Double Closing vs. Assignment Contract: Understanding the Legality
For new real estate investors in the U.S., understanding the legal distinctions between double closing and assignment contracts is crucial for wholesaling properties effectively and compliantly.
Double Closing
A double closing (also called a back-to-back closing) involves two separate transactions where you actually purchase the property and then resell it. According to the National Association of Realtors, this method is legal in all 50 states when properly executed.
Key Benefits:
- More private – end buyer doesn’t see your profit
- Reduced risk of seller pushback
- Legal in all states
- Can be used with any type of financing
Assignment Contract
An assignment contract transfers your rights as the buyer in a purchase agreement to another party. The National Real Estate Investors Association reports that approximately 75% of wholesale deals use assignments.
Key Considerations:
- Less expensive – typically only requires one closing
- More transparent – profit is visible to all parties
- May face restrictions with REO or bank-owned properties
- Some states require disclosure of wholesale intent
Legal Requirements
- Must disclose intent to assign in original purchase agreement
- Assignment fee must be clearly stated
- All parties must agree to assignment clause
- State-specific real estate licensing laws must be followed
Frequently Asked Questions
Q: Is wholesaling real estate legal?
A: Yes, when done properly following state laws and disclosure requirements.
Q: Do I need a real estate license to wholesale properties?
A: Requirements vary by state – some require a license for multiple transactions per year.
Q: Which method is more expensive?
A: Double closing typically costs more due to two sets of closing costs.
Q: Can I assign bank-owned properties?
A: Most REO properties prohibit assignments – double closing is usually required.
Q: What’s the average wholesale fee?
A: According to industry data, typical wholesale fees range from $5,000 to $15,000 per deal.
Q: Which method is better for beginners?
A: Assignment contracts are often easier for beginners due to lower costs and simpler process.
Q: Are there limits on how many properties I can wholesale?
A: Some states limit the number of transactions non-licensed individuals can do annually.
The Bottom Line
Both double closing and assignment contracts are legal wholesale methods when properly executed. Your choice should depend on your state’s requirements, available capital, and specific deal circumstances. Always consult with a real estate attorney familiar with local laws before proceeding with either strategy.