Assignment Closings vs. Double Closings
Assignment Closings vs. Double Closings – Know the Difference and How We Can Help!
The success of your real estate investment 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. Get started with a quick primer by the title and closing experts at Excellence Title Partners.
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 investor is making on the deal. This could be a source of contention for the end buyer, who may think that the investor is making a lot of money without taking on comparable risk. Hence, many investors 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 investors like this approach because unlike in an assignment closing, the original deal remains private for the time being.
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 early as 24 hours from the first closing.
Excellence Title Partners Specializes in Both Assignment Closings and Double Closings.
As a full-service title and settlement firm, Excellence Title Partners has all the expertise and experience you need to successfully carry out either closing method. We successfully close deals under both methods on a regular basis and can also assist with preparing the assignment of contract and serving as the closing, title, and escrow agent. To learn more about how we can help, call (689) 345-5550 or email us at [email protected]!
