What is an assignment fee?
An assignment fee is the money a wholesaler earns for transferring their right to buy a property to another buyer. It is the difference between the price the wholesaler agreed with the seller and the price the end buyer pays.
The seller still receives the price in their contract. The end buyer pays that price plus the fee, and the fee is typically paid through the title company at closing.
An assignment only works if the original contract can be assigned, so the purchase agreement should say so, usually with wording such as “and/or assigns.”
Common mistakes
- Using a contract that does not allow assignment.
- Hiding your role so the seller is surprised by the fee at closing.
- Not getting a deposit from the end buyer in the assignment agreement.
More questions
When is the assignment fee paid?
Usually at closing, through the title company or closing attorney, as a line on the closing statement. Many wholesalers also take a deposit from the end buyer when the assignment is signed.
Is an assignment fee taxable?
In general it is income to the wholesaler. How it is taxed depends on your situation, so ask a tax professional.
Can the seller cancel if they see the fee?
A seller who did not understand your role may try, and some states give sellers cancellation rights in wholesale deals. Being clear about your role from the start avoids the problem.