How to make adjustments for Wholesaler Assignment Fees.

[expo77]

Working on an AS-IS/ARV appraisal report and my best comp that is a few houses down recently sold through a wholesaler. MLS states that the property sold for $115,000. County Tax Records state that the property sold for $99,000. Under the seller concession area on MLS the realtor states $99,000 sale price with $16,000 assignment fee. If I use this as a comparable what is the proper way to address the assignment fee? First time I've seen this directly stated on MLS.

 

[Terrel L. Shields]

Assignment fees are intangibles associated with a sale. They are seller concessions. And they are likely inflating the value of the property. The buyer pays it, but the seller does not get more than the $99k. What is a typical RE fee? 5%? Then why would it sell for more than $104k? I would label it what it is and call it what it is, a concession.

 

[Chandler]

Working on an AS-IS/ARV appraisal report and my best comp that is a few houses down recently sold through a wholesaler. MLS states that the property sold for $115,000. County Tax Records state that the property sold for $99,000. Under the seller concession area on MLS the realtor states $99,000 sale price with $16,000 assignment fee. If I use this as a comparable what is the proper way to address the assignment fee? First time I've seen this directly stated on MLS.

I don't see how that is a good comparable, so I can't really answer the question unfortunately. I buy houses from wholesalers and they're always below market value and have at least a little in the way of repairs. Most of the time I can't even go into the property before buying and they are never listed on MLS. Is this a rare case where the "Wholesaler" listed it on MLS and it was exposed to the market?

 

[Chandler]

Assignment fees are intangibles associated with a sale. They are seller concessions. And they are likely inflating the value of the property. The buyer pays it, but the seller does not get more than the $99k. What is a typical RE fee? 5%? Then why would it sell for more than $104k? I would label it what it is and call it what it is, a concession.

In wholesale transactions, there is typically no realtor fee. The Wholesaler negotiates deals with typically distressed sellers for x amount with an assignment clause, and they end up assigning the sale to an investor for a higher sales price than negotiated with the seller. The Wholesaler pockets the difference and never owns the home.

 

[expo77]

I don't see how that is a good comparable, so I can't really answer the question unfortunately. I buy houses from wholesalers and they're always below market value and have at least a little in the way of repairs. Most of the time I can't even go into the property before buying and they are never listed on MLS. Is this a rare case where the "Wholesaler" listed it on MLS and it was exposed to the market?

It's a good comparable as it needs similar work just like the subject. It was listed on MLS so that's why it's confusing, I don't normally see that. Since the buyer had to pay 99k + 16k it seems like the market value would be 115k even though it will only be recorded as 99k

 

[Terrel L. Shields]

The Wholesaler pockets the difference and never owns the home.

Correct but if the seller wanted "out" and listed instead with an agent, then typically a seller says, "I need $X to get out and you get whatever you can above it."

 

[expo77]

In wholesale transactions, there is typically no realtor fee. The Wholesaler negotiates deals with typically distressed sellers for x amount with an assignment clause, and they end up assigning the sale to an investor for a higher sales price than negotiated with the seller. The Wholesaler pockets the difference and never owns the home.

I understand that process. However I'm debating with myself if I use it as a comparable would I use a base price of 115k or 99k. The county tax records will only show the 99k but the buyer had to pay the 16k assignment fee.

 

[Terrel L. Shields]

Since the buyer had to pay 99k + 16k it seems like the market value would be 115k even though it will only be recorded as 99k

But that fee is intangible. The buyer only got $99k - it's a choice and I know which I'd rather defend since the AMC etc will look at the transaction fee listed in the public record.

 

[Chandler]

If it was listed on MLS, it wasn't a wholesale transaction. It's possible the realtor threw it in MLS after the deal was made but a true wholesale transaction isn't exposed to the market that way.

 

[Chandler]

Seems to me like the seller got $83,000, the Wholesaler sold it for $99,000 and got the $16,000 from title at closing. Therefore your number for sales price is $99,000 if you choose to use it, but I maintain it's probably not an arms length transaction.