Property Wholesaling has emerged as a popular strategy for generating profits without the need for significant upfront capital. At the heart of this strategy lies the assignment contract - a pivotal document that facilitates the transfer of rights from the wholesaler to the end buyer. Understanding its components is key to obtaining lucrative real estate assignment fees.
Introduction to Real Estate Property Wholesaling and Assignment Fees
Property wholesaling involves finding distressed properties at below-market prices, getting under contract with the seller (Purchase Agreement), and then assigning or selling the contract to another buyer for a fee. This fee, often referred to as an assignment fee, is where wholesalers make their profit. Keep in mind that typically wholesalers are not realtors, so the assignment fee should not be considered as a "commission".
This profit can vary greatly and is determined by how much your seller is willing to sell it for and how much the buyer is willing to buy it for. I have made as little as $500 and as much as $30,000 on a single real estate contract assignment fee. You can pretty much set your own price if you encounter the right properties.
The Key Elements of a Property Wholesaling Assignment Contract are:
Parties Involved
Assignor: The individual or entity initiating the contract.
Seller: The current owner of the property.
Assignee: The buyer to whom the contract rights are being assigned.
Property Description
Include details such as:
Property address
Legal description
Any specific terms related to the property's condition or features. Example: Flood zone, septic tank, etc.
Purchase Price and Terms
Specify:
The price agreed upon between the wholesaler/assignor and the seller.
Any contingencies or conditions that must be met for the contract to be valid. For example: Must close by a certain date, mineral rights, etc.
Who pays closing costs
Assignment Fee
Detail the amount of the fee:
The fee the wholesaler will receive for assigning the contract to the end buyer.
Contract Termination and Contingencies
Outline:
Conditions under which the contract can be terminated.
For example: you may include language that outlines the inspection period time frame. If during the inspection period, the buyer is dissatisfied with the findings and desires to void the contract, it can be done so without penalty.
Contingencies /Disclosures that protect the wholesaler in case certain conditions aren't met.
Sample Language: Seller sells property as-is with no warranty of property conditions. ASSIGNOR(S) makes no representation to BUYER(S), or his agents, as to the condition of the subject property.
Signatures and Dates
Ensure:
All parties involved sign the contract.
Dates are specified for when the contract becomes effective and any deadlines for performance.
Legal Considerations and Compliance
Ensure the contract complies with:
Local and state laws regarding real estate transactions.
Any specific regulations governing assignment contracts in your area.
LICENSURE:
Disclose whether or not you hold an active / inactive real estate license
Conclusion
Be upfront and transparent with the seller and the buyer/assignee. Although, I never disclose my fee to sellers, I explain what a property wholesaler is and how the process works. You definitely don't want to lose a sell due to confusion or full disclosure.
It is essential for real estate investors to fully understand the complexities of a property wholesaling assignment contract. By understanding each component—from the parties involved to the legal considerations—you can navigate transactions smoothly and maximize your profitability in property wholesaling.
Whether you have experience as an investor or are new to the field, understanding the basics of this agreement will enable you to move confidently in real estate wholesaling. Take the necessary steps to integrate these key points into your investment approach in order to harness the opportunities of property wholesaling for your financial gain. Subscribe for more tips!
The information in this article are the opinions of the writer. Before investing in real estate, conduct extensive research and perform due diligence.
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