Buying from wholesalers: does the assignment fee belong in my numbers or in my irritation?

Question

I've bought a few things passively and I'm looking at single family for the first time, which means wholesaler emails. Two of them showed me the assignment amount up front, one buried it, and my reaction to the buried one was worse than the fee itself.

The case for ignoring the fee entirely: I'm buying a house at a price. If the all-in number works against my estimate of value after repairs, it works. What the seller got and what the middleman kept is none of my business, the same way I don't audit a listing agent's commission split.

The case for caring: the fee tells me how much room was in the deal and whether the wholesaler is pricing off real comps or off what they think I'll tolerate. A $13,000 fee on a $140,000 purchase reads differently than a $31,000 one. And if they hid it, I want to know what else got shaded.

I genuinely can't decide whether this is a discipline thing, where I should just underwrite the price in front of me, or an information thing where the fee is a signal I'd be foolish to throw away. Simple question for the beginners in the room, which I still am on this side of the business.

dpatel_re · Accepted Answer

Underwrite the price. The fee is not an input to your model, it's a fact about someone else's business. What I do care about is whether the value after repairs they quoted matches mine, because that's the number that decides whether I lose money, and it's wrong more often than the fee is unreasonable. When the two disagree by more than about eight percent I stop reading.

angela_burke · Answer

Running a small service team, I see this from the other end. Clients who obsess over what the middle party made usually end up paying more elsewhere because they burned the relationship that brings them deals. The fee being visible is a courtesy, not information you're owed.

tashaford30 · Answer

@cobalt I don't fully buy that. If it's a courtesy then hiding it costs them nothing, and I'd rather deal with someone for whom transparency is the default. Planning my first purchase and I've decided I want the fee on the settlement statement where I can see it.

laurenkim53 · Answer

Rural low price points change this a lot. On a $70,000 house a $13,000 fee is nearly a fifth of the price and it absolutely is my business, because there usually isn't room for both of us.

nicole_adeyemi · Answer

@hollow right, the ratio is the whole thing. On land I've seen fees that exceeded what the seller cleared. Doesn't make it illegal, does make me want to know who I'm dealing with next time.

wendy_park48 · Answer

The assignment agreement usually names the fee, and in most states it lands on the closing statement, though that varies by state and by how the closer handles it. So the practical answer is that you'll see it whether they volunteer it or not. What I actually read for is the inspection window and whether their contract with the seller was assignable in the first place, because a fee I dislike is survivable and a contract that can't be assigned isn't.

Buying from wholesalers: does the assignment fee belong in my numbers or in my irritation?

6 replies