Real Estate Commission VS. Wholesaler assignment Fee
- Ronda Sharp
- Mar 21
- 2 min read
When navigating real estate deals, understanding the difference between a real estate commission and an assignment fee is crucial. Each plays a distinct role, depending on whether you’re a licensed agent or a wholesaler. Let’s break it down!
What is a Real Estate Commission?
A real estate commission is the fee paid to licensed agents for facilitating a property sale. Typically, this fee is a percentage of the final sale price (often around 5-6%), split between the buyer’s and seller’s agents.
Who Pays It? Usually, the seller covers the commission.
When is it Paid? At closing, from the sale proceeds.
Agents earn commissions for listing properties, marketing them, hosting showings, and handling negotiations. Agents often pay a fee to a real estate broker for each home they sell.
What is an Assignment Fee?
An assignment fee is what a wholesaler earns for assigning their rights in a purchase contract to an end buyer. This fee is not tied to the property sale price but to the spread between the contracted purchase price and what the buyer agrees to pay.
Who Pays It? The end buyer (usually an investor).
When is it Paid? At closing, or sometimes upfront.
For example, if you contract a property for $100,000 and assign it to a buyer for $110,000, your assignment fee is $10,000.
Key Differences:
Licensing: You need a license to earn a commission, but not for an assignment fee (depending on state laws).
Responsibility: Real Estate agents help close deals; wholesalers find and assign deals.
Payment Source: Commissions come from the seller if they use a real estate agent; assignment fees come from the buyer during a wholesaler transaction.
Understanding these distinctions helps you choose the best strategy for your real estate goals. Whether earning commissions as an agent or collecting assignment fees as a wholesaler, knowing the mechanics ensures you stay compliant and profitable!
The information in this article are of the experience and opinion of the author. Due diligence should always be done before investing in real estate.
Comments