Is an Assignment?

Assignment most often refers to one of two definitions in the financial world:

• The transfer of an individual's rights or property to another person or business. This concept exists in a variety of business transactions and is often spelled out contractually.
• In trading, assignment occurs when an option contract is exercised. The owner of the contract exercises the contract and assigns the option writer to an obligation to complete the requirements of the contract.

Key Takeaways

• Assignment is a transfer of rights or property from one party to another.
• Options assignments occur when option buyers exercise their rights to a position in a security.
• Other examples of assignments can be found in wages, mortgages, and leases.

Uses For Assignments

Assignment refers to the transfer of some or all property rights and obligations associated with an asset, property, contract, or other asset of value. to another entity through a written agreement.

Assignment rights happen every day in many different situations. A payee, like a utility or a merchant, assigns the right to collect payment from a written check to a bank. A merchant can assign the funds from a line of credit to a manufacturing third party that makes a product that the merchant will eventually sell. A trademark owner can transfer, sell, or give another person interest in the trademark or logo. A homeowner who sells their house assigns the deed to the new buyer.

To be effective, an assignment must involve parties with legal capacity, consideration, consent, and legality of the object.

A wage assignment is a forced payment of an obligation by automatic withholding from an employee’s pay. Courts issue wage assignments for people late with child or spousal support, taxes, loans, or other obligations. Money is automatically subtracted from a worker's paycheck without consent if they have a history of nonpayment. For example, a person delinquent on $100 monthly loan payments has a wage assignment deducting the money from their paycheck and sent to the lender. Wage assignments are helpful in paying back long-term debts.

Another instance can be found in a mortgage assignment. This is where a mortgage deed gives a lender interest in a mortgaged property in return for payments received. Lenders often sell mortgages to third parties, such as other lenders. A mortgage assignment document clarifies the assignment of contract and instructs the borrower in making future mortgage payments, and potentially modifies the mortgage terms.

A final example involves a lease assignment. This benefits a relocating tenant wanting to end a lease early or a landlord looking for rent payments to pay creditors. Once the new tenant signs the lease, taking over responsibility for rent payments and other obligations, the previous tenant is released from those responsibilities. In a separate lease assignment, a landlord agrees to pay a creditor through an assignment of rent due under rental property leases. The agreement is used to pay a mortgage lender if the landlord defaults on the loan or files for bankruptcy . Any rental income would then be paid directly to the lender.

Options Assignment

Options can be assigned when a buyer decides to exercise their right to buy (or sell) stock at a particular strike price . The corresponding seller of the option is not determined when a buyer opens an option trade, but only at the time that an option holder decides to exercise their right to buy stock. So an option seller with open positions is matched with the exercising buyer via automated lottery. The randomly selected seller is then assigned to fulfill the buyer's rights. This is known as an option assignment.

Once assigned, the writer (seller) of the option will have the obligation to sell (if a call option ) or buy (if a put option ) the designated number of shares of stock at the agreed-upon price (the strike price). For instance, if the writer sold calls they would be obligated to sell the stock, and the process is often referred to as having the stock called away . For puts, the buyer of the option sells stock (puts stock shares) to the writer in the form of a short-sold position.

Suppose a trader owns 100 call options on company ABC's stock with a strike price of $10 per share. The stock is now trading at $30 and ABC is due to pay a dividend shortly. As a result, the trader exercises the options early and receives 10,000 shares of ABC paid at $10. At the same time, the other side of the long call (the short call) is assigned the contract and must deliver the shares to the long.

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Frontier airlines eliminates change fees and introduces 4 new fare classes.

Frontier Airlines has announced that it is eliminating change fees on some tickets, part of its effort to appeal to more travelers.

The changes, which took effect on May 17, aim to simplify the ticket-buying process.

The Denver-based airline, known for its cheap fares, previously charged for additional services like seat assignments and carry-on baggage, similar to rivals Spirit Airlines and Allegiant Air.

Frontier is now introducing packages that bundle these extras, including early boarding. Most customers are expected to opt for these new bundled options, though some fares will still offer a la carte choices.

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"Today marks the beginning of a new era for Frontier - one with transparency in our prices, no change fees and the lowest total price," Barry Biffle, CEO of Frontier Airlines, said in the official press release .

"This is 'The New Frontier' and we are committed to offering more than the lowest fares -- we deliver the best price for all the options you want and the customer support you need, when you need it. No gimmicks, just really low prices and good customer service," the statement continued.

The new "economy" bundle, which includes a carry-on bag and seat assignment, will start at $30 more than the base fare.

The "premium" bundle, offering these perks plus early boarding, will cost $50 more. For an additional $100, the "business" bundle will provide travelers with two checked bags and a front-row seat with extra legroom.

This move follows a final rule issued by the U.S. Department of Transportation last month, which requires airlines to disclose all fees, including those for checked and carry-on baggage. The DOT estimates this change will save travelers over half a billion dollars annually.

Frontier Airlines eliminates change fees and introduces 4 new fare classes originally appeared on goodmorningamerica.com