Simultaneous Closing vs. Assingment of Contract

Bird Dogs, Wholesaling
1

Hi - Can anyone tell me:

  1. What are the pros, cons and risks of each of these when wholesaling.
  2. Why you can make more $ when you do a simultaneous closing vs an assignment of contract (I read this in a book)
  3. Closing costs for each of these.
  4. How title commitments and insurance work in both of these cases.
    Thanks for your help!
    Juliet
2

Juliet,
Here’s a few answers…

  1. simo close - could involve double costs on some items, but earnings private, have to control and monitor all parties closely, can avoid some double costs by working closely with title company and letting them know what you’re doing

title commitment and insurance are typically chased down in the buyer’s name (you) so you have to let the parties know to leave things open, again, some of it comes down to your intentions if your buyer flakes

  1. assignment - could get paid quicker, some folks won’t pay until close, your fee is limited by other investors’ greed glands - you shouldn’t be making X amount on this deal! :director

title commitment and insurance don’t concern you unless you plan to close if your buyer doesn’t and you haven’t been paid

3

Hi Julie,

In a perfect world, we would all rather stick to assignments, they are easier and cheaper. However we don’t always have the option of assigning a contract. Some sellers won’t allow you to do so.

If you do a simultaneous close you have to pay two sets of closing costs. One set for the first settlement and another set for the second settlement. Some of the costs can be saved because you don’t have to do two title searches, your settlement company may be able to cust the costs on one of the settlements because the work has already been done for the other etc…

You don’t make more money when doing simultaneous closes, instead people tend to do them when there is more money on the table to be made. You can hide your profit from your buyer when you do a simultaneous close. In an assignment YOUR PROFIT stands out like a sore thumb to them in the form of an assignment fee. If you put a home under contract for $10k and are assigning it for $15k that is all the buyer will wee when they are at the settlement table and it will usually disturb them. But if you spend an extra $1000-$1500 on a simultaneous close, they won’t ever know your mark up, at least not before settlement is done.

I hope this helps.