To Assign or Not to Assign

[Rachel Murray]

I'm getting my wholesaling contracts together and am wondering how wholesalers decide whether or not to use assignments of contract. Basically I'm seeing two options for structuring a wholesale deal and would like to know how/why you choose one over the other. 

OPTION 1: Assignment - Seller signs purchase and sale agreement with an option to assign, buyer receives assigned contract at closing (buyer, seller and wholesaler are all in closing room together). 

OPTION 2: No Assignment - Seller signs purchase and sale agreement with wholesaler for $x, Buyer signs purchase and sale agreement with wholesaler for $y, double closing at title company (end buyer and seller never interact)

Thanks in advance! Located in Michigan.

[Will Barnard]

Unless you are licensed, most assignment deals are done illegally in just about every state. Any unlicensed person negotiating a purchase price with seller, marketing the property (or the contract) to bring buyer and seller together and receiving compensation for it is brokering without a license. That is the most common means wholesalers use and it violates most state licensing laws. 
Double closings cost more and eat up profit margins, although they temporarily hide the wholesalers profit margin until after recording. 

The third way to do this as an unlicensed individual is to have your buyer in place in advance, ship for their criteria, have a new entity formed naming you and your buyer as owners and make the offer in that entity name, then at the closing table, you simply sell your shares in the company. No laws broken, no lies needed, no weasel contingencies needed, and no additional costs to transaction other than the entity formation (which comparatively to the other options is cheaper).