Assigning vs Double Closing - Seller Finding Out Assignment Fee?

Question

I have read that if you assign an option or PSA, the orginal seller will know what you made as your assignment fee. That is why many people choose to double close when the assignment fee is high. Can someone explain how the seller will find out the assignment fee if you choose not to double close and you simply assign the contract?

If you assign your contract to an investor, and the investor closes with the original seller at their asking price, how will the seller ever find out the assignment fee? Does that have to be disclosed somewhere?

Brandon

Kyle J. · Answer

Anything done outside of escrow isn't going to show up on the closing statement.  That's why it's called outside of escrow.

I guess in theory you could have the assignment fee paid outside of escrow, but you can't really do the assignment itself outside of escrow because how would the title company know that your end buyer is even a party to the transaction if you don't assign them your right to purchase the property (i.e. your original contract with the seller)?

Again, in theory, I guess you could assign it for no money and then have the end buyer pay you the fee outside of escrow.  But that's getting complicated.  What would you do if they didn't pay you the fee after escrow closed and they now own the house?

If you're that worried about it, you could always close on it yourself and then sell it to the end buyer which would be two separate transactions (i.e. a double close).  But even then, it wouldn't be hard for the buyer or seller to figure out how much you made if they really wanted to know because all they would have to do is look up the two back-to-back closing prices for the property and it'd be pretty obvious that you made the difference.

Account Closed · Answer

@Kyle J.

From my understanding, if the assignment is also done outside of escrow, the assignment will not show up on the closing statement, correct?

Account Closed · Answer

@Kyle J.

If the person who found the deal accepted a bird dog fee instead of locking the property up with a contract and assigning it, does the bird dog fee show up on the closing settlement statement?

Kyle J. · Answer

No, because that's typically something paid outside of escrow.

Kyle J. · Answer

The assignment fee will typically be shown as an expense to the buyer on the closing settlement statement. So, for example, if you and the seller enter into a contract to purchase their house for $95k and then you assign it to the end buyer for a $5k assignment fee, the cost to the end buyer will be $100k but that's not going to be the sales price of the house. The sales price of the house is $95k and the $5k assignment fee will be listed separately as such.