Assignment Fee Check "Before" Closing & Marketing Properties

3 Replies

Hello Everyone,

So today I spoke with an attorney today regarding the process of wholesaling and how to properly set up my purchase contract and assignment contract. I hear so many different things from people online it just keeps me confused and prevents me from taking the "next step". I have already began my mailing and talked to a few sellers, and before anything moved forward I wanted to clear things up with an attorney. Also, I see people market deals all the time and due to the recent changes in Texas law, I wanted to clear that area up as well. I am definitely the type of person who likes to have his ducks in a row before executing - which can be an issue sometimes.

One thing that I learned surprised me. If I use the TREC contract, and then have the "assignee" sign the assignment contract (that has the assignment fee on it), then the buyer should hand me the check at that moment. Then, that removes me from the rest of the process. No going to closing, etc. like I have read/heard from everyone else. If the buyer tries to default, then I still get the assignment fee because he already signed the contract, and is still obligated to the original purchase contract as well. He said I am there to "sell the contract" not "sell the property".

Has any wholesalers gone about the process this way?

Also regarding marketing. He advised that if you are posting on craigslist, etc.: avoid posting price, avoid posting pictures, ARV's, and repairs. What can be done for posting is headers like "House on 123 Street for $500K Assignment", or "Selling Contract for $500K" and have interested buyers contact you. Once they contact you, THEN you can give them more information. Because if you do not here in Texas, you would fall under brokering without a license. He advised that the best thing I could do is have investor buyers that I can trust and that will go through with the transaction.

I would like to here your thoughts on this. 

Thanks!

An assignment of your contract does NOT relieve you of your obligations under the purchase contract unless your purchase contract specifically states the seller is releasing you from all obligations upon assignment. Yes, you will have the assignment fee but you better be prepared to close or the seller could come back on you since they signed a contract with you, not and assignor.  

Originally posted by @Guy Gimenez :

An assignment of your contract does NOT relieve you of your obligations under the purchase contract unless your purchase contract specifically states the seller is releasing you from all obligations upon assignment. Yes, you will have the assignment fee but you better be prepared to close or the seller could come back on you since they signed a contract with you, not and assignor.  

Thanks for the comment Guy. Well that is where the Termination "Option Period" would come in I believe. My attorney advised that I could put up a non-refundable option fee for maybe $100 - $500 dollars for a period of time that goes by and then increase for each # of days that goes by in the contract, so for instance:

(Option Fee - not Earnest Money)

$500 give to seller 3 days after contract is signed.

If close hasn't happened within 15 days, give them another $500.

If close hasn't happened within another 15 days, give them another $500. 

That way if your termination option was open for 30 or however many days, and you terminated, the seller would still get non-refundable money, I would get my earnest money back (likely $1000), and then go our own separate ways.

I have enough funds to put up an earnest money deposit, plus non-refundable termination option fee. I feel its more ethical to have some sort of skin in the game.

That assumes your contract allows for you to "automatically extend" your option period without seller's written agreement on any subsequent extensions. You would indeed have to remain in an extended option period throughout your contract or seek other termination points. However, once you assign the contract, you're not able to extend the option period as the assignor, and IF the assignee doesn't close, you're still obligated to close absent other termination points you may have in the contract. 

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