Hello, I have been researching wholesaling land (online) and I keep seeing an average number used of $5,000. for the assignment fee. Is this just for example purposes? Is that like a minimum to expect??
I have heard of people wholesaling for much more, so I was curious as to why that number is used.
Also, has anyone had a seller or buyer annoyed when they see the closing statement and see the differences in the selling and purchase price???
Thanks for info. on this.
I am new here and can’t wait to get more info. from experienced land flippers. I am so glad I found this video and forum. Thank you REtipster!
@dca great question.
I’ve also seen that $5,000 amount used as a benchmark for years. I’m not sure why… maybe it’s just an average or a minimum amount for most wholesalers?
You’re right, though, it can be much higher than this. I’ve heard examples from people who have gone over $80K for their assignment fee and I’m sure it can go even higher than that, it’s just a question of how high will be problematic if the buyer sees it and it causes problems. In these cases, that’s when you’d want to go with a double closing instead of an assignment.
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@retipsterseth Thank you for replying. But with a double close, I would have to pay for closing costs, twice. 
I guess they would not be that high and worth it in the long run if all works out as planned??
Another question, the seller will pay for the title policy, and any liens or back taxes and escrow fee and lawyer fees from title co to draw up docs, correct?
And do you request proof of funds from a cash buyer when you assign the contract?
On the data tree search system, does it allow to you search what cash buyers are paying for properties?
Thank you again!
@dca anyone can pay for the closing costs and title insurance, it just depends on how you spell out these details in your PA and who you assign these costs to.
Even if you do decide to pay for the closing costs on both closings, this should be easy to cover if the deal and profit margins are big enough to justify the extra steps of a double closing.
As for finding cash buyers on DataTree, yes, you can do this. I explained how to do this in a pretty old video about ListSource (a competitor of DataTree), but you could apply the same filtering logic within DataTree to get the same kinds of people on your list.
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@retipsterseth Thank you. Yes I do realize it completely depends on how the terms are laid out in the contract, I guess I was just wondering what the norm was, if there is one in real estate, right?
And the reason we want cash buyers is bc the financing route would take longer, correct? Basically? Any may possibly not go through. And do you request proof of funds for that cash buyer?
I so appreciate you responding so quickly. I enjoyed the one video I have watched so far…and appreciate your honesty and straightforwardness.
@dca I believe the seller typically pays for the title insurance (even though it’s technically for the new owner, it’s ultimately protecting the seller in case any future title disputes come up… that’s why it usually is set up this way). Other closing costs are split up between the two parties, but again, “normal” is a bit subjective.
As investors, it’s not uncommon for us to pay for everything… so if you’re selling to another investor, they may go into it with the assumption that they are paying for the closing costs on their end of the deal.
Cash buyers are what we’re all looking for because they can make the process go much faster and, more importantly, banks typically won’t get involved with assignments and double closings, because it goes against their internal rules. If a person can only buy with conventional bank financing, they likely won’t be able to do an assignment or double closing.
Requesting proof of funds might be a good idea if you don’t know the person and have no prior experience. If it’s an investor you’ve worked with a lot before, you may be in a better position to just trust that they’re good for it.
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@retipsterseth @dca I’ve closed deals where the wholesale fees have crossed $100k per transaction. However, those have been structured as double closings instead of assignments, to protect my purchase price. In a double closing, I pay closing costs twice, for AB (Seller to me) and BC (me to Buyer) transactions. It takes around $5k out of my profit, sometimes more if the title commitment is expensive, but it’s totally worth it if the deal crosses the finish line.
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@armaan-premjee Wow! For over $100K in fees? $5K sounds worth it to me.
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@retipsterseth Yupp, had one deal where I bought for $60k, sold for $190k. Netted $115k after Survey, 6% to realtor, closing costs. Had another deal where Purchase price was $404k, sales price was $575k. Netted $122k on that deal. Had to spend $7k on Survey, 6% realtor commission, plus closing costs.
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@dca For closing costs ‘customary’ or ‘by local custom’ might be better words than ‘normal’. Here in Northern California it is customary for the Buyer to pay most closing costs - title insurance, escrow, survey, inspections - whatever they may deem necessary to assure themselves of what they are buying. I guess the theory behind that is ‘you can close without title insurance or an escrow or a survey, so if you want one, have at it and pay for it yourself’.
Customs is other markets are not the same. Some places it the seller is typically required to provide good title as evidenced by a title insurance policy they pay for and provide to the buyer. No matter what pond you fish in, it is all negotiable.
Demand what works best for you and be flexible if you can to make a deal happen. For double closings ask your closing agent about a title binder policy. If they can provide one, you pay 120% of the typical premium when you buy, but when you sell and insure with the same insurer, you get a refund 100% of the original title policy price. Say the title policy price is $1000. You buy a binder for $1200 when you close the buy. You get a $1000 refund when you close the sale to offset the cost of the new policy. Saves us a lot on flip cost.
Agree with the other comments on assignment fees. Prices are high around here and $10,000 is a more typical assignment fee. Some do run into the six figure numbers. I agree that when there is that much spread - buy, close, sell, close is a better option. And it is worth it to absorb the added cost. Title companies may give you some blowback on a typical double closing, so have a chit chat with your escrow officer on the front end, just so you know what to expect.
Our escrow officer is something I like to demand even though the local custom is that the buyer selects the escrow officer and Realtors often get very terratorial about pushing business to their friends that buy them lunch. I don’t give a damn about their preference. Unless my property is a dog, it is often my way or the highway for their buyer. I need control of the escrow to control the title insurance and get my title binder refund! Best of luck.
@dca Rather than pay big upfront assignment fees, I try to include the birddog with a piece of the deal. I give some cash upfront to buy some gas and groceries - more than I paid a year ago. The rest is paid in a small percentage of the deal as a beneficiary of the title holding trust. If their deal is as good as they say it is, they will make more on the flip than they would if the whole fee was paid in cash up front.
I do not pay blind assignment fees or buy in double closings without a really good reason that clearly benefits me. I’ll check the title to ensure the seller is the owner. I bought several that I lost a few bucks on and that experience kind of soured me. I demand to know and understand the whole deal up front or I will just pass as an investor and move on to look at a square deal instead of trying to see through smoke and mirrors. If you think your deal is worth a $100,000 assignment fee, tell me about it, if I see value I’ll pay the freight and buy in.
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@sean-markey
Thank you very much for all your info. I so appreciate getting feedback here. I can see the need for a double close if you know early on you will need it. Do you put an option period in to give you time to find a buyer and/or do you just put the close date out a month or more to give you time. In Texas if the seller is paying for the title policy, they choose. Sometimes buyers really are not particular about the title companies. In my area fees are all similar. Not the case in Houston. I have not found one yet very close to me that appears to be investor friendly so I am on the hunt for that. lol
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@sean-markey I had no idea about the title binder policy but I have never done a double close where I am involved.
I am not following on the birddog. You give cash to the seller up front for holding the property? Oh no, I just have small acreage that I am looking at and have not done any flips yet. But I wish!
Thank you again!
@dca I am talking from the investor perspective where the birddog is the one that found the deal, tied up the property and is trying to sell me the deal for an assignment fee. They may sell me the contract for a reasonable straight up fee. or they may close in the first part of a double escrow (using my cash on deposit) and then in the second closing, sell me the property to make their spread. Title insurers have grown wary of double escrows over the past ten years or so. Check up front to ensure you are good to go if that is your plan.
Check with your title company or escrow agent about the binder. I use that regularly with distress houses but I do not recall using it on a land deal, at least not within the past couple decades. Should be the same deal as long as they get to write the new policy.
@dca If you are the one that is selling the contract for an assignment fee, time is your friend. Get as long a period as you can from the seller. You could use an option but these deals seem to be typically just contracts with extended escrows of 30 or 60 or 90 days or maybe with a built in extension.
I am usually the guy buying the contract from the birddog and closing on the property with the seller. As a buyer I am very particular about the escow agent and title insurer. An escrow officer and underwriter that know me are much more likely to help me get a messy deal closed. It does pay to shop around and too have a backup B team and maybe a C team too.