When Are Assignment Fees Paid?
I came across an interesting thread on when assignment fees are paid here on BP with the title Paid at Closing vs. Paid at Assignment. It raised a couple of questions in my mind about the risks of wholesaling, namely the implications in the event that you assign a contract and the buyer backs out.
It seems to me that Paid at Assignment would both:
- Result in committed assignees, otherwise they would risk losing the money they paid the assignor, and
- Provide the assignor with a significant cash cushion against breach of contract if they cannot locate another buyer prior to closing, and ultimately decide to cancel the contract with the property owner.
But this raises another question. Let's say you execute a P&S with the property owner and give them an EMD of $500. You assign the contract to a real estate investor and receive a fee of $10k at assignment. The investor fails to close and you cannot find another buyer in time, so you cancel the contract with the property owner and forfeit the EMD of $500.
But you've essentially made $9,500 for breaching the contract! This can't be right and I would suspect it would create serious problems for the wholesaler.
Does anyone have experience with this type of situation that they could share?