Contract Assignment Fee Question

to handle the assignment fee is to collect it when you assign the contract as your fee is earned when you tender the contract to the new party. However, most people do not follow this logic and instead collect the fee when the deal closes. But by doing it this way you aren't assigning the contract as you are still part of the contract until closing. It is one reason people say that assignment is not legal. Assignment is always legal; it is the manner in which it is done that makes it improper.

Page 163 Profit RE RIGHT NOW says:give paperwork to closing agent and get
paid agree-amt at close of escrow. Book says title agent NOT know about the
assignment or the rules of law, so one should have an attorney for to
collect the fee if you not there. Your fee is earned if the deal closes only.
IF BUYER BACKS OUT BEFORE CLOSING DO YOU GET PAID-- NO.

The Answer is in the Book:Profit From Real Estate RIGHT NOW and says:
to get paid at closing on page 163 of book.

Thank you for the replies.

I am re-entering the business and have a property under contract and an interested cash buyer / investor.

The buyer told me they like the property and can close in 10 days and I said great let's get together and I'll write up the assignment of contract and you write up a check for my assignment fee.

They balked and said they've never paid assignment fees prior to closing. Went on to say that what if the seller was to back out or for whatever reason the buyer was unable to get it closed "due to no fault" of the buyer...

I replied that I usually get paid at the time I assign my contract.

The investor balked again and said if I were to spend the money and the deal fall apart for whatever reason that he'd have to sue me to get the money back...

I ended by saying that I wouldn't have an issue having the title company hold onto my fee until closing.

If my earnest deposit to my seller is $500 and my assignment fee is $5,000... Should I have the investor deposit $5,500 into escrow or $500 (earnest deposit to seller) and a portioin of my fee? Or does it not matter?

I think playing devils advocate what if the investor/buyer were to drop the ball and devalue my contract by tying it up and letting it expire? If my fee wasn't in escrow I wouldn't get paid... even if it was would I have to fight to get it?

Please help!

Mike, I appreciate your cut and paste but I'm not sure that BOOM! was helpful... I'm looking for advice or suggestions not reverting back to the original response my original post. My scenario evolved when I typed more of my current situation and I am looking for guidance... NOT a smarty pants reposting someone elses comments...

NOT a 'smarty pants' reply, just agree w/Bill

alot of ppl have been taught to collect 1/2 assignment up front and the other 1/2 @ closing

others have been taught to just turn in ALL the paper work to title co and get paid @ closing

others weed out so called buyers by collecting a 'non-refundable assignment fee' on the spot, somewhat guaranteeing the deal closes

hope this helps

PLEASE fill out your profile info

Here is an issue that I have come across MULTIPLE times. My investor/buyer is not really using his cash to purchase the property. He/she has a relationship with his Bank or private money source. He/she does not have the liquid funds to pay my assignment fee in advance. They can only pay my fee at closing when his/her lender fund the purchase.
I actually prefer collecting my fee at closing. The fee actually shows on the buyers side of the HUD as an assignment fee paid to my company. Totally legit.
I have had several prominent attorneys tell me this should be the ONLY way it is done.
Like Mike said above, I always collect a non refundable earnest check from my buyers. They are to do all of their due diligence in advance of signing my assignment contract. This pretty much assures they will close. I have NEVER has a buyer back out after they sign the contract and put up their non refundable earnest money.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Michael,
Sorry Noob questions here. You say you always collect a non refundable earnest check up front. Does this heck go into escrow to go toward your assignment fee at closing, or do you hold on to the check in case the deal falls apart and you cash it then?
Jim

I put my buyers earnest check in my bank account because I already have my own earnest money down with the original contract. The total amount paid to me as my assignment fee still shows on the HUD.

The earnest money is a "wash" so to speak. I put up earnest and am in the hole for that amount. My buyer puts up earnest and I am even again. So I collect my full assignment fee at closing. Now if I collect a larger EMD from my buyer than the EMD I put down on the original contract then I collect my fee minus the EMD overage from my buyer. The total amount paid to me still shows on the HUD.

Hope that makes it clear,

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

What great explainations from Bill, Mike and Mike, Jim

I also try to get my money up front if at all possible. When we sign the Assignment, i get two CASHIER'S CHECKS OR CASH.

I have a clause on my Assignment Contract that says "Assignee acknowledges the Assignment Fee is nonrefundable except only under the following circumstances:
1) The seller declines to sell at any time before the expiration of the contract: and/or
2) The title cannot be cleared for sale."

You can also reply to the buyer that you are signing your rights in the contract over to him also. He is tying up YOUR contract and if he were to back out that leaves you high and dry and by that time the contract will have expired.

The key is having a big buyers list. Buyers are not going to be happy about paying up front. Plain and simple. But if you have a good deal and they know that is what you require, they know if they don't pay up the next buyer will.

Good luck!

Karen

As Mike said, you REALLY do need to fill out your bio.

The first place we look when someone asks a question is the bio. When it is not filled out, we assume that you are not serious about this business. After all, that is an action that is totally in your control.

I am actually surprised that you got this much response without it. That is not the norm.

Karen

Thank you to everybodys responses.

Mike, I apologize if I came off a little rough. I was growing frustrated with feeling unsure of how to handle the situation.

In the morning I quickly called a title company that I had used years ago and they assured me that it is something that many investors here have been doing... getting paid at closing out of escrow.

I contacted my cash buyer and they're on board. They are going to the title company tomorrow to put $$$ into escrow.

In the past I would get paid at the time I assigned my contract but thinking back... that WAS after I established a relationship with a handfull of investors who would buy practically anything I could get my hands on. So after a few deals getting paid up front never was an issue.

With this being a new cash buyer with zero relationship they felt more comfortable having it paid out at closing.

So, although that cash would have folded into my wallet nicely TODAY... I don't mind waiting a week for it and it will make it that much more "rewarding".

Thanks again to everyone who responded.

FYI, I updated my profile as a few have suggested.

What if your buyer decides he doesnt want it at the last minute... Whats your fee then?? Do you have enough time to find another buyer?? There are many ways to structure these deals... Mine is... I dont wait. I tell them that if they are serious about this great deal... I need a non-refundable deposit... ( assignment fee ) payable to me.... to take it off the market and quit showing it. Depending on the amount... I may do half.... if that doesnt work... Im on to the next buyer..... Why would you ever want to wait?? Maybe your assignment contract needs new verbage... If the seller decides not to sell ( which does not happen ) or we cant supply clean title.... they will get the deposit back... other then that... Im getting paid now!

DG