Investor · Chicago, IL · Member since 2013 · 21 posts · 28 votes
I have my 1st wholesale deal, and the buyer and seller don't know that I'm wholesaling it. Buyer knows there's an assignment fee, just doesn't know who it is.
I convinced the Title company to include the fee but they insist on putting my name or my LLC name on the HUD as "Assignment fee to XYZ", even though I asked them to just write "Assignment fee" without the to.
how do I convince Title to remove the "to XYZ" part without seeming shady?
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
12y
Without seeming shady? You've already missed that boat. The title company has to disclose where all of the funds are going on the settlement statement, they can't just have line items going to a mystery party. If you want to do repeat business I don't know why you can't do it in an up front an honest way.
Who does the buyer think you are, the actual seller? If that's the buyer will find out pretty quickly when there's a different seller.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
12y
Unfortunately you may well still end up in front of a judge. As you're doing deals, always ask yourself how the deal would look if you do have to explain it to a judge. Or to a reporter.
Investor · Chicago, IL · Member since 2013 · 21 posts · 28 votes
12y
Quick update for you guys: I spoke to the buyer and told him the situation, then took @Wayne Brooks' advice and asked him if we could split the difference on the price reduction. He happily agreed and even thanked me for saving him some money, and we asked Title to put the assignment fee on the HUD1.
Thank you all for the great advice, it lead me to an inner process in which I came out better and more educated for it.
Contractor · Cove, AR · Member since 2014 · 5 posts · 1 vote
12y
If you renegotiated with the seller, for $5,000 reduction in purchase price, why couldn't you afford to do a double close and avoid all this?
Where did you have any profit in the deal before you renegotiated with the seller?
I'm a newbie and just studying on how to do different transactions. The way you set this up doesn't sound right to me and the way you are attempting to hide it surely sounds shady.
Sounds like everyone will have a bad experience with the transaction
Investor · Chicago, IL · Member since 2013 · 21 posts · 28 votes
12y
@Donald Klos Hey Donald, the way I had it structured was that I provide a service to the investor of consulting him with regards to real estate. So I have my consulting fee to lean on.
I just gave an example of $5000. In reality it was $2500. Double closing the deal would have left me at the same position I was after doing the split on the price reduction (maybe even worse), and I wouldn't have been able to do a double close anyway, since I can't be the seller if I'm consulting....there's a conflict of interest.
Investor · Chicago, IL · Member since 2013 · 21 posts · 28 votes
12y
@Billy Hills See my previous post. I spoke to the investor and asked him if we could split the difference on the price reduction. He happily agreed and even thanked me for saving him some money, and we asked Title to put the assignment fee on the HUD1.
Roy, as an aside I'm pretty sure you are violating your state licensing laws by collecting a "commission/referral fee/finders fee/whatever you may call it"from a buyer for finding them a property, whether it is on the HUD or not.
Also, your trying to make an additional spread, and figure out how to hide it from the buyer, when the buyer is paying you a finders fee for locating him a property.......is pretty much the definition of being shady......do that here, and you'd never do another deal with anyone we know.
Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
12y
Glad that the transaction worked out and everyone was happy.
I'm also concerned as others have said about this "consulting" deal you have.
Very surprised that an attorney said this was okay unless you are a) explaining what the actual arrangement here poorly or b) you explained it to the attorney very poorly.
What you said here was basically that your buyer said that they would pay you a percentage of the sale price as a commission when you found them a property.
That is pretty much the definition of a buyers agent and you are practicing real estate without a license. Not a snowballs chance in Hades that you would not get totally nailed on that if you were ever to be brought in front of a judge. It is just way to blatant.
In reality any birddog fee is illegal for non-licensed parties. I have seen things structured as a consulting fee for "acquisition analysis" where there is an invoice for evaluating a deal for a flat fee. This legitimately sounds like an actual consultation relationship as it is for evaluating the merits of a deal and it is a flat fee.