Assigning Contract or Double Closing?

Question

Hello,

I am new to the wholesaling business.  I have a deal under contract and will make about $10K but not sure if I can do an assignment.  Would prefer to do double closing but transnational funding will make margin too small to be worth it.  Does anyone have an idea on what is the best way to handle an assignment of contract?

John Lopez · Answer

I've had an attorney do what's called a "split HUD". The seller only see's your name and the purchase price you agreed on. The other part of the HUD is signed by the end buyer. They will see your name, the assignment fee, and purchase price.

Nicole Graves · Answer

Understood.  However, a Seller Side Only HUD is a different way of structuring your closing papers.  Here are some links I just found on Bigger Pockets with others discussing whether their state allows it.  Again, I believe it's a question for the investor's attorney for clarification. The first link below has a full summary from @Phil Pustejovsky that may be helpful in explaining it more.  Again- not advice but merely something to ask a lawyer about if of interest.

https://www.biggerpockets.com/forums/93/topics/223785-does-anyone-know-if-seller-side-only-hud-is-legal-in-kentucky

https://www.biggerpockets.com/forums/93/topics/119...

Account Closed · Answer

On your buy side, write your contract so the seller pays all the closing costs.  Truly motivated sellers will agree to that.

On the sell side, write your contract so the buyer pays all the closing costs.  Deal hungry buyers will agree to that.

Result?  You pay no closing costs.

As far as the high cost of transactional funding, shop around.

Nadirah Dawson · Answer

Per my real estate workshops and some real estate schooling, I thought you can do two separate contracts...1) the and/or assign contract for you and the cash buyer and 2) the sale purchase agreement for cash buyer and seller, all the seller would see is the total amount being paid for the purchase, and not the full breakdown so the seller won't know your fee.

Duane Ortega · Answer

@Kathleen Nguyen

Yes, true, funding fees will make the margin smaller.  However, if you are buying the property for $20K or some small amount, 10K does not seem so small anymore.  It's relative.  But yes, you do need to make sure you are making at least 20% is what I would recommend.  We fund nationwide and consider 20% as a healthy mark-up.  We've seen less, and we've seen more profit margins.  With less, they make it up with volume.  I would suggest to build a satisfactory profit margin so that double closing won't be a problem.  Then you won't have to worry about other parties complaining about your profits.

Good luck,

Duane.

Phil Z. · Answer

Your Purchase Agreement may have terms in regards to assignments.  Such as requiring seller approval, or not requiring seller approval.  If assignable, all you need is an assignment agreement between you and the buyer.

Edward Peugh · Answer

Why wouldn't you be able to do an assignment?

Ed

Gina Worsham · Answer

Good to know!  Thank you for the information @Rich Baer

Rich Baer · Answer

@Gina Worsham

The double closing (back to back) will only save you a few hundred dollars. You can save on the title search and possibly the Attorney fees.

Assigning Contract or Double Closing?

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