Partner wants the assignment fee split at closing, I want to be the one who invoices

Question

Deal in progress, 3/2 in a working class suburb, contract at 118k, buyer at 141k, so 23k of spread before title fees. I sourced it, he brought the buyer and did the walkthrough with them.

His structure: both of us appear on the settlement statement, title cuts two checks, 11.5k each. His argument is nobody has to trust anybody, the escrow agent handles it, and if the deal shrinks at the table we both eat it proportionally without a conversation.

My structure: assignment fee goes to my entity, I pay him on a JV agreement after funds clear. My argument is I control the paper, I control what happens if the buyer beats me up on a repair credit in the last 48 hours, and I don't want a second party on the statement giving title a reason to ask questions. Whether title will even cut two fee checks varies by company and by state, some closers won't do it at all, so this isn't purely a preference question.

The part that actually bothers me is what each version does to the relationship on deal three. His way, he never has to rely on my word. My way, he does, and he knows it, which means my way has a cost I'm paying in trust even when I behave perfectly.

I've also seen the argument that being on the statement is the only way a JV partner has any real remedy if the other side goes dark. Somebody who has been stiffed can tell me if that's true in practice.

Which way do you paper it when the fee is real money and the partner is new to you?

jordan_ellis2 · Answer

No closings yet so take the observation for what it's worth, but I've read maybe fifteen JV agreements now while trying to figure out what I'd sign, and the ones that put both parties on the statement almost never say what happens when the fee shrinks. They say 50/50 of the assignment fee. Then the buyer asks for a 4k roof credit and suddenly the question is whether that comes out of the fee at all or out of the purchase price, and the settlement statement just does whatever the closer decides to do.

Quarry, your version at least gives you a moment to have the conversation before money moves. That seems like it matters more than who is on the paper.

mikeoconnell7 · Answer

The trust point you made is the real one and I'd push on it from the other direction.

I build service work around investors, so most of what I sign is a fee agreement where I'm the one waiting to get paid after somebody else's money clears. It changes how I behave. I chase, I document, I keep a copy of every email, and I price in the possibility of a slow payer. None of that is hostile, it's just what being second in line does to you.

If your partner ends up doing that with you, your deal three costs more than it should. He'll want a bigger split or a tighter agreement or a deadline with teeth. That's not him distrusting you personally, it's the position you put him in.

So I lean toward both on the statement for a first deal together, then move to your structure once there's history. The shrinking-fee problem pike raised is solvable with one line in the agreement saying reductions to the fee are shared pro rata and neither party can agree to one without the other. Get your closer to confirm in writing whether they'll even cut two checks before you build the deal around it, because I've had that answer come back no twice.

Partner wants the assignment fee split at closing, I want to be the one who invoices

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