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How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

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Assigning Real Estate Contracts: Everything You Need to Know

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. 3 min read updated on February 01, 2023

Updated July 10, 2020:

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. Then, you find a buyer willing to pay a higher price for it.

How Contract Assignment Works

The first thing you need to do for contract assignment is to find a motivated seller. This is a person who owns a property, and for some reason, needs to sell in a hurry. This is generally because of a problem they are having, such as needing to move to a new home quickly. You'll need to be able to tell the difference between this sort of seller and someone who isn't in so much of a hurry to sell, and perhaps just wants to know what the property is worth.

You can find motivated sellers by placing ads in the newspaper, marketing on the internet, or sending direct mail. A combination of strategies works best.

The next thing you need to do is to obtain an assignment contract document. You can find templates on the web, but it's a good idea to have an attorney look it over before signing anything. That way, you will know that everything is completely legal. You will also be able to use that attorney if things don't work out as planned.

After the contract is signed, you submit it to a title company or an attorney who handles real estate closings . They will then do a title search. This ensures there are no existing liens against the property. This step is crucial because you do not want to buy a property that has a problem with the title. The title company is objective and independent and therefore makes sure everything is fair and legal.

At this point, you may search for a buyer. This will require more marketing strategies and can be a difficult process, but when you do find a buyer, you can move on to the next step - closing on the property. You'll need to collect a non-refundable deposit known as “earnest money” to make sure the buyer won't back out. If the buyer does change their mind, you get to keep the earnest money. This amount can be determined by you or the buyer.

Next, you get paid! The amount you receive will cover the amount you agreed to pay the property seller, along with an amount you get to keep in return for finding the buyer and making the transaction happen.

While this process takes place, you should make sure the seller understands how the process works , and that you will make a profit from the transaction. Otherwise, either the seller or buyer may decide they don't like the idea of your profiting from the sale and may back out. Reassure the seller that they are still getting the amount agreed upon for the sale.

Most contract assignments are done for $5,000 profit or less, but you can do it for a higher amount if you choose. If problems arise, it's possible to do a double or simultaneous closing, thereby keeping both parts of the sale separate and anonymous. Some title companies may not agree to do this, so if it becomes an issue, you should discuss it in advance.

Drawbacks of Contract Assignment

Contract assignment, or wholesaling, can be a  profitable venture , but there are a few pitfalls to watch out for, such as:

• You cannot make any repairs or renovations to the property because you do not own it at any point.
• You cannot offer any type of financing to the buyer.
• You must get the sale accomplished within a short amount of time before the contract expires.
• The process of closing on the property is detailed and can be complicated.
• You must find a buyer who is willing to pay in cash because it's hard to find a lender who will approve a mortgage for an assigned contract.

You also need to check the laws in your state, because in some states it is not legal to market a property that you don't own.

If you need more information or help with assigning real estate contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Property Contracts
• Sample Real Estate Contracts
• Land Sale Contracts
• Commercial Real Estate Contract Provisions
• Deed Contract Agreement
• Assignment Of Contracts
• Define Subject to Contract
• As Is Sales Contract
• Bill of Sale Land Contract
• Extension Addendum to Contract

Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

Table of Contents

• What Is an Assignment?
• What is an Assignment in Real Estate?
• What Does it Mean to Assign a Contract in Real Estate?
• How Does a Contract Assignment Work?
• Pros and Cons of Assigning Contracts

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

• Find the right property.
• Get a purchase agreement signed.
• Find an end buyer.
• Assign the contract.
• Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won’t take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it’s compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

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Assignment of Contract – Assignable Contract Basics for Real Estate Investors

What is assignment of contract? Learn about this wholesaling strategy and why assignment agreements are the preferred solution for flipping real estate contracts.

Beginners to investing in real estate and wholesaling must navigate a complex landscape littered with confusing terms and strategies. One of the first concepts to understand before wholesaling is assignment of contract, also known as assignment of agreement or “flipping real estate contracts.”  

An assignment contract is the most popular exit strategy for wholesalers, and it isn’t as complicated as it may seem. What does assignment of contract mean? How can it be used to get into wholesaling? Here’s what you need to know.

What Is Assignment of Contract?

How assignment of contract works in real estate wholesaling, what is an assignment fee in real estate, assignment of agreement pros & cons, assignable contract faqs.

• Transactly Saves Time. Learn How Now!

Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer.

This strategy is also known as flipping real estate contracts because that’s essentially how it works:

• The wholesaler finds a property that’s already discounted or represents a great deal and enters into a contract with the seller,
• The contract contains an assignment clause that allows the wholesaler to assign the contract to someone else (if they choose to!), then
• The wholesaler can assign the contract to another party and receive an assignment fee when the transaction closes.

Assignment of contract in real estate is a popular strategy for beginners in real estate investment because it requires very little or even no capital. As long as you can find an interested buyer, you do not need to come up with a large sum of money to buy and then resell the property – you are only selling your right to buy it .

An assignment contract passes along your purchase rights as well as your contract obligations. After the contract assignment, you are no longer involved in the transaction with no right to make claims or responsibilities to get the transaction to closing.

Until you assign contract to someone else, however, you are completely on the hook for all contract responsibilities and rights.

This means that you are in control of the deal until you decide to assign the contract, but if you aren’t able to get someone to take over the contract, you are legally obligated to follow through with the sale .

Assignment of Contract vs Double Closing

Double closing and assignment of agreement are the two main real estate wholesaling exit strategies. Unlike the double closing strategy, an assignment contract does not require the wholesaler to purchase the property.

Assignment of contract is usually the preferred option because it can be completed in hours and does not require you to fund the purchase . Double closings take twice as much work and require a great deal of coordination. They are also illegal in some states.

Ready to see how an assignment contract actually works? Even though it has a low barrier to entry for beginner investors, the challenges of completing an assignment of contract shouldn’t be underestimated. Here are the general steps involved in wholesaling.

Step #1. Find a seller/property

The process begins by finding a property that you think is a good deal or a good investment and entering into a purchase agreement with the seller. Of course, not just any property is suitable for this strategy. You need to find a motivated seller willing to accept an assignment agreement and a price that works with your strategy. Direct mail marketing, online marketing, and checking the county delinquent tax list are just a few possible lead generation strategies you can employ.

Step #2: Enter into an assignable contract

The contract with the seller will be almost the same as a standard purchase agreement except it will contain an assignment clause.

An important element in an assignable purchase contract is “ and/or assigns ” next to your name as the buyer . The term “assigns” is used here as a noun to refer to a potential assignee. This is a basic assignment clause authorizing you to transfer your position and rights in the contract to an assignee if you choose.

The contract must also follow local laws regulating contract language. In some jurisdictions, assignment of contract is not allowed. It’s becoming increasingly common for wholesalers to assign agreements to an LLC instead of an individual. In this case, the LLC would be under contract with the seller. This can potentially bypass lender objections and even anti-assignment clauses for distressed properties. Rather than assigning the contract to someone else, the investor can reassign their interest in the LLC through an “assignment of membership interest.”

Note: even the presence of an assignment clause can make some sellers nervous or unwilling to make a deal . The seller may be picky about whom they want to buy the property, or they may be suspicious or concerned about the concept of assigning a contract to an unknown third party who may or may not be able to complete the sale.

The assignment clause should always be disclosed and explained to the seller. If they are nervous, they can be assured that they will still get the agreed-upon amount.

Step #3. Submit the assignment contract for a title search

Once you are under contract, you must typically submit the contract to a title company to perform the title search. This ensures there are no liens attached to the property.

Step #4. Find an end buyer to assign the contract

Next is the most challenging step: finding a buyer who can fulfill the contract’s original terms including the closing date and purchase price.

Successful wholesalers build buyers lists and employ marketing campaigns, social media, and networking to find a good match for an assignable contract.

Once you locate an end buyer, your contract should include earnest money the buyer must pay upfront. This gives you some protection if the buyer breaches the contract and, potentially, causes you to breach your contract with the seller. With a non-refundable deposit, you can be sure your earnest money to the seller will be covered in a worst-case scenario.

You can see an assignment of contract example here between an assignor and assignee.

Step #5. Receive your assignment fee

The final step is receiving your assignment fee. This fee is your profit from the transaction, and it’s usually paid when the transaction closes.

The assignment fee is how the wholesaler makes money through an assignment contract. This fee is paid by the end buyer when they purchase the right to buy the property as compensation for being connected to the original seller. Assignment contracts should clearly spell out the assignment fee and how it will be paid.

An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer.

The standard real estate assignment fee is $5,000 . However, it varies by transaction and calculating the assignment fee may be higher or lower depending on whether the buyer is buying and holding the property or rehabbing and flipping.

The assignment fee is not always a flat amount. The difference between the agreed-upon price with the seller and the end buyer is the profit you stand to earn as the assignor. If you agreed to purchase the property for $150,000 from the seller and assign the contract to a buyer for $200,000, your assignment fee or profit would be $50,000.

In most cases, an investor receives a deposit when the Assignment of Purchase and Sale Agreement is signed with the rest paid at closing.

Be aware that assignment agreements can have a bad reputation . This is usually the case when the end buyer and seller are unsatisfied, realizing they could have sold higher or bought lower and essentially paid thousands to an investor who never even wanted to buy the property.

Opting for the standard, flat assignment fee is much more readily accepted by sellers and buyers as it’s comparable to a real estate agent’s commission or even much lower and the parties can avoid working with an agent.

Real estate investors enjoy many benefits of an assignment of contract:

• This strategy requires little or no capital which makes it a popular entry to wholesaling as investors learn the ropes.
• Investors are not added to the title chain and never own the property which reduces costs and the amount of time the deal takes.
• An assignment of agreement is easier and faster than double closing which requires two separate closings and two sets of fees and disclosures.
• Wholesaling can be a great tool to expand an investor’s network for future opportunities.

As with most things, there are important drawbacks to consider. Before jumping into wholesaling and flipping real estate contracts, consider the downsides .

• It can be difficult to work with sellers and buyers who are not familiar with wholesaling or assignment agreements.
• Some sellers avoid or decline assignment of contract offers because they are suspicious of the arrangement, think it is too risky, or want to know who they are selling to.
• There is a limited time to find an end buyer. Without a reliable buyer’s list, it can be very challenging to find a viable end buyer before the closing date.
• The end buyer may back out at the last minute. This may happen if they do not have owner’s rights until the contract is assigned or they do not want to pay an assignment fee.
• Not all properties are eligible for wholesaling like HUD and REO properties. There may be anti-assignment clauses or other hurdles. It is possible to get around this by purchasing the property with an LLC which can then be sold, but this is a level of complication that many wholesalers want to avoid.
• Assignors do not have owner’s rights. When the property is under contract, investors cannot make repairs or improvements. This makes it harder to assign a contract for a distressed property in poor condition.
• It can be hard to confirm an end buyer is qualified. The end buyer is responsible for paying the agreed upon price set by the seller and assignor. Many lenders do not handle assignment agreements which usually means turning to all-cash end buyers. Depending on the market, they can be hard to find.

In the worst-case scenario, if a wholesaling deal falls through because the end buyer backs out, the investor or assignor is still responsible for buying the property and must follow through with the purchase agreement. If you do not, you are in breach of contract and lose the earnest money you put down.

To avoid this worst-case scenario, be prepared with a good buyer’s list. You should only put properties under contract that you consider a good deal and you can market to other investors or homeowners. You may be able to get more time by asking for an extension to the assignment of contract while you find another buyer or even turn to other wholesalers to see if they have someone who would be a good fit.

What is the difference between assignor vs assignee?

In an assignment clause, the assignor is the buyer who then assigns the contract to an assignee. The assignee is the end buyer or final buyer who becomes the owner when the transaction closes. After the assignment, contract rights and obligations are transferred from the assignor to the assignee.

What Is an assignable contract?

An assignable contract in real estate is a purchase agreement that allows the buyer to assign their rights and obligations to another party before the contract expires. The assignee then becomes obligated to meet the terms of the contract and, at closing, get title to the property.

Is Assignment of Agreement Legal?

Assignment of contract is legal as long as state regulations are followed and it’s an assignable contract. The terms of your agreement with the seller must allow for the contract to be assumed. To be legal and enforceable, the following general requirements must be met.

• The assignment does not violate state law or public policy. In some states and jurisdictions, contract assignments are prohibited.
• There is no assignment clause prohibiting assignment.
• There is written consent between all parties.
• The property does not have restrictions prohibiting assignment. Some properties have deed restrictions or anti-assignment clauses prohibiting assignment of contract within a specific period of time. This includes HUD properties, short sales, and REO properties which usually prohibit a property from being resold for 90 days. There is potentially a way around these non-assignable contracts using an LLC.

Can a non-assignable contract still be assigned?

Even an non-assignable contract can become an assignable contract in some cases. A common approach is creating an agreement with an LLC or trust as the purchaser. The investor can then assign the entity to someone else because the contractual rights and obligations are the entity’s.

Assignment agreements are not as complicated as they may sound, and they offer an excellent entry into real estate investing without significant capital. A transaction coordinator at Transactly can be an invaluable solution, no matter your volume, to keep your wholesaling business on track and facilitate every step of the transaction to closing – and your assignment fee!

Adam Valley

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General Principles of Assignments in Real Estate Transactions

Assume a seller, ABC Company, enters into a contract to sell a parcel of land (referred to here as “Blackacre”) to Ms. Green. Ms. Green subsequently assigns her interest in the contract to Mr. Smith. Such assignments of contracts of purchase and sale raise a number of practical issues—e.g. notice to the seller, payment for the assignment, and transfer of the deposit—that affect not only the seller but also the original purchaser and the eventual purchaser. A party wishing to assign its interest in a contract of purchase and sale to a new party should not assume that the matter is as simple as entering into an assignment with the new party and then walking away and forgetting about the contract.

A real estate contract will often contain provisions that limit or prohibit an assignment of a party’s interest in the contract. If the contract is silent as to the rights to the parties to assign their interests in the contract, then the rights of the parties, with few exceptions, can be assigned. Normally, assignments of contracts relating to the purchase and sale of real estate involve the purchaser assigning its interest in the contract; however, it is not unheard of to have the seller assign its interest in the contract.

In our scenario, to be binding on it as the seller, ABC Company must be given notice of the assignment, although it does not have to receive a copy of the assignment or the business terms relating to the assignment. If ABC Company has been given notice that Ms. Green’s interest in the contract has been assigned, it may be concerned that she is ‘flipping’ her interest in the contract for a profit. Consequently, ABC Company may wish to seek advice as to whether the contract is enforceable.

Assuming that Mr. Smith is paying Ms. Green a specified amount of money for the assignment, the question arises as to when this money will be paid. Ms. Green will want the money to be paid when they enter into the assignment but Mr. Smith will want to pay at the time that they complete the purchase and sale of Blackacre. In most cases, the latter time period is the norm but, in any case, money paid for an assignment is subject to the Goods and Services Tax.

Ms. Green will likely have paid a deposit to ABC Company pursuant to the contract and will want the deposit to be repaid to her at the time of the assignment rather than having to wait until the purchase and sale of Blackacre is completed. It would not be unusual for Mr. Smith to reimburse the deposit to Ms. Green at the time that they enter into the assignment.

Mr. Smith should look to obtain assurances by way of representations and warranties from Ms. Green that the contract to purchase Blackacre is in full force and effect and that her interest can be assigned to him. In turn, Ms. Green should look to obtain representations and warranties from Mr. Smith that he will fulfill her obligations to complete the purchase of Blackacre since an assignment will not release Ms. Green of her obligations under the contract unless such release is specifically provided for—and has been agreed to by ABC Company.

Frequently, and contrary to the scenario presented here, a contract for a real estate transaction will often limit the right of the purchaser to assign its interest in the contract. A common limitation is that “. . . the purchaser may only assign its interest in the contract with the consent of the seller, such consent not to be unreasonably withheld.” In most cases, it would not be unreasonable for the seller to insist that the assignee contract directly with the seller to fulfill the obligations of the assignor under the contract so that, if there is a default, the seller has the right to seek remedies against both the assignor and the assignee.

So long as all parties to a contract of purchase and sale are aware of their rights and obligations, the completion of a purchase and sale where a contract has been assigned can and should proceed in a straightforward manner.

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An assignment clause (AC) is an important part of many contracts, especially for real estate. In this article we discuss:

• What is an Assignment Clause? (with Example)
• Anti-Assignment Clauses (with Example)
• Non-Assignment Clauses
• Important Considerations
• How Assets America ® Can Help

Frequently Asked Questions

What is an assignment clause.

An AC is part of a contract governing the sale of a property and other transactions. It deals with questions regarding the assignment of the property in the purchase agreement. The thrust of the assignment clause is that the buyer can rent, lease, repair, sell, or assign the property.

To “assign” simply means to hand off the benefits and obligations of a contract from one party to another. In short, it’s the transfer of contractual rights.

In-Depth Definition

Explicitly, an AC expresses the liabilities surrounding the assignment from the assignor to the assignee. The real estate contract assignment clause can take on two different forms, depending on the contract author:

• The AC states that the assignor makes no representations or warranties about the property or the agreement. This makes the assignment “AS IS.”
• The assignee won’t hold the assignor at fault. It protects the assignor from damages, liabilities, costs, claims, or other expenses stemming from the agreement.

The contract’s assignment clause states the “buyer and/or assigns.” In this clause, “assigns” is a noun that means assignees. It refers to anyone you choose to receive your property rights.

The assignment provision establishes the fact that the buyer (who is the assignor) can assign the property to an assignee. Upon assignment, the assignee becomes the new buyer.

The AC conveys to the assignee both the AC’s property rights and the AC’s contract obligations. After an assignment, the assignor is out of the picture.

What is a Lease Assignment?

Assignment Clause Example

This is an example of a real estate contract assignment clause :

“The Buyer reserves the right to assign this contract in whole or in part to any third party without further notice to the Seller; said assignment not to relieve the Buyer from his or her obligation to complete the terms and conditions of this contract should be assigning default.”

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Assignment provision.

An assignment provision is a separate clause that states the assignee’s acceptance of the contract assignment.

Assignment Provision Example

Here is an example of an assignment provision :

“Investor, as Assignee, hereby accepts the above and foregoing Assignment of Contract dated XXXX, XX, 20XX by and between Assignor and ____________________ (seller) and agrees to assume all of the obligations and perform all of the duties of Assignor under the Contract.”

Anti-Assignment Clauses & Non-Assignment Clauses

An anti-assignment clause prevents either party from assigning a contract without the permission of the other party. It typically does so by prohibiting payment for the assignment. A non-assignment clause is another name for an anti-assignment clause.

Anti-Assignment Clause Example

This is an anti-assignment clause example from the AIA Standard Form of Agreement:

” The Party 1 and Party 2, respectively, bind themselves, their partners, successors, assigns, and legal representatives to the other party to this Agreement and to the partners, successors, assigns, and legal representatives of such other party with respect to all covenants of this Agreement. Neither Party 1 nor Party 2 shall assign this Agreement without the written consent of the other.”

Important Considerations for Assignment Contracts

The presence of an AC triggers several important considerations.

Assignment Fee

In essence, the assignor is a broker that brings together a buyer and seller. As such, the assignor collects a fee for this service. Naturally, the assignor doesn’t incur the normal expenses of a buyer.

Rather, the new buyer assumes those expenses. In reality, the assignment fee replaces the fee the realtor or broker would charge in a normal transaction. Frequently, the assignment fee is less than a regular brokerage fee.

For example, compare a 2% assignment fee compared to a 6% brokerage fee. That’s a savings of $200,000 on a $5 million purchase price. Wholesalers are professionals who earn a living through assignments.

Frequently, the assignor will require that the assignee deposit the fee into escrow. Typically, the fee is not refundable, even if the assignee backs out of the deal after signing the assignment provision. In some cases, the assignee will fork over the fee directly to the assignor.

Assignor Intent

Just because the contract contains an AC does not obligate the buyer to assign the contract. The buyer remains the buyer unless it chooses to exercise the AC, at which point it becomes the assignor. It is up to the buyer to decide whether to go through with the purchase or assign the contract.

Nonetheless, the AC signals the seller of your possible intent to assign the purchase contract to someone else. For one thing, the seller might object if you try to assign the property without an AC.

You can have serious problems at closing if you show up with a surprise assignee. In fact, you could jeopardize the entire deal.

Another thing to consider is whether the buyer’s desire for an AC in the contract will frighten the seller. Perhaps the seller is very picky about the type of buyer to whom it will sell.

Or perhaps the seller has heard horror stories, real or fake, about assignments. Whatever the reason, the real estate contract assignment clause might put a possible deal in jeopardy.

Chain of Title

If you assign a property before the closing, you will not be in the chain of title. Obviously, this differs from the case in which you sell the property five minutes after buying it.

In the latter case, your name will appear in the chain of title twice, once as the buyer and again as the seller. In addition, the latter case would involve two sets of closing costs, whereas there would only one be for the assignment case. This includes back-to-back (or double) closings.

Enforceability

Assignment might not be enforceable in all situations, such as when:

• State law or public policy prohibits it.
• The contract prohibits it.
• The assignment significantly changes the expectations of the seller. Those expectations can include decreasing the value of the property or increasing the risk of default.

Also note that REO (real estate owned) properties, HUD properties, and listed properties usually don’t permit assignment contracts. An REO property is real estate owned by a bank after foreclosure. Typically, these require a 90-day period before a property can be resold.

How Assets America Can Help

The AC is a portion of a purchase agreement. When a purchase involves a commercial property requiring a loan of $10 million or greater, Assets America ® can arrange your financing.

We can finance wholesalers who decide to go through with a purchase. Alternatively, we can finance assignees as well. In either case, we offer expedient, professional financing and many supporting services. Contact us today for a confidential consultation.

What rights can you assign despite a contract clause expressly prohibiting assignment?

Normally, a prohibition against assignment does not curb the right to receive payments due. However, circumstances may cause the opposite outcome. Additionally, prohibition doesn’t prevent the right to money that the contract specifies is due.

What is the purpose of an assignment of rents clause in a deed of trust and who benefits?

The assignment of rents clause is a provision in a mortgage or deed of trust. It gives the lender the right to collect rents from mortgaged properties if the borrower defaults. All incomes and rents from a secured property flow to the lender and offset the outstanding debt. Clearly, this benefits the lender.

What is in assignment clause in a health insurance contract?

Commonly, health insurance policies contain assignment of benefits (AOB) clauses. These clauses allow the insurer to pay benefits directly to health care providers instead of the patient. In some cases, the provider has the patient sign an assignment agreement that accomplishes the same outcome. The provider submits the AOB agreement along with the insurance claim.

What does “assignment clause” mean for liability insurance?

The clause would allow the assignment of proceeds from a liability award payable to a third party. However, the insured must consent to the clause or else it isn’t binding. This restriction applies only before a loss. After a first party loss, the insurer’s consent no longer matters.

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Ronny was a pleasure to work with and is extremely knowledgeable. His hard work was never ending until the job was done. They handled a complex lease and guided us through entire process, including the paperwork. Not to mention a below market lease rate and more than all the features we needed in a site. We later used Assets America for a unique equipment financing deal where once again Ronny and team exceeded our expectations and our timeline. Thank you to Assets America for your highly professional service!

Great experience with Assets America. Fast turn around. Had a lender in place in 30 minutes looking to do the deal. Totally amazing. Highly recommend them to anyone looking for financing. Ronny is fantastic. Give them a call if the deal makes sense they can get it funded. Referring all our clients.

Assets America guided us every step of the way in finding and leasing our large industrial building with attached offices. They handled all of the complex lease negotiations and contractual paperwork. Ultimately, we received exactly the space we needed along with a lower than market per square foot pricing, lease length and end of term options we requested. In addition to the real estate lease, Assets America utilized their decades-long financial expertise to negotiate fantastic rates and terms on our large and very unique multimillion dollar equipment purchase/lease. We were thankful for how promptly and consistently they kept us informed and up to date on each step of our journey. They were always available to answer each and every one of our questions. Overall, they provided my team with a fantastic and highly professional service!

Assets America was responsible for arranging financing for two of my multi million dollar commercial projects. At the time of financing, it was extremely difficult to obtain bank financing for commercial real estate. Not only was Assets America successful, they were able to obtain an interest rate lower than going rates. The company is very capable, I would recommend Assets America to any company requiring commercial financing.

Assets America was incredibly helpful and professional in assisting us in purchasing our property. It was great to have such knowledgeable and super-experienced, licensed pros in our corner, pros upon which we could fully rely. They helped and successfully guided us to beat out 9 other competing offers! They were excellent at communicating with us at all times and they were extremely responsive. Having them on our team meant that we could always receive truthful, timely and accurate answers to our questions. We would most definitely utilize their services again and again for all of our real estate needs.

Assets America is a great company to work with. No hassles. Recommend them to everyone. Professional, fast response time and definitely gets the job done.

Ronny at Assets America has been invaluable to us and definitely is tops in his field. Great experience. Would refer them to all our business associates.

We were very pleased with Assets America’s expertise and prompt response to our inquiry. They were very straight forward with us and helped a great deal. We referred them to all our business associates.

I’ve worked with this company for decades. They are reputable, knowledgeable, and ethical with proven results. I highly recommend them to anyone needing commercial financing.

Ronny was incredibly adept and responsive – top-notch professional who arranged impressive term sheets.

Assets America helped us survive a very difficult time and we most definitely give them 5 stars!

Ronny was very friendly and though we were unable to make something happen at the moment he gave me some direction to go.

My business partner and I were looking to purchase a retail shopping center in southern California.  We sought out the services of Ronny, CFO of Assets America.  Ronny found us several commercial properties which met our desired needs.  We chose the property we liked best, and Ronny went to work. He negotiated very aggressively on our behalf. We came to terms with the Seller, entered into a purchase agreement and opened escrow.  Additionally, we needed 80 percent financing on our multimillion-dollar purchase.  Assets America also handled the commercial loan for us.  They were our One-Stop-Shop. They obtained fantastic, low, fixed rate insurance money for us.  So, Assets America handled both the sale and the loan for us and successfully closed our escrow within the time frame stated in the purchase agreement.  Ronny did and performed exactly as he said he would. Ronny and his company are true professionals.  In this day and age, it’s especially rare and wonderful to work with a person who actually does what he says he will do.  We recommend them to anyone needing any type of commercial real estate transaction and we further highly recommend them for any type of commercial financing.  They were diligent and forthright on both accounts and brought our deal to a successful closing.

Questionnaire

What the National Association of Realtors' settlement means for consumers and real estate brokers

A groundbreaking $418 million settlement announced Friday by the powerful National Association of Realtors is set to usher in the most sweeping reforms the American real estate market has seen in a century. It could dramatically drive down homebuyers’ costs — and push some real estate brokers out of business.

Here’s a look at how we got here and what to expect in the months ahead.

NAR already lost a big case

For decades, the NAR has required home sale listing brokers to provide an offer of compensation to a buyer’s agent up front. That usually comes out to about 6%, split between a seller’s broker and a buyer’s agent.

But that model has come under intensifying scrutiny from critics who have likened it to a cartel . Late last year, a jury in a Kansas City federal court found the longstanding practice to be a form of collusion that artificially inflated real estate fees, awarding a massive $1. 7 8 billion judgment against NAR .

What changes now for homebuyers and sellers

If the settlement announced Friday is approved by a federal court, the standard 6% commission goes away. Sellers would no longer have to make a compensation proposal to prospective buyers and their agents. Critics have said the encouraged brokers to push their clients toward more expensive properties.

Another new rule would see homebuyers having to sign an explicit deal with a broker before they start working with one — something experts say would lead many homebuyers to forgo using brokers entirely.

The new rules would kick in within months of approval, currently expected around mid-July.

What about the next few months?

Everyone involved in the market should expect “a certain amount of uncertainty for the coming months,” said Marty Green, principal at mortgage law firm Polunsky Beitel Green.

“The industry will be in transition as everyone digests the settlements and market forces begin working,” he predicted. “We will begin to see some creative buyer’s agent arrangements that may have been harder to get traction on before.”

Home buyers and their agents will need to decide on a commission and put it in writing. Sellers, likewise, will need to work carefully with their listing agents as the new rules come into effect.

U.S. consumers might save in the long run ...

The changes could mean buyers will save on commissions, eventually bringing U.S. fees more in line with the much lower transaction costs seen in other residential property markets around the world.

Some commissions could even be cut in half, Jaret Seiberg, housing policy analyst for TD Cowen Washington Research Group, told clients in a note Friday.

The new rules “should lead to commissions falling 25% to 50%, which we view as benefiting online real estate brokers,” Seiberg wrote, but he warned it’s too early to declare “the end of local real estate agents given their local expertise and reputation in neighborhoods. It is why we do not see this following the travel agency model in which online eclipsed local offices.”

... but buyers could face more confusion

Holden Lewis, a home and mortgage expert at NerdWallet, warned of a “potential negative trade-off”: “Buyer-seller negotiations will become more complex, and buyers with plenty of cash might navigate the process more easily than buyers who don’t have a lot of savings,” he said. Seiberg flagged a similar concern in his note, saying it could particularly affect first-time buyers with limited means to pay for an agent.

Brokers and agents have come out against the settlement, saying it will make the home-buying process more byzantine for consumers and discounts the important role agents play in helping them navigate it.

“I’m a full-service real estate agent, so when I go to list my client’s house, I align their goals with my goal, and that goal is selling for the highest amount possible,” said Roy Remick, a realtor based in Northern Virginia, who said he often pays thousands of dollars of his own for services like staging homes to aid the sale process.

“This is ultimately someone saying, ‘You guys make too much money,’ which I don’t think is right for someone to dictate,” he said.

Buyers’ agents will be left “flying blind” since they won’t know how much they’ll end up making from a given home, Remick warned. “We’ll have to make a bunch of phone calls, because now we don’t know what [the commission] is because we can’t see it in the MLS. But we’ve already got an agreement with buyer how much they’ll be able to compensate us.”

Christine Romans is the senior business correspondent at NBC News.

Rob Wile is a breaking business news reporter for NBC News Digital.

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March 22, 2024

Real Estate Definition: Assignment Sale

When a buyer enters into a purchase agreement for a pre-constructed or newly built property, they may find themselves in a situation where they no longer wish to proceed with the purchase. In such cases, the buyer can assign their rights and obligations under the agreement to a new buyer – and this is where an assignment sale comes in.

What is an Assignment Sale?

An assignment sale refers to a sales transaction in which the original buyer of a property (“assignor”) transfers their rights and obligations of the Agreement of Purchase and Sale to another buyer (“assignee”) before the original buyer takes possession of the property. The assignee then becomes responsible for completing the deal with the seller. Essentially, an assignment clause allows the buyer to sell the property before they move in. While assignment sales can occur with both homes and condos , they are more common among buyers of pre-construction condos.

Factors to Consider Before Entering an Assignment Sale

While assignment sales can be advantageous, it is crucial for both the original buyer and the new buyer to consider certain factors before entering into such transactions.

Developer’s Consent

Before proceeding with an assignment sale, you must obtain the developer’s consent. Some developers may have strict rules or restrictions, and failure to comply can lead to legal complications.

Assignment Fees

The assignor may charge an assignment fee to the new buyer for transferring their rights and obligations. This fee can vary depending on the market conditions and the specific terms of the Assignor-Assignee Agreement.

Legal Advice

Both parties should seek legal advice before entering into an assignment sale. This ensures that all parties understand their rights, obligations, and potential risks associated with the transaction.

How Does an Assignment Sale Work?

Before proceeding with an assignment sale, the original buyer must obtain the consent of the developer or builder. This step is crucial as some developers may have specific rules or restrictions regarding assignment sales. When the developer consents, the original buyer can look for a new buyer to take over the purchase agreement.

Once there’s a new buyer, both the original buyer and the new buyer (assignee) enter into an agreement known as the Assignor-Assignee Agreement. This agreement outlines the terms and conditions of the assignment sale, including the assignment fee, if any. Then, the developer will review the Assignor-Assignee agreement and may require additional documentation or fees.

Once the developer approves the assignment sale, the closing process begins. At this stage, the new buyer is responsible for completing the purchase, including paying any remaining balance to the developer.

Why Do Assignment Sales Happen?

One primary reason why assignment sales happen is a change of plans. People may decide to leave the area due to personal circumstances such as starting a family, getting married, or looking for job opportunities elsewhere. Additionally, some individuals may face financial challenges that prevent them from completing the purchase.

Alternatively, a common scenario involves investors who never intended to close on the property acquisition. A popular investment strategy is to purchase a property during its early release to take advantage of the emerging market and low pricing and sell it before incurring land transfer taxes, HST, or becoming tied to a mortgage.

Benefits of Assignment Sales

Assignment sales can offer several benefits to both the assignor and the assignee. Some of these benefits include:

Profit Potential

For the original buyer, an assignment sale provides an opportunity to make a profit without completing the purchase. If the market value has increased since the initial purchase agreement, the assignor can sell their rights at a higher price.

Opportunity for Early Ownership

The assignee can benefit from an assignment sale to gain early ownership of a pre-construction property. This can be particularly appealing for individuals looking to invest in real estate or those with specific requirements for a new home.

Flexibility

Assignment sales offer flexibility to both parties involved. The original buyer can exit the purchase agreement without incurring significant penalties, while the new buyer can secure a property without going through the entire pre-construction process.

How a Real Estate Agent Can Help You Navigate this Process

Assignment sales are a complicated process; working with an experienced real estate agent who can help you navigate and understand the ins and outs of this transaction is crucial. These professionals can not only assist you in marketing your assignment, but they can also overcome any limitations imposed by the builder. Moreover, agents have a vast network and can easily connect you with an interested buyer. Although assignment sales may seem daunting, having a skilled lawyer and an experienced realtor is a smart financial move!

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Understanding the Concept of an Assignment Fee in Real Estate

Navigating the realm of real estate transactions can often feel like deciphering a complex puzzle, especially for those who are early on their property journey. A concept that can confuse professionals and individuals involved in transactions alike is the idea of an assignment fee in real estate—something that comes into play in various scenarios. In the context of real estate, an assignment fee is an essential concept to grasp, bridging the gap between  creative financing  and the traditional purchase and sale of properties.

What is Assignment in Real Estate?

To understand an assignment fee in real estate, you first have to understand what an assignment is. An assignment contract is essentially the document that gives someone the right to purchase a property. The assignment fee refers to the payment made to an individual, generally known as an assignor, for transferring their rights and obligations under a pre-existing real estate assignment contract to another party, known as the assignee. 

This transaction is particularly prevalent in the practice of  real estate wholesaling . In these transactions, an individual will secure a contract to purchase a property and then assign that same contract to an end buyer, charging a fee for the convenience and the opportunity they present.

A contract assignment fee is a strategic tool for those looking to leverage lucrative opportunities within the market without needing a significant capital investment. It allows for flexibility in the investment realm, enabling professionals to generate income from real estate deals without the traditional barriers of entry. This means people can make headway in their careers without having to obtain mortgage loans or conduct extensive renovations.

In essence, the assignment fee is the financial reflection of the value that the assignor brings to the table in a transaction. The assignor is a useful party for both buyers and sellers, helping the process along by identifying a potentially profitable deal, negotiating terms, and then passing on the right to execute the deal to a suitable party. Understanding this concept is crucial for real estate investors at all stages of their careers, especially those interested in using wholesale strategies and creative financing options.

What is an Assignment Fee in Real Estate?

The assignment fee in real estate is a concept rooted in the overarching principle of a contractual rights transfer. It represents the price that an assignee, someone interested in purchasing property, pays to the assignor for the rights to acquire said property under the terms the assignor has already negotiated with the seller. To make sure you get the right fee for the assignment of a contact, you need to understand the mechanics of how they work. 

This section expands on how assignment fees function in real estate transactions and delves into the factors that influence their amounts.

Explanation of How Assignment Fees Work in Real Estate

When an investor or a wholesaler, known in this case as the assignor, enters into a purchase agreement with a property seller, they acquire the legal right to buy the property at some negotiated, agreed-upon terms. However, instead of completing the purchase themselves, the assignor then finds another buyer, known as the assignee, who is interested in taking over the contract to eventually own the property.  This is when assignment fees come into play. 

The assignee must pay an assignment fee to the assignor for the right to purchase the property. Only once this fee is paid can the assignee step into the shoes of the original buyer, then proceed to close the deal with the seller. The original contract to buy is thus “assigned” from the assignor to the assignee, who from then on becomes responsible for fulfilling its terms.

Factors That Determine the Amount of Assignment Fees

The amount, or monetary value, of the assignment fee can vary greatly from deal to deal, being influenced by a range of factors, which we’ve broken down below:

Property Value and Equity:  Appropriately, the value and equity of the property will inform the assignment fee. A property with high value or substantial equity typically commands a higher assignment fee and vice versa.

Market Demand:  Consider  overarching market trends  when ascertaining an appropriate assignment fee. For example, in a seller’s market with higher demand for properties, assignment fees can increase because of plentiful competition among buyers.

Deal Profitability:  Even in the cases of lower-value properties, the nature of the deal itself will impact the assignment fee. This means that the more profitable a deal appears to be, the higher the fee that an assignor can command.

Negotiation Skills:  In a similar vein to the impact that profitability can have, negotiation skills can also change the shape of an assignment fee. The ability of the assignor to negotiate deals on both ends can directly impact their fee amount, with skilled negotiators often being able to secure higher fees.

Timeframe:  Time is money, and in the case of a wholesale assignment contract, this can be especially true. If the assignor negotiates the situation and closes the deal quickly, they might be able to command a higher fee for the increased convenience of a speedy transaction.

Comparison of Assignment Fees with Other Real Estate Transaction Costs

Assignment fees differ from the costs associated with various other real estate transactions in a variety of ways: 

Earnest Money vs. Assignment Fee:  Earnest money is a kind of deposit made to demonstrate the buyer’s seriousness about acquiring a property. This fee can typically be refunded under certain conditions or applied to the purchase at closing. On the other hand, an assignment fee is a non-refundable payment made to the assignor, specifically for the right to take over the contract.

Closing Costs vs. Assignment Fee:  Closing costs can encompass a variety of fees that buyers and sellers pay at the end of a real estate transaction. These fees can include things such as those associated with title searches, real estate attorney’s fees, and credit report charges. Assignment fees are separate from these, only ever being paid to the assignor for the contract rights.

Commission vs. Assignment Fee:  Real estate agents earn their living through commissions based on the property’s sale price, paid by the seller, generally from their earnings through making the sale. In contrast, an assignment fee is paid by the assignee to the assignor and is not related to the sale price or commission.

Understanding the nature of assignment fees, such as when they’re applicable, how they are calculated in relation to a transaction, and how they compare to other common transaction costs, is essential for anyone involved in real estate investing. This level of understanding is particularly vital in strategies such as wholesaling, where such fees are part and parcel of the process.

Pros and Cons of Assignment Fees

Assignment fees in real estate can be positive elements of transactions for sellers and investors while posing some notable challenges depending on the perspective of all parties involved, including the buyer. Below, we explore the advantages and disadvantages for the enactors of these transactions, as well as the risks and challenges that come with assignment fees.

Advantages for Sellers and Investors

For sellers:.

Quick Sales:  Sellers benefit from the existence of assignment fees as they can do wonders for speeding up the transaction. Wholesaling and the assignment fees that come with it are especially viable solutions when a seller wants to shift their asset quickly. Investors or fellow wholesalers who offer to pay these fees often aim to close deals rapidly.

Fewer Hurdles:  Sellers might avoid some traditional selling hurdles when embracing the nature of wholesaling and assignment fees. In the standard selling cycle, sellers might have to go through various stages, such as multiple showings or a buyer’s own financial approval process. These processes can be skipped altogether when dealing with investors ready to pay an assignment fee.

For Investors:

Profitability:  Investors or wholesalers can use assignment fees as their primary source of income. As it sidesteps the traditional processes of investing and reselling properties, wholesalers stand to make a profit through the assignment fee without having to close on the property themselves. By embracing this system, they also avoid closing costs and the need for financing.

Less Capital:  Wholesaling is a great method for generating income, without needing the same level of seed investment. Since the investor doesn’t need to purchase the property outright, they generally just have to pay a small (often refundable) deposit for the contract; there is less capital required upfront compared to traditional real estate investments.

Flexibility:  Because of the nature of deals that use assignment fees, investors can back out of a particular deal at any time. This can be achieved by offering and assigning the contract to another, more suitable buyer if the deal doesn’t fit their investment strategy or if they cannot secure financing.

Disadvantages for Buyers and Sellers

For buyers:.

Increased Cost:  Assignment fees do often increase the overall cost for the end buyer, as it becomes their responsibility to cover both the property’s agreed-upon price and the assignment fee. In some cases, the assignment fee can be taken from the overall sale price, but this isn’t common, meaning the speedier sale usually comes with an inflated price tag. 

Transparency Issues:  Buyers in these situations can often find it challenging to get full transparency regarding the property’s conditions or the original contract terms if not properly disclosed by the assignor. This shouldn’t be an issue, as long as the wholesaler or assignor does their job properly, but buyers should make sure to vet any collaborators carefully. 

Potential for Overextension:  Sellers may encounter issues if they work with the wrong wholesaler or investor. In some cases, an inexperienced investor can overextend and find it difficult to find a buyer to whom they can assign the contract, slowing down the transaction process and possibly reversing it. 

Market Misrepresentation:  Sellers could face the challenges of market misrepresentation if the assignor markets the property incorrectly or unethically, leading to potential legal challenges. For example, if the assignor lies about the property’s amenities, uses  unrealistic photography , or overvalues it, buyers might respond with legal action. 

Potential Risks and Challenges with Assignment Fees

Legal and Ethical Considerations:  The legality of assignment fees, much like many other aspects of the real estate market,  varies from region to region . Along with the legal side of things, there may also be ethical considerations to consider if parties are not fully informed of the contract terms and fees involved.

Market Fluctuations:  Market conditions can change rapidly—need we remind you of what happened to the housing market in 2008? This means that if the property value decreases or interest rates increase, it will likely become more challenging for the assignor to find a buyer willing to pay the fee on top of the existing property price.

Contractual Risks:  If the assignee fails to close the deal, the assignor might end up legally obligated to purchase the property under the original contract terms. Considering the reasons that most investors choose to embrace wholesaling and assignment fees, this could pose a significant financial risk that they’re not ready to incur.

Reputational Risks:  Assignors who consistently charge unnecessarily high assignment fees might gain a negative reputation in the real estate community among potential clients and fellow professionals alike. It’s important to consider what a fair, mutually beneficial fee should be to avoid potentially negatively affecting future business.

Complexity in Transactions:  Assignment fees add a level of complexity to real estate transactions, which are already fairly complicated at the best of times. There may be misunderstandings or disputes between the involved parties over the terms of the contract, the condition of the property, or the responsibilities each party has.

Both sellers and investors involved in wholesaling and assignment in real estate need to weigh the potential for quick and profitable transactions against the complexities and risks assignment fees introduce. It is crucial for every party involved to conduct suitable due diligence, operate transparently, and possibly seek professional legal counsel to ensure the process is conducted legally and ethically.

Legal and Ethical Considerations

The use of assignment fees in real estate transactions is full of potential, being a viable part of a strategic investment plan. However, while assignment fees and the deals they’re attached to can be highly lucrative, they also come with the potential for legal and ethical quandaries. Here, we delve into the legal regulations and ethical considerations that assignors should consider, highlighting potential issues that could arise from the misuse of assignment fees.

Legal Regulations and Requirements

Regulatory landscape:.

Disclosure Requirements:  Many jurisdictions require the full disclosure of an assignment fee to all parties involved in a transaction, ensuring no one feels like they’ve missed out on any vital information. Failure to clearly express the assignment fee to the buyer can often lead to legal penalties or complications.

Contractual Rights:  There are some contractual points to consider when handling an assignment fee in real estate. The original purchase agreement must expressly allow for the assignment of the contract without the need for repeat consent of the seller, or the investor must obtain written permission from the seller to assign the contract.

Licensing Laws:  Some regions may require an individual enacting a wholesale deal or receiving an assignment fee to have a professional real estate license, as the transaction could be considered as engaging in real estate brokerage without a license. This is worth considering if you want to pursue a career as a wholesaler or investor in general. 

State and Local Laws:  Both assignment fee legality and the ability to assign a contract can vary greatly between the different states and localities of the US. It’s crucial to understand the specific regulations of the area where you’re working and or where the property is located. It’s always important to tailor your approach to real estate for the area that you operate within. 

Ethical Considerations:

Fairness to All Parties:  Ethically, the fee should always reflect the value that’s actually been added by the assignor in finding the deal and should not be exploitative. If you’re working as a real estate wholesaler or receiving an assignment fee in any other way, make sure that you’re offering real value without overstating your contribution to the transaction. 

Transparency:  Assignors must be totally transparent about the property’s condition, the original contract terms, and the assignment fee’s size at every stage of the transaction. Remember, you’re not just trying to avoid legal implications with your honesty; you’re looking to build positive professional relationships built on trust. 

Conflict of Interest:  Ethically, an assignor should avoid any conflicts of interest in all transactions and should not misrepresent the potential value or investment benefits to the assignee. For example, if the assignor knows that an area is losing steam in the market, they should make that clear to their assignee.

Examples of Potential Legal and Ethical Issues

Non-Disclosure:  Failing to disclose one’s assignment fee openly and clearly to the end buyer or seller can lead to lawsuits, as it may be considered a fraudulent practice. It’s absolutely essential that a wholesaler makes it clear what they stand to gain from a deal so everyone understands the transaction from top to bottom. 

Predatory Practices:  Charging exorbitant assignment fees, especially in distressed markets or from vulnerable sellers, which are often hubs for real estate wholesaling, can be seen as unethical and might lead to legal challenges. This is why offering real value and making your fees reasonable is crucial.

Misrepresentation:  An assignor could face serious legal action if they misrepresent the terms of the original contract or the property’s condition for the purpose of securing a higher fee. It goes hand in hand with all of the other aspects of transparency—assignors must be clear and honest at every stage to avoid legal and ethical complications. 

Violation of Licensing Laws:  If an assignor acts as a de facto real estate broker by frequently assigning contracts for fees without a professional license, they might face legal penalties, including fines and injunctions. These laws vary from state to state, meaning it’s best to have a license in place, ensuring you can work in as many areas as possible. 

Breach of Contract:  If the original contract does not allow for the assignment of the property and the assignor proceeds without consent, they are highly likely to be sued for breach of contract. It should go without saying, but every real estate transaction needs to be enacted with the utmost professionalism, ensuring every party is fully aware of its nature. 

It’s essential for every party involved in the assignment of real estate contracts to be aware of the legal and ethical implications. The complex nature of these transactions often warrants the involvement of a dedicated legal professional to navigate the potential minefield of legal regulations and ethical considerations. Moreover, maintaining transparency and integrity throughout the process not only helps assignors avoid legal troubles but also builds a reputation that can lead to more successful deals in the future.

In this exploration of assignment fees in real estate, we’ve navigated their many complexities and nuances. From definition to application, assignment fees are a pivotal mechanism for investors, particularly in the realm of wholesaling.

There are many advantages and disadvantages associated with assignment fees. For sellers and investors, they can represent an expedient route to liquidity and profit. Conversely, for buyers, they can often introduce additional layers of cost and complexity.

The discussion of legal and ethical considerations illuminated the tightrope walked by those who engage in these transactions. The importance of adhering to disclosure norms, maintaining transparency, and aligning practices with the legal stipulations of the local and state jurisdictions cannot be overstated in this particular vein of real estate.

While the concept of assignment fees may appear straightforward, its application is often fraught with potential legal and ethical pitfalls. Those involved in real estate transactions must have a clear understanding of these fees and the corresponding regulations that govern their use.

By engaging in thorough research and due diligence and enlisting expert guidance, navigating the complex world of real estate can be achieved with confidence. The strategic use of assignment fees can indeed unlock opportunities and foster successful transactions, but only when managed with suitable care and consideration of all the variables at play.

For more insightful pieces about the real estate industry,  visit our blog today .

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Real Estate Assignment Fee: Your Guide to Earning Profit

Are you looking for a profitable investment opportunity in the real estate industry? If so, then real estate assignment fees may be worth exploring. This investment strategy involves assigning one’s rights to purchase a property to another buyer for a fee. With the right approach and knowledge, investors can earn a significant profit through real estate assignments.

To be successful in this field, it is important to have a solid understanding of real estate transactions, investing, and contracts. In this article, we will provide an overview of real estate assignment fees and how they work. We will also outline the steps an investor needs to take to maximize profit and mitigate potential risks.

• 0.1 Key takeaways:
• 1.1 How Real Estate Assignment Fees Work
• 1.2 The Risks and Challenges of Real Estate Assignment Fees
• 2 Steps to Earning Profit from Real Estate Assignment Fees
• 3 Maximizing Profit through Effective Real Estate Contracts
• 4.1 Conducting Thorough Market Research
• 4.2 Building a Network of Reliable Professionals
• 4.3 Staying Prepared for Potential Issues
• 5 Conclusion
• 6.1 Q: What is a real estate assignment fee?
• 6.2 Q: How does a real estate assignment fee work?
• 6.3 Q: What are the advantages of real estate assignment fees?
• 6.4 Q: What are the potential risks associated with real estate assignment fees?
• 6.5 Q: How can I earn profit from real estate assignment fees?
• 6.6 Q: What should I include in a real estate contract to maximize profit from assignment fees?
• 6.7 Q: How can I mitigate risks and challenges associated with real estate assignment fees?

Key takeaways:

• Real estate assignment fees involve assigning one’s rights to purchase a property to another buyer for a fee.
• A solid understanding of real estate transactions, investing, and contracts is crucial to success in this field.
• To maximize profit, investors need to find motivated sellers, analyze potential deals, negotiate contracts, and market the assignment opportunity to potential buyers.
• Effective real estate contracts can help investors protect their interests and ensure a smooth transaction.
• Investors should be aware of potential risks and challenges and take steps to mitigate them.

Understanding Real Estate Assignment Fees

If you’re looking to make a profit in real estate investing, it’s essential to understand the concept of real estate assignment fees. Simply put, an assignment fee in real estate refers to the fee charged by an investor to assign a contract for a property to another buyer . This strategy is commonly used in wholesaling real estate transactions.

Wholesaling real estate involves finding motivated sellers who are willing to sell their properties quickly and at a discount. The investor then enters into a contract to buy the property at a reduced price and assigns the contract to another buyer for a higher price, earning a profit through the assignment fee.

One of the advantages of real estate assignment fees is that they require less upfront capital compared to other real estate investing strategies. However, as with any investment, there are potential risks involved. It’s crucial to have a solid understanding of the process and the potential challenges to make informed decisions.

How Real Estate Assignment Fees Work

Real estate assignment fees work by allowing investors to essentially sell their contracts to other buyers. The process typically starts with the investor finding a motivated seller who is willing to sell their property at a discount. The investor then enters into a contract to buy the property at the agreed-upon price.

Once the contract is signed, the investor can then market the property to potential buyers and assign the contract to another buyer at a higher price, collecting the assignment fee. This fee is typically a percentage of the sale price or a flat fee agreed upon in the contract.

It’s important to note that real estate assignment fees are legal in most states, but it’s essential to check local regulations and laws before proceeding with this strategy. Some states have specific rules and requirements to follow, such as obtaining a real estate license or adhering to specific disclosure requirements.

The Risks and Challenges of Real Estate Assignment Fees

While real estate assignment fees can be a profitable strategy, there are potential risks and challenges that investors should be aware of. One of the biggest risks is the possibility of the buyer backing out of the deal, leaving the investor with the property and no buyer to assign the contract to.

Additionally, the investor may encounter challenges in finding a buyer willing to pay the assigned price, which could lead to decreased profits or even losses. It’s crucial to conduct proper due diligence and market research to mitigate these risks and ensure a successful transaction.

In the next section, we’ll discuss the steps to earning a profit from real estate assignment fees, including finding motivated sellers, analyzing potential deals, and negotiating contracts.

Steps to Earning Profit from Real Estate Assignment Fees

If you’re looking to earn profit through real estate assignment fees, here are some steps to guide you through the process:

• Finding motivated sellers: Look for distressed or motivated sellers who need to sell their properties quickly. This could include homeowners facing foreclosure, probate sales, or owners relocating for work.
• Analyzing potential deals: Once you’ve identified a potential seller, conduct market research to determine the property’s value and estimate the costs of any necessary repairs or renovations. Make sure the property is worth the investment.
• Negotiating contracts: Negotiate with the seller for a purchase contract with an assignment clause. This will allow you to assign the contract to another buyer for a fee.
• Marketing the assignment opportunity: Once you have the contract, market the assignment opportunity to potential buyers, such as other investors or homebuyers looking for a good deal. Be sure to explain the benefits of the property and the potential profit to be made.

It’s important to conduct due diligence throughout this process to ensure that the deal is worth the investment. Always make sure to have proper documentation and legal representation to protect your interests.

Maximizing Profit through Effective Real Estate Contracts

Real estate contracts play a crucial role in ensuring a smooth transaction and protecting the investor’s interests when dealing with assignment fees. To maximize profit, it is important to include key clauses and provisions in the contract that promote favorable terms and conditions. Here are some tips:

• Include an escape clause: This clause allows the investor to back out of the contract if they are unable to find a suitable buyer within a certain timeframe.
• Specify the assignment fee: Clearly define the fee that the investor will receive upon assignment, and ensure that it is fair and reasonable for the services provided.
• Include a non-compete clause: This clause prevents the seller from continuing to market the property while the investor is attempting to assign the contract, ensuring that the investor has exclusive rights to the deal.
• Ensure proper documentation: All contracts should be in writing and signed by all parties involved, and any agreements should be documented with written correspondence.
• Negotiate favorable terms: Work with a lawyer or real estate professional to negotiate terms that protect your interests and minimize risk.

By following these tips, investors can ensure that their contracts are effective and maximize profit potential in real estate assignment fees.

Mitigating Risks and Challenges in Real Estate Assignment Fees

While real estate assignment fees can be a profitable investment strategy, there are also potential risks and challenges that investors should be aware of. By taking proactive measures, however, investors can minimize these risks and maximize their profits.

Conducting Thorough Market Research

One of the most important steps in mitigating risk is to conduct thorough market research. This involves analyzing market trends, property values, and other local factors that can affect the success of real estate assignments. Investors should also keep up-to-date with changing regulations that may impact their investments.

Building a Network of Reliable Professionals

Another important strategy for mitigating risk is to build a network of reliable professionals, such as attorneys, real estate agents, and contractors. These professionals can provide valuable advice and support, helping to ensure that assignments are successful and profitable.

Staying Prepared for Potential Issues

Despite careful planning and diligence, issues may arise during the assignment process. Investors can prepare for these potential issues by having contingency plans in place, such as backup buyers or alternative funding sources. It is also important to maintain clear and open communication with all parties involved in the transaction.

By taking these proactive measures, investors can mitigate the risks and challenges associated with real estate assignment fees, while maximizing their chances for success.

Real estate assignment fees can be a profitable investment strategy for those who are willing to put in the effort. With a solid understanding of real estate transactions, investing, and contracts, investors can earn significant profit by wholesaling properties and earning assignment fees.

Remember to conduct thorough due diligence, build a network of reliable professionals, and stay updated on local regulations to mitigate the risks associated with real estate assignment fees. By maximizing profit through effective real estate contracts and managing potential challenges, investors can create a successful real estate investing business.

If you’re interested in exploring this investment strategy further, don’t hesitate to take action and start your journey towards earning profit through real estate assignment fees.

Q: What is a real estate assignment fee?

A: A real estate assignment fee is a fee that an investor earns by assigning their rights to purchase a property to another buyer . It is a common practice in wholesaling real estate, where investors enter into contracts to buy properties and then assign those contracts to another buyer for a fee.

Q: How does a real estate assignment fee work?

A: To earn a real estate assignment fee, an investor typically finds a motivated seller, negotiates a contract to purchase the property, and then finds a buyer who is willing to pay a higher price. The investor assigns their contract to the buyer , who then proceeds with the purchase. The difference between the purchase price in the original contract and the price paid by the buyer becomes the assignment fee for the investor.

Q: What are the advantages of real estate assignment fees?

A: Real estate assignment fees offer several advantages for investors. They provide an opportunity to earn profit without the need for substantial capital or extensive renovations. Real estate assignment fees also allow investors to leverage their negotiation skills and market knowledge to secure favorable deals. Additionally, this strategy enables investors to participate in multiple transactions and diversify their investment portfolio.

Q: What are the potential risks associated with real estate assignment fees?

A: While real estate assignment fees can be lucrative, they do come with potential risks. One risk is the possibility of not finding a buyer for the assigned contract within the agreed-upon timeframe, which could result in the investor being responsible for purchasing the property themselves. Another risk is encountering legal complexities or disputes related to contract assignments. It is crucial for investors to conduct proper due diligence, consult legal professionals, and have a thorough understanding of local regulations to mitigate these risks.

Q: How can I earn profit from real estate assignment fees?

A: To earn profit from real estate assignment fees, you need to follow a few key steps. These include finding motivated sellers who are open to selling their properties at a discounted price, analyzing potential deals to ensure they are profitable, negotiating contracts that allow for assignment, and marketing the assignment opportunity to potential buyers. It is essential to conduct thorough due diligence, build a network of reliable professionals, and document the transaction properly to maximize your profit.

Q: What should I include in a real estate contract to maximize profit from assignment fees?

A: When drafting a real estate contract for assignment purposes, there are key clauses and provisions that can help maximize your profit. These may include provisions that protect your right to assign the contract, specify the assignment fee, outline the timeline for finding a buyer , and address potential contingencies. It is recommended to seek legal advice and negotiate favorable terms and conditions to protect your interests and ensure a smooth transaction.

Q: How can I mitigate risks and challenges associated with real estate assignment fees?

A: Mitigating risks and challenges in real estate assignment fees requires careful planning and research. Conduct thorough market research to understand the local market dynamics and demand for assigned contracts. Build a network of reliable professionals, such as real estate agents, attorneys, and contractors, who can provide guidance and support. Stay updated on local regulations to ensure compliance and manage any potential issues that may arise during the assignment process.

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Real estate is a vibrant, dynamic and competitive industry. From the thrill of a sale to the pursuit of new leads, it keeps you on your toes. That said, it can also be incredibly isolating, and it can be hard to stay motivated. As a way to deal with this, many agents and brokers seek out professional mentorship as a means to gain insight and level up their performance. Across the country, the best real estate coaches serve as valuable mentors who can help agents and brokers achieve the success they deserve. 

“It’s really hard for independent business owners to get unbiased advice from themselves,” says Kyle Scott, President of SERHANT. Ventures. “So they need unbiased experts to work with that will help them grow their business — someone who has been there, who has done it, and who is able to see their business from both the 35,000-foot view and down in the weeds.” 

A quick internet search will prove that real estate coaching programs are plentiful. Whether you’re looking to expand your team or client network or figure out how to delegate work so you can focus on the tasks you do best, a real estate coaching program could be a valuable launchpad. But when it comes to choosing the right one for your unique needs, there’s a lot to consider. Here, we highlight some of the best real estate coaches in the industry and their programs.

• Best for luxury agents: Sell it like Serhant
• Best for affordable, expert group coaching: Tom Ferry
• Best for mobile learning: Tim and Julie Harris
• Best for introverts: Ashley Harwood
• Best for brand new agents: Candy Miles-Crocker
• Best for social media skills: Levi Lascak
• Best for brand messaging: Jess Lenouvel
• Best for team leaders: Buffini and Company
• Best for building a solid routine: Vanda Martin
• Best for a scaling your business: Tat Londono
• Best for targeting weak spots: Steve Shull
• Best for role playing: Aaron Novello
• Best for energy & enthusiasm: Krista Mashore Coaching

Who can benefit most from real estate coaching?

An unbiased view is worth millions. Often, we turn to our closest friends and family for guidance. Unfortunately, they’re usually not familiar with the ins and outs of the real estate industry and can’t provide you with the relevant feedback you need. As a result, many independent contractors rely on themselves, which generally doesn’t work either.

You can’t advise yourself, you’re too close to it. A coach works best for someone who is actually looking to grow their business, someone who is looking to put in the time and the energy to make a difference in achieving more income this year. Hire a coach if you want to start taking your business to the next level for any reason — you want to make more money, have more freedom with your time, or stop riding the ins and outs of the commission cycle.

1. Sell It Like Serhant

Grown throughout the pandemic, the Sell It Like Serhant program has been carefully adapted to the current market. It follows a weekly and bi-weekly platform featuring one-on-one virtual coaching from Serhant’s proprietary video platform. After a half-hour or hour-long group meeting every week or every other week, participants follow actionable steps to help them grow their business. Thus far, more than 22,000 enrollees in 128 countries have been through the Sell It Like Serhant program.

What We Love

Serhant offers daily office hours so participants can pop into virtual sessions to ask questions or get expert advice between their regularly scheduled sessions. A community platform also allows participants to pass referrals to each other. Thus far, it seems to have worked: To date, participating agents have closed over $250 million of referral deals.

There are different membership tiers, depending on the level of guidance you need. The introductory Real Estate Core Course starts at $497. Prices are higher for a more specific course or one with 1:1 coaching.

Who’s it Best For?

If you’re looking to build a memorable personal brand, SERHANT. is the way to go. “The number one differentiator about our program is we understand that as a real estate agent, you have one job: to generate leads,” says SERHANT. Ventures President Kyle Scott. “Our number one focus is helping you build a clear, compelling, memorable personal brand and put your lead generation on autopilot. So that way, you can do what you do best, which is build relationships and close deals.”

2. Tom Ferry International

For good reason, Ferry International refers to itself as the real estate industry’s leading coaching and training company. Focused on Ferry’s “8 Levels of Performance,” the programs are a staple of real estate coaching. Their new group coaching sessions cover various aspects of real estate sales.

Prospecting Bootcamp is a 14-hour program comprised of seven two-hour group coaching sessions, and includes a peer-to-peer collaboration space. It involves independent work pulled from training videos and downloadable resources.

Recruitment Roadmap consists of hour-long sessions each week for ten weeks. Completed over Zoom and through the Tom Ferry video platform, each group coaching program offers a high level of specialization. Finally, their Fast Track program offers 12 interactive group coaching sessions designed to help new agents build the necessary skills to succeed — like mastering listing presentations and handling objections. 

What we love 

If you’re looking for the gold standard of real estate coaching, Tom Ferry has the goods to back up the bravado. Because of their many years in the biz, Tom Ferry has a huge base of coaches, which means there are plenty of options to find the program best suited for your specific needs.

Tom Ferry’s Prospecting Bootcamp and Fast Track coaching programs cost $999 but can be broken down into three monthly payments. The Recruitment Roadmap group coaching costs $1,499 but can be split into three monthly payments of $500. Consider their free coaching consultation if you want to dip your toes in the water. Check out their customer reviews, where several coaching program alums rave about the program.

If you thrive in a group setting that allows you to feed off the energy of others, Tom Ferry might be right for you. Their group coaching programs are new and more affordable alternatives to often costly 1:1 coaching fees.

3. Tim and Julie Harris

The dynamic duo of real estate coaching, Tim and Julie Harris are a major name in the industry. Under their business, Harris Real Estate Coaching, their programs are divided into three tiers: Premier , Premier Plus , and VIP , all of which rely on a user-friendly online platform.

Pricing 

Premier platform costs $197 per month, but a 30-day free trial is available. Premier Plus costs $599 per month, while VIP costs $999 per month. Of course, their wildly successful podcast is a great free resource to tap into, as well as Tim and Julie’s many written contributions to HousingWire .

Who’s it Best For? 

If you’re constantly on the go, the ability to access the course from any device is a major asset.

4. Candy Miles-Crocker

Newbies are welcome at Candy Miles Crocker’s program. Known as the “Real Life Realtor,” she’s the brain behind Real Life Real Estate Training . With a variety of courses in her offerings, including a plethora of self-paced online courses, Miles-Crocker gives new agents a leg-up on the rest.

What we love

Miles-Crocker is still an active agent, working with clients to close deals. Her 20+ years of experience practicing in Washington, D.C., Virginia and Maryland have helped her build “systems, strategies and scripts” that she shares with her coaching clients.

The CORE Essentials Blueprint program retails for $1,597. Smaller, more specific courses, such as The Buyer Presentation , are priced at $347.  While all pricing isn’t listed on her website, Miles-Crocker also offers a free course that includes her 6-point system for growth.

Miles-Crocker’s courses could be beneficial if you are new to agent life or looking to get your business reorganized. She even has one specifically for your first 30 days as a real estate agent.

5. Ashley Harwood

Boston-based Ashley Harwood inspires introverts with her convincing, heartfelt and high-touch approach to practicing real estate. Her very human, very relatable Move Over Extroverts coaching approach is the perfect antidote for cheerleader-style coaches that urge you to door-knock, chase down divorce leads or become a social media superstar.

Harwood is a licensed agent coaching agents week-in and week-out at no less than three Keller-Williams offices in the great Boston metro. We love her humanity, inspiring videos , and her latest enterpise — The Quiet Success Club . Inspired by Susan Cain’s New York Times bestseller Quiet , about the power of introverts, Harwood brings together a community of like-minded real estate agents wanting a more client-centric approach to succeeding as an agent.

Join The Quiet Success Club for $45 per month (paid monthly) or get two months free when you pay for an annual subscription (for $450). The club is currently offering founding member pricing for $25 per month or $250, but it’s a limited-time offer available only under April 30, 2024. You can also sign up for Harwood’s free Facebook group, Introverts in Real Estate , or register for a full day of 1:1 coaching with her. During these VIP Days , Harwood will guide you through the completion of a comprehensive, personalized real estate business plan.

Introverts, of course! While you may not count yourself as one, if you read Susan Cain’s book, you may unearth your more introverted traits — like recharging your battery by being alone. Ok, even if you don’t bask in solitude, Harwood promises a calming community where agents can be themselves, be seen, and where they don’t have to be the loudest voice in her mastermind group, purposefully (and quietly) designed to teach successful lead generation and other strategies.

6. Levi Lascsak

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If you’re looking to improve your social media game, Levi Lascsak is the YouTube master. The author of Passive Prospecting specializes in helping real estate professionals embrace the video platform, and he does so in jam-packed, 2-day virtual events. Discover how he earned over $4 million in gross commission income as a new agent.

What we love  

Lascsak’s social media marketing skills are top-of-the-line. While he may not be part of the traditional world of real estate coaching, Lascak’s ability to relate to younger audiences is an asset that Millennial and Gen Z agents might appreciate.

The live, 2-day events are available at a discount for $47. But as you can expect, he’s got endless information available for free on YouTube.

Who’s it best for?

If you’re a digital native looking to pack a bunch of education into a short period, a Lascsak course is particularly beneficial.

7. Jess Lenouvel

Promising to help agents scale from six to seven figures, The Listings Lab founder Jess Lenouvel is the author of More Money, Less Hustle. A strong example of a coach with a significant understanding of social media, Lenouvel hosts vibrant live events that hype up the audience and prepare them to take their career to the next level.

What we Love

Lenouvel emphasizes the significant power of mindset to achieve one’s goals. She understands how quickly the market shifts and emphasizes staying on top of trends to succeed.

Tickets to The Listings Lab retail for $997, but Lenouvel offers a variety of free resources as well, like her Listing Lab guide .

Lenouvel’s live events focus on messaging. For those looking to solidify their brand and develop a clear, concise message, her events might be what you need.

8. Buffini & Company

Another giant of the real estate coaching industry, Buffini & Company is one of the largest coaching and training companies in the United States. They have two major coaching programs:  The Leadership Coaching program includes three monthly coaching calls, free admission to a 2-day conference, and curriculums and training led by Brian Buffini. There are also bi-monthly coaching sessions and a monthly web series with a live Q&A.

Buffini & Company also performs a REALstrengths profile — an in-depth personality assessment. In the One2One Coaching program, there are two coaching calls per month, a monthly marketing kit, the REALStrengths profile, and as with the SERHANT. program, Buffini features the Buffini Referral Network, allowing participants to send and receive referrals with other agents.

Buffini coaches aren’t independent contractors. Instead, they’re full-time employees who go through intense training. Thus far, they’ve conducted 1.7 million coaching calls and more than one million hours of coaching.

The Leadership Coaching program costs $1,499 a month. Private coaching, referred to as One2One Coaching , costs $549 per month. Two tiers of Referral Maker courses are available from $45 to $149 each per month.

Team spirit is the name of the game for Buffini’s Leadership Coaching program. If you’re a team leader looking to improve your coaching skills and assist your team in leveling up, the Leadership Coaching program might be right for you. If you want a more personalized path as a solo agent, the One2One Coaching program may be a better fit.

9. Vanda Martin

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A popular name in the real estate coaching industry, Vanda Martin ’s VIP Coaching Program follows three components: coaching, content, and community. Martin doesn’t shy away from mistakes – instead, she emphasizes avoiding indecision that puts you behind the pack. 

Positive vibes are plentiful in Martin’s world, and her energy is tangible. Just check out her Instagram videos.

Martin’s pricing isn’t listed.

If you’re looking for a female leader who emphasizes loving your job and building habits that will take you to a greater level of success, Martin’s ability to convey those feelings is clear. Just check out the endless testimo n ials on her website.

9. Tat Londono

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Tatiana Londono is the founder and CEO of Londono Realty Group Inc. The author of Real Estate Unfiltered , she offers a variety of programming that ranges from free templates to intensive coaching sessions. The Millionaire Realtor Membership provides weekly input from Londono, while the intensive Millionaire Real Estate Agent Coaching Program focuses on building 12-month objectives using a custom success action plan. It uses live programming and workshops with Londono herself, as well as an exclusive online community and referral network for members.

Londono’s keen sense of social media and her posts are a masterclass in how to boost your engagement on platforms like TikTok and Instagram. Don’t miss her takes on Taylor Swift’s real estate portfolio.

There are several tiers of Londono’s programs. The Millionaire Realtor Membership costs $97 per month, while the intensive Millionaire Real Estate Agent Coaching Program doesn’t publicly list its price tag. However, you can access her “six-figure real estate scripts” for free on her website .

Londono’s programs specifically target agents who are looking to scale their business. If you’re struggling with lead generation or want to increase the number of views you’re racking up on social media, Londono is a valuable source within the industry.

10. Steve Shull

Steve Shull’s Performance Coaching focuses on using consistent execution to achieve your goals. With options ranging from 1:1 private coaching to small group coaching for 10 to 20 agents, the groups have 30-minute Zoom calls three times a day, but the number of sessions you choose to attend is up to you.  Several self-directed courses are also available on the website, focusing on topics ranging from mindset to time blocking.

If you’re not positive you want to make the investment, Performance Coaching allows a 14-day free trial of daily accountability calls. 

Small group coaching costs $6,000 a year, and while 1:1 coaching prices aren’t listed online, you should prepare for a hefty price tag. 

If you have a specific area you’re looking to improve upon, Performance Coaching offers coaches with unique areas of expertise, ranging from CRMs to business strategy. Tailoring your program to your greatest areas of weakness can help you become a more well-rounded agent.

11. Aaron Novello

Aaron Novello of Elite Real Estate Coaching has several programs tailor-made for agents looking to hone their craft. A Masterclass in Systems works to teach agents how to scale their real estate business, organize their team, and use programming like Follow Up Boss to manage their business. The Role Play Mastermind is for agents looking to prepare themselves for tough discussions by working with a role-play partner for 15 to 30 minutes, five days a week. The group coaching option includes a variety of scripts Novello used to close on homes, as well as mindset guides, skill sheets, and expert guidance from experts in the field.

Novello’s exclusive accountability group allows active members and former coaching clients to share everything from guidance to motivation. If you’re looking to save money, Novello also has a free podcast available on YouTube .

Group coaching costs $250 per month and comes with a money-back guarantee. Novello’s masterclass also retails for $250. The Role Play Mastermind costs $500 per year.

If you struggle with having difficult conversations and are looking for solid templates to guide you, Novello’s Role Play Mastermind is a solid investment. The group coaching option emphasizes taking the educational portion and putting it into practice in the real world rather than just watching videos.

12. Krista Mashore Coaching

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Filled with energy and known for popping up in the press, Krista Mashore is the mind behind Unstoppable Agent, her 3-day mastery class. It includes over 15 hours of coaching, group workshops, breakout sessions, and skill-building workshops to provide you with the skills to implement digital marketing successfully into your real estate business. 

A positive attitude counts for a lot, and Mashore’s personality is a key component of the success of her course.

Mashore’s accessibility is another one of her program’s best assets. Her 3-day class is currently priced at $47, but pricing occasionally varies.

If you crave energy and enthusiasm, Krista Mashore has the goods. She’s also an expert on working in today’s low-inventory market, which is ideal for someone struggling with the current housing shortage. But she’s also got a good sense of humor, which shines through in her social media presence.

The full picture: The best real estate coaches for 2024

Hiring a top real estate coach goes far beyond just expanding your skills. While growing and educating yourself as you navigate your career is essential, hiring a coach is all about seeking to achieve more. Whether you’re looking to boost lead generation, build a solid personal brand, or make more commission income, having the input of a seasoned expert is a priceless step in the right direction. As you can see through the endless reviews and testimonials on coaches’ websites, agents who want to scale their business and take their profits to a higher level often seek the outside guidance of a coach. While the cost of hiring someone may be significant, the return on investment is equally as monumental.

Frequently Asked Questions

Real estate coaching programs vary in price significantly. Most cost over $500 per month, with others charging several thousand dollars per month. “Oftentimes, it is the case that you get what you pay for,” said Kyle Scott, President of SERHANT. Ventures.

However, prices can also vary depending on the specific niche of real estate coaching you’re focusing on. The more specificity you’re seeking, the higher the financial investment. Of course, self-led courses are likely to cost much less.

Does your career feel stalled right now? Are you ready to take your career to the next level, but you’re not sure where to start? In a down market, you can channel your time and energy into actively improving your business skills so that you’ll be sufficiently prepared for when the market changes.

“When things pick up again, you’re ready to capture the climbing market,” says Scott. “If that’s the case, then the best time to embrace coaching is now. At the same time, a thriving market presents agents with new challenges, ranging from having to turn away business or being unable to service your existing business in a way you’re proud of,” Scott noted. “In that type of market, a real estate coach can help you determine what kind of junior agent or assistant would serve you best. How do I figure out how to manage my business in a way that I can keep up with the volume?”

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Mortgage rates did not go higher after the most recent Fed meeting and inventory is still growing.

4 Ways a Settlement Could Change the Housing Industry

The influential National Association of Realtors agreed to make several changes to its policies to settle class-action lawsuits brought by home sellers who say they were forced to pay inflated commissions to real estate agents.

By Debra Kamin

In the early hours of Friday morning, the National Association of Realtors agreed to a global settlement deal that would resolve several lawsuits against the trade group.

A group of Missouri home sellers sued N.A.R. over their policies on agent compensation, arguing that a N.A.R. rule requiring home sellers to pay commissions to their agents and the agents of their buyers led to inflated fees and price fixing. The lawsuit also called into a question another rule requiring agents to list homes on N.A.R.-affiliated databases in order to sell them. In October, a jury agreed that both practices were anticompetitive, and a judge ordered damages of at least $1.8 billion.

More than a dozen copycat cases, all accusing N.A.R. of stifling competition and violating antitrust laws, have followed.

With the settlement agreement, N.A.R. will pay $418 million in damages , but more important, it has agreed to rewrite a number of rules that have long been central to the U.S. housing industry. Here’s how things stand to change, pending court approval.

Home prices will drop.

In the United States, most agents specify a commission of 5 or 6 percent, paid by the seller. That means that someone with a $1 million home should expect to spend up to $60,000 on real estate commissions alone, with $30,000 going to his agent and $30,000 going to the agent who brings a buyer. Even for a home that costs $400,000 — close to the current median for homes across the United States — sellers are still paying around $24,000 in commissions, a cost that is baked into the final sales price of the home.

With the settlement agreement, sellers’ agents will no longer be required to make offers of commission to buyers’ agents, a practice called decoupling. This will save homeowners billions.

“Decoupling will allow commissions to be removed and negotiated down, lowering both housing prices and overall consumer costs,” said Steve Brobeck, the retired executive director of the Consumer Federation of America. Mr. Brobeck said that Americans spend about $100 billion a year in real estate commissions, and with the settlement, that number is expected to dip by at least $20 billion and up to $50 billion.

Since commissions are tacked onto the price of a home, “Over time, both sellers and buyers will force rates down through negotiation and comparison shopping in a more price-transparent marketplace,” he said.

The 6 percent commission will cease to be the norm.

The lawsuits argued that N.A.R., and brokerages that required their agents to be members of N.A.R., had set rules that led to an industrywide standard commission of 5 or 6 percent — one of the highest rates in the world. Without that guaranteed rate, agents will now most likely be forced to lower their commissions to compete for business.

“U.S. commissions are unlikely to decline to the 1 or 2 percent rate level in England, where only one agent and an attorney are usually involved in a home sale. But they certainly will decline substantially, and commissions will also increasingly reflect the competence and efforts of agents on sales,” Mr. Brobeck said in an email.

Steering — the practice of agents directing buyers to more expensive houses — will be less common.

Most of the databases where homes are listed for sale in the United States are restricted to dues-paying members who belong to N.A.R., a dominance that has led to antitrust allegations against N.A.R.

One N.A.R. rule demands that a listing agent, when posting a home on the database, clearly state the amount of compensation that a buying agent will receive should they bring a buyer. This is a practice that critics say has long led to “steering,” in which buyers’ agents direct their clients to pricier homes in a bid to collect a bigger commission check.

Under the settlement, any fields displaying broker compensation will be eliminated entirely, which will help damper the practice.

About one million real estate agents could leave the profession.

The number of real estate agents swelled during the pandemic, when mortgage rates plummeted and the housing market boomed. In 2020 and 2021, more than 156,000 people got their real estate licenses, and membership in the National Association of Realtors hit a peak of 1.6 million members in 2022.

A lot of that growth was predicated on the idea of easy money.

But now a lot of those agents are struggling, and a reduction in commission rates will only increase the pain. Half of the agents in the country sold one house — or no house s at all — last year. With the industry now staring down a massive overhaul, veteran agents predict their less experienced peers will leave the field all together.

Some analysts predict a mass departure. One widely cited report from investment banking firm Keefe, Bruyette & Woods projects 1 million agents leaving the field as shared commissions vanish.

“Veteran agents have built strong relationships, established reputations and extensive networks. Newer real estate agents may struggle,” said Jen McDonald, who leads LPT Realty in Reno, Nev., and has spent 24 years in the industry. “Without established reputations or strong clients bases, they are going to find it challenging to retain clients or attract new ones.”

Debra Kamin reports on real estate, covering what it means to buy, sell and own a home in America today. More about Debra Kamin

What Is an Assignment Fee in Real Estate?

The real estate investment landscape requires a deep understanding of various terminologies and concepts and one term that frequently comes up, especially in wholesaling, is the "assignment fee."

This concept plays a critical role in the wholesaling transaction process and can significantly influence the profitability of deals. 

To fully grasp its impact and effectively utilize it as a part of your real estate investing strategy, it's important to delve deeper into the nature of assignment fees and their role in real estate wholesaling. We’ll do just that in this blog, so keep reading!

What is an Assignment Contract?

An assignment contract in real estate is essentially an agreement that allows one party (the assignor) to transfer or assign the rights and obligations of a property purchase agreement to another party (the assignee).  Contract assignments are typically used by real estate investors who have very little money or those who don't want to buy properties and put in an earnest money deposit.

To be more detailed, the property owner and the assignor (usually a real estate investor or wholesaler) enter into a purchase agreement. This real estate contract states that the assignor agrees to buy the property for a specific price within a certain time frame. The real estate contract details all the terms and conditions of the sale.

The assignor then decides they don't want to or cannot complete the purchase themselves. Instead, they find another interested party (the assignee) who wants to purchase the property. 

The assignor enters into an assignment contract with the assignee. This real estate assignment contract effectively transfers all rights and obligations of the initial purchase agreement from the assignor to the assignee. 

Once the assignment contract is signed, the assignee steps into the shoes of the assignor. They are now the ones who will buy the property, adhering to the terms and conditions of the original purchase agreement. The assignee will complete the purchase with the original property owner.

What is an Assignment Fee?

The assignment fee is the difference between the price the real estate wholesaler contracted with the original seller and the price the end buyers or cash buyers agree to pay. This fee is essentially the wholesaler's compensation for their role in finding the property, securing the real estate assignment contract, and linking the seller with a willing cash buyer.

For instance, if the real estate wholesaler got a property under a real estate assignment contract for $100,000 and found an end buyer willing to pay $120,000, the $20,000 difference would be the real estate assignment fee during the closing date. This is the wholesaler's profit for effectively linking up the seller and the buyer.

How Much is the Average Assignment Fee For a Real Estate Investor? (How Much Does a Real Estate Wholesaler Make?)

The average assignment fee for a real estate wholesaler can vary widely based on several factors, including the real estate market they're operating in, the specific property, and the details of the deal. 

It's not uncommon to see assignment fees range anywhere from a few thousand dollars to $20,000 or even higher. Some wholesalers aim for a standard assignment fee, like $5,000 or $10,000 per deal, while others may aim to make a certain percentage of the property's price which may realistically cost 10 to 20%.

A significant factor that impacts the assignment fee is the potential profit in the deal. If a property is significantly undervalued and there's a large margin for profit on the closing date, the assignment fee could be higher. Similarly, if the deal is less profitable, the assignment fee might be on the lower end. 

As the real estate market can fluctuate and change rapidly, always consult with a real estate professional or legal expert for the most current and accurate information.

What is the Average Assignment Fee for a Lot?

The average assignment fee for a lot, much like with a house or other types of real estate, can vary greatly based on numerous factors such as the location of the lot, its size, the demand in the area, zoning restrictions, and more.

There isn't a universally applicable average fee due to the wide array of factors at play. However, wholesalers might aim to earn a certain percentage of the lot's price as their assignment fee, typically somewhere around 10 to 20% , but it can go higher or lower depending on the specifics of the deal.

For example, in an area where vacant lots are in high demand for new construction, the assignment fee could be substantial. Conversely, in an area with lower demand or restrictive zoning, the assignment fee might be lower. This may also vary if you are double closing.

Who Pays the Assignment Fee?

In a real estate wholesaling transaction, the assignment fee is typically paid by the end buyer or assignee. This is because the assignment fee represents the wholesaler's profit for facilitating the deal, identifying the property, securing the original contract, and then assigning that real estate contract to the cash buyer.

The cash buyer pays the wholesaler the agreed-upon assignment fee, often at the closing date, in addition to the real estate purchase price that the wholesaler originally negotiated with the seller. The wholesaler makes their profit from the assignment fee, while the seller receives the originally agreed price. This may be a little different when double closing.

How are Assignment Fees Calculated?

The calculation of an assignment fee in real estate wholesaling is fairly straightforward. The assignment fee in an assignment of contract is typically the difference between the price that the wholesaler has agreed to pay the property seller and the price that the end buyer agrees to pay for the property.

Remember, while this is a common way to calculate assignment fees on real estate contracts, there can be variations based on the specific deal and local laws and regulations. 

Are Assignment Fees Taxable?

Assignment fees in real estate wholesaling are generally taxable. They are considered income for the wholesaler and are subject to tax laws just like any other form of income.

When a wholesaler earns an assignment fee in an assignment of contract, this fee is essentially the profit they make from facilitating the real estate transaction. Therefore, it's considered as part of their taxable income for the year in which the fee was earned.

The specific tax rate can vary depending on several factors in an assignment of contract, including the total amount of income the wholesaler earns in a year, their filing status, and more. Additionally, the tax treatment can vary if the wholesaler operates as an individual or through a business entity, like an LLC or a corporation.

As always, tax laws can be complex and they can vary from place to place, so it's essential to consult with a tax professional or tax advisor to understand the implications and obligations in your specific situation.

It's crucial to keep accurate records of all real estate transactions or assignment of contract, including the earning of assignment fees and double close deals, to ensure you're prepared when it's time to file taxes.

Does the Assignment Fee Show Up on the HUD?

The HUD-1 Settlement Statement, often simply referred to as the HUD (implemented by the Department of Housing and Urban Development), is a standardized form that outlines the final details of a real estate transaction, including closing costs.

It itemizes all charges imposed on both the cash buyer and the seller and provides a full accounting of the transaction when flipping real estate contracts.

The assignment fee could show up on the HUD-1 Settlement Statement, but its placement would depend on the specific circumstances of the transaction. 

In some cases, wholesalers prefer to keep the assignment fee off the HUD-1 to maintain privacy about their earnings from the transaction. Instead, they might use a separate assignment agreement with the end buyer or cash buyer that outlines the fee in the assignment contracts.

However, some transactions — especially those involving certain types of financing such as double close or those subject to specific local laws or regulations — may require all fees to be documented on the HUD-1. In such cases, the assignment fee might be listed as a line item on the form.

Can a Real Estate Agent Get an Assignment Fee?

In many cases, real estate agents are not typically involved in assignment fees because such fees are often associated with wholesaling transactions or assignment contracts , a practice that most agents don't engage in as they are representing sellers or cash buyers in a more traditional sales process.

However, it's technically possible for a real estate agent to earn an assignment fee if they're also operating as a wholesaler or are involved in a wholesale transaction, but there are some important things to consider.

First, the agent must fully disclose their intentions to all involved parties. If they have a property under contract and intend to assign that contract for a fee, they must let the seller, buyer, and any other relevant parties know about this. 

Second, the agent should confirm that this practice is allowed under their brokerage's policies. Some brokerages may not allow their agents to engage in wholesaling or similar activities. 

Lastly, the agent needs to ensure they're adhering to all local and national laws in an assignment of contract. This can vary greatly, so it's crucial to consult with a legal expert or a real estate attorney or closing attorney to ensure everything is being done legally and all contractual obligations are performed.

How to Increase Assignment Fees for Wholesale Real Estate Investors?

There are many strategies you can use to increase assignment fees in an assignment of contract, but they can vary in effectiveness based on your local market, real estate laws, and personal real estate investing strategy. 

To help you start earning larger assignment fees, check out the following tips:

Double Closings

Double closing, also known as "simultaneous closing" in assignment contracts, involves two separate transactions that are linked at the same time. The wholesaler first purchases the property from the seller and then immediately sells it to the buyer. 

By doing double closings, the wholesaler can often increase their assignment fee because the end buyer does not see the original real estate purchase or asking price , which allows the wholesaler to mark up the property's price more significantly.

Use the go-to formula or the 75% rule

If you don't want to do double closing, maybe the 75% rule will work for you. The 75% rule is a guideline that suggests that an investor should pay no more than 75% of the after repair value (ARV) of a property minus the repairs needed. Sticking to this rule in assignment contracts can ensure that the property is purchased at a price that allows room for a profitable assignment fee.

Be confident in negotiating 

A strong negotiation can significantly increase assignment fees real estate. Wholesalers must be skilled in negotiating a lower price with the seller and a higher price with the buyer in the assignment of contract. This requires confidence, a good understanding of property values, and a knack for sales and communication.

Find high-quality cash buyers

Cash buyers are often willing to pay more for the convenience of a quick close , which can result in a higher assignment fee. Establishing a strong network of reliable cash buyers who are looking for investment opportunities can be very profitable for a wholesaler.

Implement a max allowable offer

This refers to setting a ceiling on the original purchase price that still allows for a profitable assignment fee. By calculating the max allowable offer (MAO), wholesalers can ensure they never overpay for a property and that there's always room for their assignment fee.

Don't waste time on unmotivated sellers

An unmotivated seller is unlikely to agree to a price that leaves room for a good assignment fee. Wholesalers should focus their time and energy on sellers who are motivated to sell quickly and willing to negotiate on price.

Find out what works for other wholesalers

Networking and learning from other successful wholesalers can provide valuable insights. Other wholesalers might share successful strategies, potential pitfalls to avoid, or even refer deals if they have too many.

Use the 80/20 rule

The 80/20 rule, or the Pareto Principle , states that 80% of effects come from 20% of causes. In wholesaling, this could mean that 80% of profits come from 20% of deals. 

Identifying and focusing on the types of deals in assignment contracts that generate the most profit can help increase overall real estate assignment fees.

Steps in Wholesaling Real Estate

Now that you already understand what an assignment fee is, it’s time to start wholesaling real estate. To guide you, here are the detailed steps.

Step 1. Understand Local Wholesaling Regulations

Before embarking on any real estate venture, it's vital to understand the rules and regulations that govern the practice. 

This includes both local and national laws relating to wholesaling. Be aware of the legalities involved in assigning contracts, necessary disclosures, and any license requirements in your area.

Step 2. Identify Potential Properties

The next step involves seeking out properties that are not listed on the market—these are often referred to as off-market properties. 

These can be properties in need of repair, owned by motivated sellers, or those foreclosed upon property or real estate owned. Uncovering the property address of these opportunities often requires diligent research and networking.

Step 3. Evaluate the Property's Potential Value

Assess the property's After Repair Value (ARV). This is an estimate of what the property could be worth after paying for the repair costs. 

This is a crucial step in determining whether the deal could be profitable and how much you should offer for the property. The typical repair cost can be expensive so you should really look into this before signing the sale agreement.

Step 4. Engage with the Property Owner

Once you've identified a promising property, the next step is to reach out to the seller to offer an assignment of contract. This could be through a direct mail campaign, a phone call, or even a door-to-door visit. The goal is to discuss their interest in selling the property for a contract assignment.

Step 5. Conduct Thorough Property Assessment

This involves investigating the property in detail. You'd want to look at the physical condition of the property, any title issues by contacting the title company, and any other factors that could affect the property's value or scalability before you get ready for a sales agreement and get the property sold. This process is often referred to as "due diligence."

Step 6. Secure the Property with a Purchase Contract

If the property passes your due diligence and the owner is willing to sell, the next step is to put the property under contract. This agreement for the property obtained should allow you to assign the contract to another buyer (unless local laws prohibit this).

Step 7. Locate a Potential Buyer

Now that you've secured the contract, you need to find an end buyer. This is often a real estate investor looking for a new project. You'll want to have a robust buyer's list that you can reach out to when you have a property available.

Step 8. Assign the Contract to the Buyer

Once you have a willing buyer, you'll assign them the rights to the purchase contract. This involves another contract, known as the assignment contract, in which you officially transfer your rights as the buyer to the new buyer.

Step 9. Receive Your Wholesaling Fee

After the assignment contracts reassigned and the new buyer purchases the property from the seller in the closing table, you can get the assignment fee paid. 

This is your profit for facilitating the deal , and it's usually the difference between the price you contracted with the seller and the price the buyer agreed to pay for the original contract in case you do not double close.

Key Takeaways: What is an Assignment Fee in Real Estate?

Understanding the concept of an assignment fee in assignment contracts is crucial for anyone involved in real estate wholesaling. As discussed in this blog, an assignment fee is essentially the profit a wholesaler makes for facilitating a property transaction.

Various factors can influence the amount of this fee, such as the property's potential value, market demand, and the negotiation skills of the wholesaler. 

If you feel like you are ready for your first wholesale deal, then check us out at Property Leads . We offer highly motivated seller leads perfect for wholesaling! We sell these leads exclusively to cut your competition.

Fill out our form below to start getting wholesaling leads and earning assignment fees.

PROPERTY LEADS

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Rules that helped set real estate agent commissions are changing. Here’s what you need to know

FILE - Key lock boxes for real estate showings hang on a fence outside a high-rise condominium building, Oct. 27, 2022, in Chicago. The cost of hiring a real estate agent to buy or sell a home is poised to change along with decades-old rules that have helped determine broker commissions. (AP Photo/Kiichiro Sato, File)

FILE - A sign announcing a home for sale is posted outside a residence, Feb. 1, 2024, in Aceworth, Ga., near Atlanta. The cost of hiring a real estate agent to buy or sell a home is poised to change along with decades-old rules that have helped determine broker commissions. (AP Photo/Mike Stewart, File)

FILE - A new housing development in Middlesex Township, Pa., is shown on Oct. 12, 2022. The cost of hiring a real estate agent to buy or sell a home is poised to change along with decades-old rules that have helped determine broker commissions. (AP Photo/Gene J. Puskar, File)

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The cost of hiring a real estate agent to buy or sell a home may soon change, along with decades-old rules that have helped determine broker commissions.

The policy changes could help spur price competition for agents’ services and lower the cost for sellers who now typically cover the commission for the buyer’s agent, as well as that of their own.

In turn, more homebuyers could face pressure to pay for their agent’s commission out of pocket. That could be a challenge, especially for buyers already stretching financially to make a down payment and cover other upfront costs involved in buying a home.

Still, housing market watchers say it can’t be immediately determined how significantly any changes that potentially shift the cost of hiring an agent to a homebuyer will affect home sales. An adjustment period is likely as buyers, sellers and agents figure out how to navigate what comes next.

“I just think it’s too soon to tell,” said Greg Kling, an associate professor at the University of Southern California Marshall School of Business who has taught and written about real estate taxation. “We’re going to either see prices are going up for buyers, or the market is going to correct itself.”

WHAT’S DRIVING THIS?

As part of a settlement announced Friday , the National Association of Realtors agreed to make some policy changes in order to resolve multiple class-action lawsuits brought on behalf of home sellers across the U.S.

The trade group agreed to change its rules so that brokers who list a home for sale on any of the databases affiliated with the NAR are no longer allowed to include offers of compensation for a buyer’s agent.

This change is meant to address a central assertion in lawsuits brought against the NAR and several major real estate brokerages: that homeowners are being forced to pay artificially inflated agent commissions when they sell their home.

The trade group also agreed to require agents, or others working with a homebuyer, to enter into a written agreement with them. That is meant to ensure homebuyers know going in what their agent will charge them for their services.

If the court signs off on the settlement, the NAR would implement the rule changes in mid-July. Meanwhile, several real estate brokerage operators, including Anywhere Real Estate and Keller Williams, have reached separate settlement agreements that include provisions for more transparency about agent commissions for homebuyers and sellers.

“The residential real estate marketplace will take some time, perhaps several years, to fully process the implications of this settlement,” said Stephen Brobeck, senior fellow at the Consumer Federation of America. “But over time more, agents will feel free to offer different types of compensation and more consumers will comparison shop and negotiate commissions in a more transparent marketplace.”

WHAT THIS COULD MEAN FOR HOMEBUYERS

The key potential change centers on who foots the bill for real estate agents who represent homebuyers.

Currently, an agent or broker representing a home seller typically splits a commission — often around 5% to 6% of the home’s sale price — with the agent working on behalf of the homebuyer. Such an arrangement is known in the industry as “cooperative compensation.”

Under the proposed NAR settlement, a broker who represents a seller would no longer be allowed to include a blanket offer of cooperative compensation to a prospective buyer’s agent when they advertise the property on NAR-affiliated Multiple Listings Services, where a majority of U.S. homes are listed for sale. This is meant to remove any incentive from a buyer’s agent to steer their client away from home listings that don’t include a cooperative compensation offer.

However, the proposed rule change leaves it open for individual home sellers to negotiate such an arrangement with a buyer’s agent outside of the MLS platforms, essentially creating a loophole for agents to keep things as they are now.

Homebuyers could also ask the home seller for a concession that includes money to help cover the buyer’s agent compensation.

What happens if a seller doesn’t want to offer to pay the buyer’s agent commission? Homebuyers would be on the hook to shop around for an agent they can afford. They’d also have to sign a contract with an agent before they enlist their services, spelling out how much the agent’s compensation will be.

Having to factor in another expense into their homebuying budget could be challenging for homebuyers without a lot of savings or financial flexibility, making it tougher for them to navigate the housing market.

Still, many variables are at play when it comes to buying or selling a home, not the least of which is how motivated each party is to close the deal.

“If I’m a buyer and I know this seller is not going to reimburse my agent, then I may make a lower offer,” said Kling. “Now, obviously in a hot market, that strategy’s not going to work. But then in a hot market, I would have paid over listing price anyway.”

HOW MIGHT THIS AFFECT HOME SELLERS?

The biggest change for homeowners looking to sell is they could push back against paying for buyer-agent commissions, which could translate into considerable savings.

Consider a seller who agrees to pay a 3% commission for their listing agent — instead of potentially twice that to cover the buyer’s agent, too — and sells their home for February’s national median sale price of $379,100. That homeowner would save roughly $11,373 paying only their agent’s commission.

“The settlement will also encourage more sellers to negotiate the compensation of their listing agents,” said Brobeck.

Still, sellers may still face some pressure to cover buyer-agent commissions.

The NAR built in an exception to its proposed rule change that would allow a buyer’s agent to see offers of cooperative compensation on home listings being advertised by their own brokerage.

That workaround could tempt buyer agents to “steer” clients away from any listings that don’t come with an upfront compensation offer, which could prompt sellers to offer more competitive commissions to be split between their agent and the buyer’s, analysts with Keefe, Bruyette & Woods wrote in a research note Monday.

“So long as steering incentives still exist, home sellers may be compelled to offer supracompetitive commissions to buyer agents in order to avoid steering,” the analysts wrote.

HOW MIGHT THIS CHANGE THE REAL ESTATE INDUSTRY?

One concern is that by making it easier for sellers to opt out of making a cooperative compensation offer to buyer agents, some buyers will opt against hiring an agent or only doing so toward the end of the process after they’ve gone through most of the home hunt themselves. That could end up weeding out some “lower-performing brokers,” Kling said.

Another scenario is that alternative types of real estate business models will become more popular. This includes using discount brokers that will list a home for a flat fee of $500.

“They don’t offer any compensation to the buyer agent because the buyer agent negotiates their own conditions if they want more,” said Mike Downer, a broker associate with Coldwell Banker Realty in Naples, Florida. “That business model has been around for a long time.”

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Realtors’ settlement could dramatically change cost of housing sales

The proposed deal with the national association of realtors would upend the rules that critics say help inflate commissions for home sellers..

The National Association of Realtors has agreed to settle litigation that accused the industry group of artificially inflating real estate commissions, setting up a reconfiguration of the housing market that could dramatically lower how much consumers pay in home transactions.

Under the proposed deal, the group representing 1.5 million real estate agents would change rules that plaintiffs and consumer advocates say have helped inflate commissions for home sellers, who for decades have paid Realtors 5 to 6 percent of the sale price. The association also would pay $418 million over four years to settle several cases.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Nykia Wright, interim chief executive of NAR. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”

NAR said it continues to deny wrongdoing.

The rule changes have the strong potential to lower fees paid by sellers in home sales — and may even bring down home prices overall — by aligning fees closer to the true value of services from real estate agents, according to consumer advocates, academics and lawyers involved in the cases.

“There’s no doubt in my mind that this is going to bring about tremendous savings to homeowners,” said Michael Ketchmark, a plaintiff attorney representing Missouri home sellers in one of the cases, adding that he was confident that agreement would fundamentally change the real estate market and help lower the cost of housing and home sales.

Benjamin D. Brown, managing partner at Cohen Milstein, one of the firms representing the plaintiffs in the Illinois case, said the “settlement will bring sweeping reforms that will help countless American families.”

The agreement still needs a federal judge’s approval before it can take effect. Some skeptics, such as Redfin CEO Glenn Kelman, questioned whether the agreement would significantly change the status quo.

The Justice Department, which last year asked a federal court to reopen its antitrust investigation into NAR’s rules, declined to comment on the settlement.

The association’s century-old commissions structure provides that sellers’ and buyers’ agents split an amount that typically ranges between 5 and 6 percent of the home sale price. Home sellers in Illinois and Missouri alleged in a pair of class-action lawsuits that NAR’s rules inflate commissions by requiring sellers’ agents to make a compensation offer to list on the Multiple Listing Service, a home selling database.

In October, a Kansas City, Mo., jury found that NAR and major brokerages conspired to keep commissions artificially high and awarded a class of Missouri home sellers $1.8 billion in damages. Meanwhile, the case in Illinois had been moving toward a trial, focused on similar allegations. The agreement announced Friday, if approved by a judge, would resolve those cases and end the long-standing commissions structure, Ketchmark said.

Since the October verdict, experts predicted that the commissions system was poised for change. Not only was it threatened by the class-action cases, but the Justice Department had been asking the U.S. Court of Appeals for the D.C. Circuit to reopen an antitrust investigation into NAR’s commissions rules that it had settled in 2020.

Experts say the proposed rule changes will result in a “decoupling” of commissions that have been traditionally borne by the seller and shared with the buyer’s agent — a system that critics say was anticompetitive and kept fees high.

The settlement unveiled Friday would bar seller agents from using multiple listing services — Realtor-accessible databases where new homes are marketed — to post commissions they offer to buying agents. The option to denote buyer compensation will simply not appear in the multiple listing services, according to attorneys involved in the case .

If a federal court approves the settlement, the rules will take effect in July, according to a person close to the settlement talks who spoke on the condition of anonymity because they were not authorized to discuss it publicly.

It’s likely that agents representing buyers will have to seek compensation directly from their clients because they will no longer get a guaranteed commission from the seller, according to Sonia Gilbukh, assistant professor at City University of New York Baruch College.

That could make it harder for cash-strapped parties to buy a home, she said. But she added that commissions should decrease, attracting less-experienced Realtors and exerting downward pressure on prices. Sellers, Gilbukh said, probably will see lower transaction costs if they no longer pay buyers’ commissions.

“It might take time for the industry to shake out into a new equilibrium,” Gilbukh said. “But overall, the reduced transaction fees should bring the [home] prices down.”

The new system would not necessarily hurt low- and lower-income buyers, said Jenny Schuetz, a senior fellow at the Brookings Institution focused on housing. Closing costs such as buying down points or paying for title insurance get bundled into mortgage loans, and a buyer agent’s fee could similarly be included. Plus, if sellers halve the fee they’re paying to real estate agents, they might sell their home at a lower price because they keep more of the proceeds, Schuetz said.

“This doesn’t have to be bad for low-income, first-time home buyers if we put in place supports so they understand how the process works, are empowered to negotiate with brokers over this and understand going into it what they’re getting,” she said.

Steve Brobeck, a senior fellow with the Consumer Federation of America, which has long studied the commissions issue, said that the agreement has the potential to shake up the industry — and he said it’s for the best.

“NAR has done the sensible thing and agreed to try to put this controversial issue behind them,” he said.

Consumers “will be the big beneficiaries,” said Brobeck, whose organization estimates that they will save $30 billion per year.

Other analysts also expect large savings for consumers. An October report by investment firm Keefe, Bruyette & Woods predicted that changes to the commissions structure could lead to a 30 percent reduction in the $100 billion annually that U.S. consumers pay in real estate commissions.

The settlement would set up two negotiations in the home sale process — one between the buyer and their agent, and another between the seller and their agent, Schuetz said.

“It’s going to be really interesting to see, particularly on the buyer side, how much buyers are willing to pay in a fee to their broker to help them purchase a home, when before there was sort of this impression that buyers didn’t pay a fee at all,” Schuetz said.

In general, she said, people tend to be more sensitive to a tax or fee that is written out, rather than baked into the price. But buyers’ needs vary widely, depending on their level of knowledge, the local market and the complexity of the transaction. Ideally, Schuetz said, agents will offer fees that match their skill level and the actual services provided — what others have referred to as an “a la carte” model.

“I could see some buyer’s agents marketing themselves as, ‘We are a full-service agent, we help you do all the things, we make this easier for you, and we charge a higher fee,’ ” Schuetz said. “And other buyer’s agents saying, ‘Hey, we’re working with buyers who don’t need a ton of help. We’re kind of cut-rate, we’ll offer you a reasonably low fee.’ ”

Redfin’s Kelman cheered the proposed settlement, but said in a blog post that “it’s still unclear if the settlement will end cooperation entirely.” The real estate listing platform has long been a critic of the commissions structure and has cast itself as an alternative to the NAR system.

Although the settlement would strip mentions of compensation for buyers’ agents from database listings, sellers could still offer money to buyer’s agents, thus allowing for some degree of cooperation, Kelman said in his blog post.

“The result could be that agent-to-agent cooperation on fees is weakened but not killed,” added Kelman, whose platform pays a majority of its agents a base salary on top of transaction bonuses that range between 1 and 1.5 percent of the sales price.

Nevertheless, he said, the settlement could “reshape agent attitudes about cooperation, and consumer attitudes about fees.”

After the settlement was announced, investors dumped shares in several of the sector’s marquee names. The parent company of eXp Realty saw its stock price decline 9.9 percent and Anywhere Real Estate Inc. — which owns Sotheby’s, Century 21 and Coldwell Banker, among others — lost 11.6 percent.

Redfin and fellow housing data aggregator Zillow lost 4.9 percent and 13.5 percent, respectively, as analysts expressed concern that shifting commissions structures could harm their revenue models. A large portion of Zillow’s revenue, for example, comes from advertising for buyer’s agents, while the company’s premium subscription products could lose members if the industry shrinks.

Zillow believes “positive changes for consumers also benefit the agents who serve them well — on both sides of the transaction,” a company spokesperson said.

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