Glossary
Assignment fee
An assignment fee is what a wholesaler earns for passing their purchase contract to an end buyer. It is the gap between the contract price and what the buyer agrees to pay.
In a wholesale deal, you sign a contract to buy the house, then assign your rights in that contract to another investor. The buyer pays you a fee for the deal and closes with the seller at your contract price.
How it works
Assignment fee = what the end buyer pays for the contract position, above the contract price. The buyer's ceiling is their MAO. Your fee is whatever room is left between that ceiling and your contract.
- Your contract price with the seller
- $120,000
- End buyer's MAO
- $130,000
Run The Deal flags a spread under $5,000 by default, since thin fees leave no room for a surprise.
What to watch
- Assignability. Some contracts, and some sale types such as many bank-owned listings, do not allow assignment.
- Disclosure. Many states require written disclosure to the seller and buyer. Run The Deal adds a disclosure note based on your license status.
- Licensing. Some states treat repeated assignments as brokerage. Check with your attorney.
- Taxes. Fees are generally income. Check with your tax pro.
Assignment vs double close
In a double close you buy the house and resell it the same day, so the end buyer may not see your spread. It costs more because you pay two sets of closing costs and may need short-term funding.
Check your buyer's numbers with the flip calculator before you set the fee.
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