Assignment vs. Double Closing with Your Buyer
Selling our deal to the back end buyer is the second most exciting part of the process for me (next to picking up the check) because it means all of our hard work has paid off and someone wants to buy our deal! This is probably the easiest part of the wholesale process and is typically done two different ways: either by Assignment (most common) or by Double Closing. We will talk about the Assignment first since it’s what you will use most of the time.
When we assign a contract we have with the seller, what we are doing is selling our contract to the buyer for fee, commonly called the Assignment Fee. If we have the property under contract for $150K and assign it to the buyer for $160K, then our Assignment Fee is $10K. I use the Assignment contract anytime our assignment fee is going to be less than $10K-$15K depending on the seller because both sides see what I’m making using this process. We do this by using a simple one page Assignment contract, and if you have bought any of my training programs then you should have the exact contract my team and I use. Filling out this contract is very straightforward and much simpler than the Purchase Agreement we have with the seller but there are two key points I want to mention.
1. The buyer gets NO INSPECTION PERIOD. I tell all of my buyers to do all of the due diligence they would like and I will get them into the property as much as I can, but the second we sign the contract and get the earnest money to title then their earnest money is non-refundable…which leads me to my second point.
2. Make sure the buyers earnest money is greater than yours. If you put up $500 for earnest with the seller, then have your buyer put up more than that…I’d recommend $2K-$3K. This protects you in case the buyer wants to back out and you don’t have time to find a new one; you will at least make something for your time and effort.
In rare cases we do what’s called a Double Close which means that the property will be sold twice in a matter of seconds. First from the seller to me, then from me to the buyer with the buyers funds covering the first purchase. I only do this if I’m concerned the seller might have an issue if they see that I’m making $20K, $30K+ and here’s why. When you double close a property there are two sets of closing costs, again from the seller to you and from you to the buyer. Typically you have to pay the first set of closing costs so make sure to build that into your price to the buyer if possible.
The main difference between an assignment and a double close is the paperwork. Since we will actually be closing on the property twice there needs to be a full Purchase Agreement between us and the buyer, but we don’t want to use the same one we did with the seller. I have a second Purchase Agreement I provide to my students that’s used for double closing and has all of the correct language already written.