How to hide my option fee from TB/assignee - Posted by Gene S Hou Tx

Posted by Jim C on January 16, 2001 at 11:54:31:


I am by no means an expert. I am very new to this and have yet to complete my first deal, but couldn’t you just tell the T/B that the owner was desperate and that he gave the house to you for a really great deal? I mean they should understand that you are an investor and need to make a profit.

Maybe you could make it sound like the option fee that they paid was a benefit to them, by reducing the amount owed on the property.

Or just tell them that you need to collect a large option fee because it helps the T/B feel like they are going to eventually purchase the house and that helps the T/B to take better care of the house.

And maybe explain to them that if they decided to not exercise their option, then you would have wasted your time because there wouldn’t be any profit in the end.

I would tell them that they would be paying all of it eventually, but this way you are guarenteed a T/B that is serious about the purchase of the property and one that will take care of it like their own. And this way, at least you don’t end up wasting your time with a T/B that had no intentions of buying the property in the first place.

Again, I have no experience with this, but I just figured I’d throw in a few ideas. If you have any input on my response, let me know. That way I can learn a little about it.

I hoped this helped a bit.
and GOOD LUCK!!!

Jim C

How to hide my option fee from TB/assignee - Posted by Gene S Hou Tx

Posted by Gene S Hou Tx on January 16, 2001 at 02:37:41:

Hello All:
Claude Diamond has a wholesale LP strategy he has labeled as a “co-operative assignment.” It’s suitable to use when owner is objecting to giving me the full control of a sandwich LP. This strategy allows me to assign my deal to TB but “subject to” approval of owner. My specific question is as follows:When I go over the terms of the agreement with my TB/assignee he is going to see the tiny option fee I paid the owner. When he compares this with the $4,5,or 6000 assignment fee I’m collecting from him I’m afraid it’ll cause problems. How can I prevent this from happening? Do I need to modify the LP agreement? If so, how? As usual, thanks for your input!


Re: How to hide my option fee from TB/assignee - Posted by Jim IL

Posted by Jim IL on January 16, 2001 at 17:27:45:

I really do not see a problem here.
When you talk to the potential T/B’er, and are telling them what the deal is, you tell them the terms.
Tell them they will pay $xx in rent, $xx as a price, after they pay you $xx to get those terms.
When they agree this is something they want, you collect your fee from them, and at the same time, go over the agreement.
This way they see the agreement when they pay you.
And you are clear that they are paying you for the service of negotiating a good deal, and THAT is what you are selling them.

As for the seller, don’t tell him what the assignment fee is.
That would be my biggest worry. That if I told the seller what I was making, he may decide to just not approve any of my buyers, in an effort to get me to pay more to him.
So, just tell your seller about the buyers, maybe show him an application or report you have on them, and get him to sign a form allowing you to assign to them and be released from liability.

Thats what I’d do.
Although frankly, I rarely just assign away my L/O’s.
I like to stay in them, and make more.
You may want to consider working harder on convincing sellers to not need to approve your T/B’er, and stay in control.
This should be easy enough if you have done deals, and can give some references.
Also, point out to the seller that the agreement is between you and he, not the sub-T/B’er and him.
So, YOU are responsible ultimately for anything that happens.

Whatever you do, good luck,
Jim IL

Re: How to hide my option fee from TB/assignee - Posted by JPiper

Posted by JPiper on January 16, 2001 at 16:24:04:


I haven’t seen the contract you’re using, but I don’t believe it can be hidden…I mean you are going to assign THE contract. Further, I don’t think it NEEDS to be hidden. This should be absolutely NO issue. And guess what, if it ever is, just go down the road and sell it one of the other numerous people who are going to call on your ad. I think the entire fear here is ALL in your head. The reality is that lots of retail buyers don’t have the credit to get financing, and therefore are looking for deals like this. If they don’t like your deal because they saw what you paid, where are they going to go?

The larger problem in my mind is that the owner sees what you’re making…and therefore decides he wants a bigger cut. For that reason you need to keep your assignment fee away from him…and that should be easy to accomplish for you.