$100k assignment fee

43 Replies

Hey guys, I am 19 years old and I currently have a property under contract for $820,000. The ARV is $1.3 million. My issue is, I want to make a $100,000 assignment fee. I already calculated that if the cash buyer buys the property for $920,000, he will still make a 32% profit if he sells for $1.3 million ( mind you, the ARV could be more). The issue is that I do not want the SELLER (not the BUYER) to know I made $100,000 at closing. I know that the title company can make a sellers side HUD and a buyers side HUD. But to be clear, I would love someone experienced to help me out with this huge transaction. I am aware that I can do double closing but in my state, which is Florida, you need a transactional funding company to fund the deal. They can make as much as 1%-3% off the loan and I will also pay closing costs. Plus, I do not want to hide my profits from the buyer, because I want to do future business with him. Thank you so much to whomever took the time to answer this.

I would tread carefully, sounds like FL is cracking down on wholesalers.

Honestly, if you are making $100k, and doing it the "better" way is to double close with transactional funding, why not do it that way? Even paying 1-3% and some closing costs, you are about to make $100k for doing nothing but being a middleman to a deal. This is the route I would take (assuming it is legal and my sellers knows that I am doing this), but I'm sure some more experienced investors and wholesalers will be along shortly.

Making $10k on a wholesale deal is pretty darn reasonable and will fly under just about every radar, all day, every day, in almost any state.

Pulling $100k from any single transaction has a decent chance of popping up on some kind of radar somewhere.

Sounds sweet, and if you do it You will have done a bigger wholesale deal than probably 99% of wholesalers. But if I were you, knowing what I know about this business, I would be kinda nervous about this.

Ok I am a pessimist , its the guys first post , he says he is 19 years old , and has a wholesale contract on a property for $ 820K . AND he wants to clear $100K on it . 

it just doesnt sound right to me .  

Originally posted by @Brian Pulaski :

@Matthew Paul imagine being the seller signing a contract for a 19 year old "cash" buyer! 

Exactly , generally speaking someone that owns a house in the 1 million dollar range is financially  educated  ( most of the time) . And leaving that much money on the table just doesnt pass the sniff test 

Not sure about this area.. but much of the deep south when you get deals ( and I get them sent to me all the time.. ) that says arv is 1.5 or 2.0  that's just a pipe dream.. might be on paper but will never happen in reality... but maybe that part of FLA it will happen.. But I agree most sellers in that situation don't leave that kind of money on the table.. and this could easily be the reverse

IE  seller knows the house is only really worth what the kid is paying for it or less.. so let him knock himself out if he thinks he can sell it for more.. and most of the time nothing happens with these deals.. there is no end buyer.

but hey it can happen.. not saying it can't.. but it would be a rare event..

I paid a 125k assignment fee last summer.. but that was for a 7 million dollar chunk of dirt that has 1 to 1.5  of up side for me that I know I can garner...

LMAO.

@Jorge Reveron , without knowing if your analysis is correct or not, the absolute best way to make this transaction work is transactional funding (IF your analysis is correct)/.  There's a BIG difference between a 1% and a 3% fee on $820,000.  IMO, a 1 percent fee equaling $8200 on a $100,000 profit is a no brainer.  3%,while still may be your best bet, is a little more difficult to swallow.

When you complete the purchase in your name, even using transactional funding, you are in control.  When your a merely a intermediary, unlicensed, operating in a gray area, you lose your leverage.  Both the buyer and seller realize the zero sum nature of the transaction at is point.  The buyer begins to think "you know, this 19 year old kid, with no money in the game, wants to make $100,000, that can go in my pocket".  The seller thinks the same, only five times more forcibly.  It's at that point that things become dangerous - for you.  The seller and buyer may talk and will realize that your status is on somewhat shaky ground, i.e., your assignment fee may be considered a commission, and if you do not possess a real estate broker license your are not legally entitled to a commission resulting from a real estate transaction.  If you do have a real estate license you may be in violation of numerous codes of conduct governing broker  - seller relationship.

So, the principals check with their attorney's to figure out a way to knock you down a few notches.  Their attys send you a letter stating all the reasons you status as to collecting a commission is not in compliance with real estate law, and then offer you $7,500 as payment in full.

Being ready, willing and able to close (even temporarily) in your name eliminates most of the above issues.

It is worth 1.3M. Zillow says so.

Given the claim the seller could make a 32% profit ($920K purchase price * 32% = $295K), and the seller will have costs around $120K for the purchase and then a retail sale and a purchase prices of $920K (adds up to $1.335 million) it would see the house requires to repairs. So I'm thinking the ARV is closer to $820K than $1.3M.

@Wayne Brooks This is no laughing matter. Think about the $10 EMD that could be at risk here.

I should note that I already have multiple cash buyers.

Maybe the buyer is a wealthy foreigner trying to get their money out of some country like Venezuela into an asset that can’t be seized by the local strongman Maduro or Castro crony... In that case maybe $100000 is a small price to pay a well connected 19 year old. 

:-)

Haha now all OP needs is a title company to help him hide the $100k.

What a joke.

Well you don't want to do an assignment because that would let the seller see how much you're making.  And you don't want to do a double close because of the costs involved.  So the third approach is to form an entity, have the entity buy the property and then sell the entity to your end buyer.  But you will still need to fund the entity so it can make the purchase.  Which probably means some sort of transnational lending.  I'm not aware of any other option to pull off a wholesale deal.

If you're determined to hide your profit from the seller, you're going to incur some significant costs.  Your call.  IDK if Florida deeds show the transfer amount.  They do in most states, though not all.  If so, the seller can simply look up the deeds after the deal closes and figure out what you made.

@Jorge Reveron How much will the repairs cost to reach the $1.3M ARV?

How did you determine the ARV?

What made you pick $100k as your assignment fee?

If need to go through so much trouble to make sure the seller doesn't see your fee, doesn't that tell you something about the nature of the fee?

The flipping rule of thumb is buy at 70% of ARV, less repair costs. (ARV- repair costs)*.7.

With a $1.3M ARV, using this rule a flipper would buy at $910,000 if they didn't do any repairs. That dog don't hunt based of your sales price.

If they bought at 80% ARV, they'd have around $120k to make repairs, which makes a little more sense.

If you have cash buyers (have you verified they have cash?) I'd follow @Don Konipol 's advice. 

You aren't breaking the law that way and if your buyers fall through you'll still hold up your end of the contract.

I get it. The OP is going to sell a seminar for only $25,000 on how to make hundreds of thousands of dollars working as an unlicensed broker.

Pay what it costs to double close with transactional funding. That will shield the resale from the seller (until after the sales are recorded and become public records) and will result in a nice payday for you. If you wish to share the original purchase price with the buyer, then do so. If your analysis of the deal is correct, your buyer will be happy to buy your deal and will happy to buy another similar deal if you can find one.

For those of you who think the $100K assignment fee may be unrealistic or unreasonable, I once paid a $40K assignment fee on a $142K (total) purchase. An opportunity arose to sell that deal to another buyer within 90 days (with less than $5K of expenses for clean out) for a $27K profit. I would gladly take a similar deal anytime I find one.

I have since participated in another deal where there was a $40K assignment fee on a $100K purchase. That deal may result in > than a $100K profit to the buyer/rehabber. Another deal had a $50K assignment  fee on a $235K purchase (this was seller financed so the buyer/rehabber only came to the table with ~$80K). That deal may result in ~$70K profit to the buyer/rehabber.

I have seen enough crazy stuff over the years to say it is possible.  If it is, the original poster should line up the transactional funding.  If his buyers are cash buyers they can actually provide it.  They might even do it much cheaper than the 1%-3%.

Most I've paid was $35k twice. I don't care how much a wholesaler makes as long as my numbers work. If this "deal" truly has this spread, why not take it down and list it on the market???

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I do not even want to say how much I have seen paid by people doing assemblages.  But... four to fives time individual lot value is not unheard of.

Originally posted by @Michael Biggs :

I do not even want to say how much I have seen paid by people doing assemblages.  But... four to fives time individual lot value is not unheard of.

 on the flips side I made a 500k flip fee on a 14 lot development.. but I did put up the 50k EM and I did spend about 75k getting it pre plat approved.. then builder closed once all appeals were exhausted..

but I was also prepared to close if he tried to back door me or go around me.. which is not uncommon when you get into the bigger money players..

at the time I did not even realize wholesaling was a thing or you would call it that.. maybe it was a development wholetail since we did put up 125k of risk money :)

on the one I just paid the 125k to someone else we have an offer on the table right now from lennar which is a 1mil profit. but again I put up by the time its done 325k to get there.. the mil we get our 325k back then a check for 1 mil if the stars all align .. we could lose 325k also.. rapid appreciation like this I guess those that call appreciation gambling maybe that's exactly what it is... gun slingers.. take me a long time to make 1 mil in a year owing rentals though  LOL.. I love the game !!!

$1,300,000 ARV

-     $104,000 Sales cost

-       $26,000 Acquisition closing cost

-    $920,000 Acquistion sales price

-----------------------

= $250,000 spread.

Whats the repair cost? Whats the average time to repair at the size? Whats the average time to sell?

Even if your ARV is correct, this sounds likely to be zero profit in this deal once that $250k has rehab costs, holding costs, deducted from it, using the assumption that at this price point its a fairly large property.

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