When do wholesalers switch from assignments to double closes?

Question

When do wholesalers usually switch from assignments to double closes?

From what I’ve seen, it seems like wholesalers start their career with assignments I’m guessing because they don’t want to spend the cash for closing costs of a double close.

It seems like they eventually just do double closes because it hides the higher profit (that they’re able to negotiate, because they’ve developed those skills/experience) from their buyers/sellers.

At what point does this switch usually occur? After how many deals? 10? 100? 1000?

I’m sure I’m going to get a lot of sarcasm on this one from people that don’t wholesale, but any answers are encouraged!   ;)  :)

Daniel Paloscio · Answer

@Jesse LeBlanc is absolutely correct. This really is going to depend on your goals. A lot of the wholesalers that both Jesse and I work with typically will elect to Double Close when the assignment fee is larger than $10k. When double closing you are able to keep the seller and buyer from seeing your fees, as some sellers get upset after you have negotiated them down to see that you are making $10k+.

Most of the hedge fund buyers are requiring their sellers (you the wholesaler) to post on title before they take ownership. The only way to do this would be by doing a double closing.

Additionally, a double closing is a much cleaner transaction. A lot of the wholesalers that I work with prefer double closings to assignments just to keep the wheels moving smoothly.

Ultimately it is your call though. If your seller and buyer are both comfortable with the fee you are making then it would make the most sense to assign and save yourself the additional costs of a 2nd closing.

Jesse LeBlanc · Answer

Good Morning @Mike Schorah That's hard to say and somewhat based on what state/market the property is in, the situation with the end buyer's lender (if there is one) and how transparent or comfortable the wholesaler is with both the seller and their buyer.

I think it's personally best to focus solely on YOU and not worry about what others are doing. I see this regularly with all of the mentees I work with and try to focus on educating them to have the most transparent relationship with the seller and their buyer so they can assign vs double close. But then you might run into a situation with a hedge fund buyer for example where sometimes over a certain profit on your end where they won't allow an assignment and must double close. So it's truly case by case with your question. :)

Some wholesalers aren't as transparent or more fearful from the day they start until the day they stop wholesaling and will double close everything UNLESS it was a super small spread then they might be more comfortable to assign.

Nate Sanow · Answer

In my state assignments became something most title companies wouldn’t do after they passed a law trying to make all wholesalers be licensed … so they only do double closings at most places now

Tom Gimer · Answer

IMO, it's more a function of percentages than gross. If your spread is $20k on a $50k purchase vs. $20k on a $200k purchase, there is no need to double close the latter.

Mohammed Rahman · Answer

Hey @Mike Schorah - it depends on what you're wanting, I've worked with a couple of wholesalers that usually just do assignments since it's quicker. Your local market may not have attorneys/title companies that do double closings either.

Anthony L Amos Jr · Answer

Like you mentioned, it happens when you want to hide your profit from a buyer. If your not making much i.e. 5k no need to double close. Double closing is more expensive so it usually only happens when your making 20k+. Your not assigning a contract your actually buying it and selling it right away. Make sure your title co knows what a double close is

Jesse LeBlanc · Answer

not exactly, but I get your point. The initial contract isn't void if the end buyer doesn't abide by the assignment, but the assignment would be terminated leaving the original contract still valid if there was still time left on the original contract (which can still always be amended if needed and signed by both parties).Sure, if you assign then walk away from your seller and don't keep up with anyone this can happen.  But I HIGHLY doubt it as the seller will be in contact with the wholesaler generally, not the investor it was assigned to.The wholesaler is generally keeping up with both sides since they are the "middle man" here even though they have assigned their contract, they still want to see the deal go through.  So assigning they better be ready to buy and control the deal themselves or have a backup to still get it closed on time.Hints another reason for having clear communication with all parties so these things don't happen, and if they do at least there is a higher chance for allowing an extension vs simply dragging a seller along without informing them of what's really going on.Double closing will yield almost the identical possible end scenario as you've stated.  The only difference is that you are still legally on the hook for buying the property in a double close vs your end buyer in an assignment.  But in a double close, you STILL run the same risk of your end buyer backing out even last second leaving you (if you didn't have a backup or the cash to buy yourself as you told the seller) in the same scenario as an assignment and the buyer backing out.

Eliott Elias · Answer

Experienced wholesalers will double close for insurance. If you assign and the end buyer does not come through the contract is terminated, if you double close you still own the property, just need to find another buyer

When do wholesalers switch from assignments to double closes?

Most Popular Reply