Wholesaler Will Not Disclose Assignment Fee to Cash Buyer...
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votesIt should not be that big of a deal. You need not need to ask them what their assignment fee is, you could always ask your closing attorney and they will tell you as they will need a copy of their contract with the seller. The wholesaler is concerned you will try to get them down more that is all. I never ask them what they are making as if I agree to their price then it is irrelevant what their fee is.
Good luck
Good luck
Curt Davis - KAIZEN Realty538 Reviews
35 Replies
- 7yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votesIt should not be that big of a deal. You need not need to ask them what their assignment fee is, you could always ask your closing attorney and they will tell you as they will need a copy of their contract with the seller. The wholesaler is concerned you will try to get them down more that is all. I never ask them what they are making as if I agree to their price then it is irrelevant what their fee is.
Good luckCurt Davis - KAIZEN Realty538 Reviews - Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes7y
I’ve seen a few of these....they just tell the price is $80k, and the agreement says you’re paying an assignment fee of $80k...yeah I know that makes no sense, but I guess they are looking for someone to “overlook” the fact they are supposedly paying an $80k “fee” to take a contract for maybe $50k....but it’s $80k all in.
I just tell that’s Not how an Assignment works...I pay a fee to You, then you assign the contract and Ipay the contract price to the Seller....which is usually met with “that’s not how I do it”.
SMH...
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes7y
@Henry M. the assignment fee shouldn't matter to you. How much the other party makes doesn't matter. What matters is whether it is a good deal for you.
That said you are dealing with a moron. If he is assigning you the deal he is essentially selling you a contract. So obviously you should see the contract. I am not going to take an assignment of a contract unless I know the terms of that contract. Hidden terms in a contract can turn what looks like a good deal into a bad deal.
@Ned Carey
You hit it out of the park. This was my thoughts. I don't have a problem with a wholesaler making money as long as it doesn't breach a good deal to a so-so deal.
If a wholesaler bought or contracted a perfect house worth $200K for a $1 and they sold it to me for a $100K... I would not have a problem with that... (of course extreme example).
The deal is so-so. An ARV of about $185K and selling it for $100K. But has a few majors needing addressing. So numbers may be tight.
Either way, I found that odd. It was actually a put off and the fact that it has been on the market for a bit with a price reduction of $13K shows me several indicators about this wholesaler.
Nevertheless, the deal may be doable at about $90K... So, I may walk away if he doesn't budge. Considering he won't be transparent, then there is no way to know whether a negotiation can be successfully accomplished. Some Wholesalers are know it alls and if it doesn't conform to their methods, the deal will eventually drop in price later or die.
Thanks for the input.
@Curt Davis I read what you're saying and I don't completely disagree with you... However, the numbers are tight and considering he was trying to get rich on the deal (dropped $13K after 40 days)... I thought I'd ask so we can try to structure a win win deal. Especially, if it meant renegotiating with the seller (if the equity was present).
Thanks for the input.
@Henry M. As long as your number works why do you care how much money they made. Sometimes you’ll find out their assignment fee if it is an assignment. Some wholesalers don’t want seller and buyer to find out how much they make so they’ll do a double closing. As a buyer you won’t know their assignment fee. But if you can make 30k on this deal do you care whether the wholesaler makes 10k or 20k.
@Renee Ren It seems as though you didn't read my responses.
The numbers are tight... If there is a deal there, I will probe. If the numbers work, I don't care if they make $100K.
He said an assignment... Not double closing... So either he is getting paid by the Seller or not. If he is assigning me the contract, then I will see the amount. But I'm not at that stage yet. His numbers are tight due to having to replace the roof and foundation work needed. So in order for me to see if there is a possible deal there, I will need to negotiate that to a more manageable amount.
Again... I don't care what ANY wholesaler makes IF the NUMBERS work.
IF the NUMBERS are tight or DON'T WORK, then instead of walking away, I will probe to see if I can negotiate a better deal... Not for greed, but to create the cushion to deal with what the property is needing to bring up to par.
If a wholesaler says ASSIGNMENT, then I the buyer should know the numbers across the board. I have to see the contract (if I chose to move forward).
Just to clarify.
"Big" Henry
@Henry M. If the number is tight you let the wholesaler know what number you like to purchase the property. Instead of negotiating the wholesaling fee you can ask him to go back negotiate with seller and do a price reduction. You can always pass the deal if the number doesn’t work.
- Specialist · New York City, NY · Member since 2019 · 8 posts · 9 votes7y
Everyone wants a good deal. The SELLER, THE WHOLESALER and the buyer. Problems develop when someone feels that the other person should not be making that much. If Anyone works hard to put a win win situation/ deal together you must respect the grind and admire the hustle. This is what we all do. We are investors looking for win-win situations.
We leave all emotions at the door when doing business. We are investors who are here to help someone out of a situation that they’re uncomfortable being in.
The information will alway be in the contract.
- Specialist · Purcellville, VA · Member since 2015 · 1k+ posts · 841 votes7y
@Henry M,
I can understand why you would want to know what the wholesaler is making in this case. If the numbers are tight, and he’s making a killing, that seems really out of whack, and you’re not going to be very happy about it. Why should he make double what you’re making for one tenth of the effort?
But, in the end, all that’s important to you is what you’re paying for it and what you’ll make in the end. If the numbers work for you, go for it. If it’s a little too lean, choose if you want to buy, negotiate, or pass. If the numbers aren’t acceptable, walk away.
If he’s trying to squeeze too much out of the deal, he won’t be in business very long. If he’s constantly over-estimating the value of his properties, again, he’ll need to change or he won’t be around too long. If he’s bringing good deals to the table, he should get whatever he’s managing to get.
Hmmmmm.... I wonder what my grocer pays for his steaks. They’re a bit pricey for my budget...
- Contractor · Coachella Valley, CA · Member since 2017 · 252 posts · 176 votes7y
As long as you agree to the price offered & the numbers work, you should not be concerned with their assignment fee.
- Specialist · Purcellville, VA · Member since 2015 · 1k+ posts · 841 votes7y
Originally posted by @Henry M.:
@Barry Pekin
Exactly! I appreciate the understanding... I'm not trying to undercut him... I'm trying to understand the structure.
Thanks!
Still, if that's a relatively accurate depiction of the conversation, I can see how you would be put off. Good customer service and clear communication can go a LOOOOOOONG way!
- Investor · Dallas, TX · Member since 2009 · 718 posts · 913 votes7y
I'm looking at your original post, and it seems to me that it was your approach that was off. You started off by asking what's his fee. As you and everyone else seem to agree, that's not really relevant to whether the deal makes sense to you financially; all that matters is whether the numbers work for you.
As other have pointed out, you do absolutely have to see the underlying contract so you know what you are getting. (I've seen them with all sorts of weird terms and those non-monetary terms can kill a deal on their own.) I'd have simply verbally negotiated a price with him and then made it clear that I'll need to see the underlying contract before I sign. Every wholesaler with half a brain knows this has to happen so you'd get the information eventually.
I get where the wholesaler is coming from in that the ones I run into often feel like the end buyers are always trying to screw them and get mad if they think the wholesaler is "making too much from the deal." (Not trying to start a debate on ethics of wholesaling.) If your first question out of the gate is, "How much are you making on the deal?" then that's going to raise red flags and make the wholesaler defensive. You're going to see the fee eventually so there's no point in raising the issue other than to improve your position in negotiation, which is certainly not to the wholesaler's advantage. (If you're negotiating with the wholesaler, you're probably not going to give an opening offer but then let him or her know much wiggle room you have.)
I always try to assure wholesalers I could care less about theirs fees and it seems to help. Just some thoughts.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @John Chapman:
I'm looking at your original post, and it seems to me that it was your approach that was off. You started off by asking what's his fee. As you and everyone else seem to agree, that's not really relevant to whether the deal makes sense to you financially; all that matters is whether the numbers work for you.
As other have pointed out, you do absolutely have to see the underlying contract so you know what you are getting. (I've seen them with all sorts of weird terms and those non-monetary terms can kill a deal on their own.) I'd have simply verbally negotiated a price with him and then made it clear that I'll need to see the underlying contract before I sign. Every wholesaler with half a brain knows this has to happen so you'd get the information eventually.
I get where the wholesaler is coming from in that the ones I run into often feel like the end buyers are always trying to screw them and get mad if they think the wholesaler is "making too much from the deal." (Not trying to start a debate on ethics of wholesaling.) If your first question out of the gate is, "How much are you making on the deal?" then that's going to raise red flags and make the wholesaler defensive. You're going to see the fee eventually so there's no point looking like you consider that issue important other than to improve your negotiation.
I always try to assure wholesalers I could care less about his fee and it seems to help. Just some thoughts.
while I fund deals with wholesaler fees for my clients.. If one is totally out of whack and many lenders are like this.. we just wont fund the deal. it raises red flag..
for me on the very rare occasion I would buy direct from a wholesaler.. I do want to know whats going on.. and its on moral grounds.. I am not starving for deals.. like many beginners.. to me if the fee is excessive I default to the wholesaler has basically lied to the seller about true value and is ripping their equity from them.. and I simply wont be a part of it.. again on moral grounds.. I have seen some pretty wild ones.. most wholesale fees I see are 2 to 5k maybe up to 10k.. but when I see a 30k ghetto house with a 25k wholesale fee I am not going to fund that.. some little old lady just got her clock cleaned.. But again I know minority view but that's my view.. And I have made my fair share of whopper profits.. but these were at public auctions all cash.. not talking someone into selling their property for half or less of what it would bring if they just did a FSBO on craigs list.. ( if they are afraid of realtors) flame on !!
- Investor · Dallas, TX · Member since 2009 · 718 posts · 913 votes7y
@Jay Hinrichs, Yeah, everything you say is valid and fair. I've never run into that as most of the stuff that is wholesaled to me is from people I know and I stay away from the shady wholesalers. I'm probably relying too much on my own experience, and I agree in the example you identify, I would not feel comfortable proceeding with the transaction (both morally and legally, you rip people off like that and you're asking for trouble). If I saw something like that after reviewing the contract, I would probably not proceed.
The fee is not relevant. Either the deal is good or it is not. Let's pretend...
House Fair Market Value "as is" is worth $120K. Wholesale price is $90K.
If the Assignment fee is $10K, $20K or $50K, why does it make a difference? At the end of the day, you're still getting $30K in equity. The difference between the purchase price you pay and the fair market value of the property is what makes the deal good, tight or bad.
The only person who "might" be concerned with the wholesaler fee is the owner of the property. If they see the settlement statement and feel as though they are getting screwed or were mislead by the wholesaler, they may try to back out of the deal or do something nasty to sabotage the sale. I can see that as a legit reason for concern. But basically, what you're doing is asking someone, "How much money do you make?" Generally speaking, that is a rude question. I'm with the wholesaler on this,although probably would've been a bit more polite and said, "We are happy to give you the entire contract for review, but it is our policy to redact our fee & purchase price to protect the privacy of our Seller and our company's interest."
Profit margin is a closely guarded secret in most companies. My day job is IT for a Fortune 500 retailer, and we never disclose our markups.
My 2 cents. That plus $4.98 will get you a pint of microbrew...
- Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes7y
The wholesaler doesn't want you to go directly to the seller and is protecting their interest.
For me, it's a matter of honesty and don't like to see distressed sellers get robbed. If everything is fair and honest then it's all good.
- Rental Property Investor · Gulfport, MS · Member since 2018 · 113 posts · 133 votes7y
@Henry M. This is pretty close to standard process man. For the purchases I have made from wholesalers I have seen the assignment fee on the HUD at closing, or never saw what the wholesaler made if they did a double close. Don't sweat what they are making, just evaluate the deal at their asking price.
- Rental Property Investor · San Diego, CA · Member since 2019 · 290 posts · 254 votes7y
@Henry M. For me, I don't care what the wholesaler's fee is. I only care if the deal I'm buying is a good deal. I just closed on a deal where I negotiated the wholesaler down $10K to get to the number I needed to make it a good deal for me - and that's what I based my decision on. I don't care how much he makes. But I'm also a new investor so take what I say with a grain of salt.
@Erik Whiting
Let me start by saying I've been doing this since 1996...
So, I'm no newbie here.
I believe everyone is becoming fixed on the fee... When that is not the purpose for my questioning.
It is either an assignment or not, that's number one.
Number two, the deal is almost there, however the structure of that deal, for me is important... Before I get into why.
I don't care if this guy is making $10K, $20K, or $50K... It truly doesn't matter to me.
AS LONG AS THE NUMBERS WORK.
In this case, they're tight.
Most people become fixed on the fee... I also don't like doing business with those who are not transparent.
I get it. There are times hiding your fee is important due to amount and yes, I do understand greed is a factor in most cases. Hence, the reason to conduct double, simultaneous, pass thru closings.
Now back to the structure... IF he is ASSIGNING the CONTRACT, then KNOWING the FEE IS IMPORTANT?
YES. This will determine several factors and again... I'm looking out for my interest. If I am going to be INVESTING into a fix and flip, it is imperative the numbers are comfortable.
In the end, I will negotiate for my purpose and we'll see if I can close a deal with this guy.
I second the Brewski mentioned.
Lol.
"Big" Henry
@Anthony Rosa
I understand... However, not everyone circumvents the wholesaler and most importantly, he should have it locked up.
I believe he is not being transparent upfront based on what he is trying to EARN. I have no issue as long as the numbers work. If they don't, I will negotiate, and move forward and on.
But again, he said assignment and I will eventually find out if I move forward or move on.
"Big" Henry
@Danielle Wolter
Lol. You are a newbie, but good for you.
So I am reading the same theme across the board. Maybe I'm not explaining myself with my responses correctly.
If someone says it is an "assignment" contract, they have to disclose their fee.
Let's just think about that for a second.
If he is getting paid by the seller directly, fine, no problem.
If he wants to double close, fine, no problem.
If he says assignment, then what is the fee to buy the cotract, if I move forward.
There is no other way to cut it unless there is a new technique I don't know about.
If I negotiate on the entire price, it will affect his fee regardless, unless he is earning a percentage from the seller.
Let me pose this to everyone who has responded which I find odd. When you negotiate with any seller... Is it important to know where they stand and what they owe on their mortgage?
The answer should be yes.
This is how you will know what the circumstances are and how to structure the best deal.
To oversimplify it as a catch-all method that it (numbers) either works for you or not... Is a shortcoming in my opinion. I negotiate deals.
The numbers is not even the first rule in my book.
For me, it is flexibility and motivation.
With that said, not all of but most (I've interacted with), wholesalers are not great negotiators. There are many times they can earn their fee while still allowing the end buyer to know the structure of the deal and renegotiate a win-win for all.
On a more recent deal, a new wholesaler said the owner was fixed on their price. He negotiated with the seller from $46K asking price to $31,500. In the wholesaler's mind, he pushed as far as it would go. I told them based on the circumstances and info I retrieved from them, that was not the case. I wrote up word for word on what to send to the seller and they came down substantially. They resigned their contract with an accepted price of $22K.
The wholesaler was very transparent with me and I assisted in a much better deal for the wholesaler... I made no money on the deal, I just used my experience to teach and create a much better deal for the wholesaler to help make them more money without breaching a potential good deal Vs. turning a tight deal into a No Deal.
I hope this lays out what or how I view the subject.
I was only asking if there are alternatives for wholesalers to not want to divulge the fee while still offering it as an assignment.
I have since realized, there may be no alternatives.
Thanks for your grain of salt though. 😁
"Big" Henry
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