Wholesaling is a well-known strategy in real estate investing.

In the right situation, it can create value:

• It helps sellers move properties quickly
• It connects deals with investors
• It can uncover off-market opportunities

But recently, we’ve been seeing a growing issue that real estate investors need to be aware of:

Assignment fees that don’t make sense — and deals that become harder to close because of them.

What Is an Assignment Fee in Real Estate?

In a wholesale transaction, a wholesaler puts a property under contract and then assigns that contract to an investor for a fee.

That fee is typically built into the deal and paid at closing.

In reasonable scenarios, assignment fees compensate the wholesaler for:

• Finding the deal
• Negotiating with the seller
• Bringing the opportunity to the investor

But the key word here is: reasonable.

A Recent Scenario We’re Seeing More Often

We’re starting to see deals structured like this:

• The wholesaler hides or obscures the original contract price
• Only presents the assignment price
• Expects the lender to underwrite based on that number
• Pushes for a quick closing based on timelines they created

That creates a problem.

Because lenders don’t just look at the final number — we look at the entire deal structure.

When the assignment fee becomes excessive, it affects:

• Loan-to-value (LTV)
• Loan-to-cost (LTC)
• Deal viability
• Investor profitability

And in many cases, the deal simply doesn’t make sense anymore.

Why Assignment Fees Matter More Than You Think

At the end of the day, the investor is:

• Bringing the capital
• Taking the risk
• Managing the rehab
• Carrying the holding costs
• Responsible for the exit

So when a wholesaler tries to extract a large assignment fee — sometimes larger than the investor’s projected profit — it creates an imbalance.

You end up with a deal where:

• The investor’s margin shrinks
• Risk increases
• Financing becomes more difficult

That’s not a sustainable structure.

Our Approach to Assignment Fees

From a lending perspective, we take a conservative and realistic approach.

We generally allow assignment fees up to 5% of the original purchase price.

Why?

Because anything beyond that often:

• Inflates the acquisition cost
• Reduces investor equity
• Weakens the overall deal

Our goal is not to kill deals — it’s to make sure they are structured in a way that works for everyone involved, especially the investor.

The Hidden Risk: Timeline Pressure

Another issue we frequently see is artificial urgency.

Here’s how it typically plays out:

1. Wholesaler signs the original contract
2. Days or weeks pass
3. The contract gets assigned to an investor
4. The lender is expected to rush to meet the original closing date

From a lender’s perspective, this creates unnecessary pressure.

From an investor’s perspective, it can lead to:

• Rushed decisions
• Incomplete due diligence
• Poor deal execution

A deal should move fast — but not blindly.

A Changing Market: More Deals, Less Pressure

We’re no longer in a market where investors need to chase every deal.

In many areas, we’re seeing:

• More inventory
• Longer days on market
• Increased negotiation opportunities
• Motivated sellers

This means investors have more options.

And that reduces the need to accept:

• Inflated assignment fees
• Poor deal structures
• Unnecessary time pressure

A Balanced View on Wholesalers

To be clear — this isn’t an anti-wholesaler message.

There are plenty of wholesalers who:

• Bring real value
• Structure fair deals
• Understand investor margins
• Help transactions move smoothly

But like any part of the market, there are also situations where the structure doesn’t align with the investor’s best interests.

The Bottom Line for Real Estate Investors

Before moving forward with any wholesale deal, ask:

• What is the original purchase price?
• How much is the assignment fee?
• Does the deal still make sense after that fee?
• Is there enough margin for the risk involved?

Because at the end of the day:

You’re the one funding the deal, doing the work, and taking the risk.

The numbers need to work for you first.

If you’re looking at a deal — wholesale or otherwise — and want a second opinion on structure, we’re happy to take a look.

📞 718-635-2377
✉️ george@loanfunders.com

Business-purpose loans only. Not a commitment to lend. All loans subject to underwriting and approval.