Options To Close A Wholesale Transaction: Assignment Of Contract vs Double Closing

Options To Close A Wholesale Transaction

The success of your real estate wholesaling business hinges on your ability to sell your properties in the most expeditious, risk-free, and profitable manner possible. The two most common approaches for property wholesalers and investors are Assignment Closings and Double Closings, each with their particular pros and cons. Knowing the difference between these two methods and when to use them will go a long way towards maximizing your returns as a wholesaler.

Assignment Closings
This is usually the less expensive and more straightforward of the two closing methods. Once you have signed a contract to purchase a property, you can then “assign” your right to buy the property to a third party for an assignment fee. Essentially, you are helping a buyer find a real estate opportunity in exchange for a sum. To illustrate how this works, consider the following scenario.

Say you find a distressed property and sign a contract with the seller to buy it for $50,000. You can make a quick $5,000 profit by locating another buyer who would be willing to buy the same property for the same price plus a $5,000 assignment fee to you.

If the third-party buyer agrees, then you seal the deal with an Assignment of Contract, which states that you are giving up all rights to purchase the property to the buyer in exchange for the fee to be paid when the deal closes. Unlike a double closing, there is only one set of closing costs, which is paid by the third-party buyer.

Many investors find that the main drawback of this approach is the lack of privacy: all the parties involved, from the seller to the third-party buyer, will see how much money the wholesaler (you) is making on the deal. This could be a source of contention for the end buyer, who may think that the wholesaler is making a lot of money without taking on comparable risk. Hence, many wholesalers use this method very selectively.

Double Closings
Also known as the “A-B and B-C” approach, double closings also require securing a third party to purchase a distressed property, but with an extra step: rather than assigning the contract to buy the property, you purchase the property and then resell it to the end buyer. Many wholesalers like this approach because unlike in an assignment closing, the original deal remains private.

The catch with a double closing is that, by definition, you must manage two different transactions, and do so in a timely and efficient manner. This is especially true if you are relying on transactional funding, which usually requires that you close with the third-party buyer within a certain time frame, typically as quick as 24 hours from the first closing.

In Conclusion

All things considered taking into account every aspect listed above regarding both assignment and double closing options should give you an idea which route would work best depending on specific circumstances related your respective wholesale real estate transaction. However , if still unsure it’s always advisable do further research and even seek professional advice from a real estate attorney or title company before committing any money towards your transaction.

Hope this helps! Happy Flipping!