How Much Should You Charge for an Assignment Fee in Property Wholesaling?

Determining how much to charge for an assignment fee can be tricky, especially if you're new to property wholesaling. Charge too little, and you’re leaving money on the table. Charge too much, and you might scare off potential buyers. In this post, we’ll guide you through the factors to consider when setting your assignment fee.

Understanding the Basics of Assignment Fees

The assignment fee is essentially your profit as the wholesaler for finding and contracting the property. Your fee is paid by the end buyer when they purchase the rights to the contract. The size of this fee varies depending on the market, the deal, and your experience.

1. Size of the Deal

The first factor that influences your assignment fee is the size of the deal. For smaller properties, you might charge between $500 and $3,000 as a fee. Larger properties with higher spreads between the purchase price and ARV can justify assignment fees in the $10,000 range and up. Check with your local real estate commission or state to determine if real estate wholesaling is legal in your area and if there are any assignment fee limitations.

2. Local Market Conditions

Always take into account the local market. In hot real estate markets where properties are in high demand, you can often charge a higher assignment fee. Conversely, in markets where buyers have more options, you may need to keep your fee lower to attract interest. The goal is to make everyone happy - you, the seller and the buyer. This means that sometimes you may have to go down on the fee to make the deal work.

3. Your Experience Level

Experienced wholesalers who have a track record of finding great deals can usually command higher fees. Buyers are willing to pay more for someone who consistently delivers profitable deals with minimal hassle. If you’re new, you might need to keep your assignment fee lower until you build your reputation. Once you become the "go-to" person, the sky is the limit!

4. Value-Added Services

Are you doing more than just finding the deal? If you're offering value-added services, such as help with financing or connecting buyers with contractors, you can justify a higher assignment fee. Buyers appreciate the extra support and may be willing to pay more for it.

Conclusion

Knowing how much to charge for an assignment fee in property wholesaling involves striking the right balance between profitability and competitiveness. By considering factors like the deal size, market conditions, and the value you bring, you can set an assignment fee that works for both you and your buyer.

The opinions in this article are the opinion and experience of the author. Due diligence should always be done when dealing with real estate.