Assignment died at the table over a fee disclosure that was never in my contract

First and probably last virtual attempt while I wait on my rental to close. Writing it up because the failure point wasn't where I was looking.

Deal shape. Single family, 1,340 square feet, tired but not distressed, in a mid sized metro about 700 miles from me. Under contract at $84,000 after three weeks of calls. Buyer lined up at $93,500, so a $9,500 assignment fee. Earnest money $2,500, which I let go hard at the end of a 10 day inspection period because the seller's family pushed and I wanted the deal. Local walker at $150, data and skip trace $410.

What happened. The closing attorney in that state, which handles closings through attorneys rather than title agents, would not proceed without written disclosure of my assignment fee to the seller plus the seller's written consent to the assignment. My purchase agreement was a template I'd pulled that had a plain assignability clause and no fee disclosure language and no consent requirement. When the disclosure went over, the seller saw $9,500 on a house she was selling for $84,000, decided she'd been underpaid, and refused to consent. Eight days of calls, an offer from me to cut the fee to $5,000, no. Deal dead.

Because my earnest money had gone hard, I lost the $2,500. Plus $410 plus $150. Call it $3,060 for the education. The buyer was annoyed but fine, he'd spent nothing.

Whether disclosure and consent are required, and in what form, depends entirely on the state and in some cases on the individual closing office's policy, and I got that wrong by assuming a generic template covered it. Whoever tells you otherwise, confirm it with an attorney licensed where the property sits.

What I'd do differently. Get the closing agent or attorney identified in the target state before I make a single offer, ask them in writing what they require to close an assignment, and put fee disclosure and seller consent language into the contract at signature so the seller sees the number when she is deciding, not eight weeks later. And I would not have let earnest money go hard on a deal where I hadn't confirmed the mechanics of my own exit.

6 replies

2luis_carrera Get yours

The $2,500 hard is the loss. Everything else is rounding.

On a $84,000 contract, $500 to $1,000 is normal earnest money and there was no reason for it to be $2,500 or to go hard at all before you'd confirmed your assignment path. The family pushing is exactly when you slow down. I've walked away from two contracts at that moment and I'm sure at least one was a real deal, and I still think it was the right call.

One question. Did the buyer ever sign anything binding him at $93,500, or was that a handshake? Because if the seller had consented, you'd have found out whether that number was real.

-1jordan_ellis2ActivePRO6

My template had that language and I didn't put it there, it came with a state specific form pack I bought for $79. Pure luck. I've since read it properly and it names the fee, requires seller acknowledgment at signature, and includes a consent line.

The reason I think that matters more than the earnest money, wren, is that a seller who sees $9,500 on day one either walks then, when it costs you nothing, or she signs and she's done arguing. You paid $3,060 to move that conversation from day one to day fifty.

2aliyah_bAU2APRO6

Adding up the pieces because this is exactly the cost breakdown I've been trying to build for myself. $2,500 dead, $410 data, $150 walker. Did the walker do anything after the walk, and did you pay the closing attorney anything, or was that all on the seller side? I've been budgeting $300 to $600 per attempted deal for closing side costs on the wholesaler and I don't know if that's real.

1samantha_ruizAU4APRO6

Different read on the cause. The disclosure was the trigger. The reason it killed the deal was that $9,500 was 11.3% of the contract price and the seller could see it against her own number in one glance.

I've had fee disclosures go through with no argument at all when the fee was 4 or 5% of the price. I've had one blow up at 13%. Sellers do the percentage in their head instantly. So even with the language in at signature, at $9,500 on $84,000 I think you were going to have a fight, just an earlier and cheaper one.

Which isn't an argument for hiding it. It's an argument that your spread told you the seller was underpaid and you should have priced for a fight.

1devon_pierce Get yoursPRO5

keystone, the percentage thing is real but I don't think the seller's consent was legally required at all in most fact patterns like this, and wren's post says the attorney wouldn't proceed without it. That's a closing office requirement, and offices differ within the same state. I've had one refuse an assignment outright and another in the same county handle three without comment.

So the fix is narrower than "disclose everything at signature." It's pick the closing office first and get their assignment requirements in writing, which wren already landed on. The rest was avoidable by making one phone call in week one.

1jessreyes12AU1APRO8

Asking the thing I'd be embarrassed to ask out loud. What does "earnest money going hard" actually mean, and who keeps it when the deal dies for a reason that isn't your fault?

My assumption was that if the seller refuses to consent, the seller broke it and you get your money back. Clearly not. Is that because the contract said so, or because fighting for $2,500 from 700 miles away isn't worth it?

Assignment died at the table over a fee disclosure that was never in my contract

6 replies