Do you pick the exit at contract signing or at the end buyer table?

For anyone reading this who hasn't done either yet, a couple of definitions so the argument makes sense.

An assignment means you sign a contract to buy a property, then sell that contract to someone else for a fee. You never own the property. The end buyer closes directly with the seller, and your fee usually shows on the settlement statement.

A double close means you actually buy the property yourself and then sell it. Two separate closings, often the same day. Your profit is the difference between what you paid and what you sold for, and neither side sees the other side's price. A few states, Oklahoma among them, require the profit to be disclosed even on a double close, so the privacy advantage isn't universal and you'd need to confirm current requirements in your own state.

Because you own the property for real, even for an hour, you need money for the first closing. Short term money used for exactly this is called transactional funding. A version sometimes called a simultaneous or dry close uses the end buyer's funds to cover both closings at once, which depends on the title company's willingness and on state practice, so ask your closer in writing before you rely on it.

What @bramble is asking is whether you commit to the second, more expensive road before you know you need it. Both answers in this thread are defensible.

I don't wholesale, I buy small multifamily, so treat this as the view from the other chair.

When a contract comes to me with and/or assigns on it and the person presenting it clearly isn't going to close, I price that in. Not because I object morally, I just know the seller hasn't necessarily agreed to what's about to happen, and I've had one of those blow up two weeks before settlement when the seller's daughter got involved. Since then I ask early who is on the deed at closing.

When someone tells me they're taking title and reselling, I stop caring about their margin entirely. I'm buying at a number that works or I'm not. So the privacy thing that everyone treats as the main benefit of double closing does almost nothing on me, but the seller-side stability does.

Question I would have been too embarrassed to ask a year ago. If you decide up front to double close, what actually goes in the contract that's different? Is it just removing and/or assigns, or is there language about you reselling that a seller's attorney would want to see? I've read a dozen contracts and I genuinely can't tell whether the difference is one clause or a whole different posture toward the seller.

@compass, from what I've read it's mostly what you take out rather than what you put in. You drop the assignment language and you don't add a clause promising you won't resell, because you don't owe anyone that promise once you own it.

Where I land on @bramble's actual question is the opposite of @parcel, and I'll admit it's the position of someone with zero deals. Six months of research says my first problem is finding a deal at all, and locking myself into two sets of closing costs plus a funding fee before I know what the spread looks like feels like paying insurance on a car I don't have yet. Keep the option, pick at the end. I fully expect somebody here to tell me why that's naive.

@pike, the thing that makes it naive is that the option isn't free. You already spent it by the time you use it.

I modeled this for myself, which is what I do instead of buying anything. If you write and/or assigns and market the contract, you have created a record of marketing a contract. If your state's regulator later looks at that pattern, pivoting to a double close on deal seven doesn't undo deals one through six. Whether that record matters is a state law question and I'm not qualified to answer it, but the point stands that the pivot is not retroactive.

The cost side is easier to price. Second closing plus funding on a typical small residential deal runs a few thousand all in depending on transfer tax, which varies wildly by state. If you assign on half your deals you save that half the time. So the question is whether that saving beats the seller-relationship advantage @parcel described plus the compliance consistency. On my spreadsheet it doesn't, but my spreadsheet has never closed anything.

I've done it both ways in the same quarter and switching midstream carries a cost that almost never gets priced in.

I had one under contract with and/or assigns, marketed it, end buyer's lender wouldn't touch an assigned contract because the loan officer didn't understand it and wasn't going to spend a week learning. So I pivoted to a double close with eleven days left. Transactional funder wanted a copy of the end buyer's proof of funds, the title company wanted to know why the contract had assignment language on a deal where I was taking title, and my seller's attorney asked a very reasonable question about whether the earlier version of the contract had been marketed. All of that got answered. It cost me about six working days of pure administration and I nearly missed the settlement date.

If I'd written it as a principal purchase from the start, none of those conversations happen. So I'm with @parcel now, though I got there by doing the dumb version first.

The framing I'd use is that the exit decision is a pricing decision, and you can't price it after you've signed.

If I underwrite a deal assuming assignment and my all-in cost is the earnest and some marketing, my minimum acceptable spread is small. If I underwrite assuming double close, I'm carrying two closings plus funding at whatever the current quote is, plus the risk that funding gets repriced if the second leg slips a day. That's a different minimum spread, and it changes which deals I'm willing to write in the first place.

So the pivot approach isn't really keeping an option open. It's underwriting to the cheap exit and then discovering you're stuck with the expensive one, which means the deals that force the pivot are exactly the deals that were underwritten too thin to absorb it. @quarry's eleven day scramble is the visible version of that. The invisible version is the deal that closed for three thousand instead of eleven and the operator wrote it off as bad luck.

Underwrite to the expensive exit. If you get to assign, you have a windfall. I'd rather my surprises point that direction.

@sextant is right about the math and I'm still going to disagree with the conclusion, because I run thin and fast and the extra few thousand is a real fraction of what I make.

My version is neither of the two schools in the post. I write as principal, no assignment language, and then I ask the title company at the end whether the end buyer's funds can cover both legs in one sitting. When they can, I've paid two sets of closing costs but no funding fee, which is the bulk of the cost right there. When they can't, I've got a funder lined up as backup and I eat it.

That gets me @parcel's clean seller conversation without committing to the full cost every time. The catch is that whether a title company will do it at all varies by company and by state practice, so it isn't something you can assume. I've had two closers who do it routinely and one who wouldn't discuss it.

@flint's approach is the first thing in the thread I actually understood on one read, and everything here is new to me.

Coming from a completely different career, the part that surprises me is how much of this is about what the seller thinks rather than what the law says. @parcel opened with the seller conversation and @cairn confirmed it from the buy side.

So my dumb follow up. If the seller's real concern is whether you'll actually close, doesn't a proof of funds letter from a transactional funder solve that regardless of which exit you pick? Or do those letters not carry weight because everyone knows the money only exists for six hours.

@ember, they carry some weight and less than you'd want. A seller's attorney who has seen a few of these knows what a transactional funding letter is and knows the money is conditional on the second leg. It reads as capability rather than proof.

What I've found more useful at the ceiling I'm hitting is a relationship rather than a letter. I've closed enough with one funder that they'll answer the phone for a seller's attorney and confirm terms directly. That converts a piece of paper into a person, and it's done more for my credibility than any language in the contract.

On @bramble's question I vote decide up front, with a caveat nobody's said yet. Deciding up front means your buyer list has to be able to absorb the deal at your resale price without seeing your buy price. If your list is thin and your buyers are used to seeing assignment fees, taking title privately can make them suspicious rather than comfortable. Two of mine ask outright what I paid. I don't tell them, and one of those two stopped calling.

@keystone's last point is the strongest argument against my own position, and it's worth sitting with.

The privacy that double closing gives you is only an advantage if your buyers accept a price without reference to your basis. Sophisticated cash buyers do that all day, because they underwrite the property. Newer buyers who came up on assignment deals are used to seeing the fee and treating it as fair or not fair. If your list is mostly the second kind, taking title doesn't hide your spread so much as make them wonder what you're hiding.

Also worth saying that in states where sale prices are public record, your buy price shows up eventually anyway, and roughly a dozen states are non-disclosure so it never does. Whether your county publishes it is something you can check in ten minutes before you build a strategy around discretion.

Reading as someone about to be a landlord rather than a wholesaler, and the thing I'm taking away is to always ask who will be on the deed.

Renovation angle that touches this. When I buy from someone who took title and resold same day, I get a cleaner file than when I buy an assigned contract. Fewer parties, one settlement statement that concerns me, and the title work has already been run twice.

That matters more than people think on a house with a problem. I bought a mid century split level with a failed foundation corner where the assignment version had three parties arguing about who ordered the structural report and who was paying for it. The double close version of that same situation is one seller and one buyer, and the argument is just a normal negotiation.

So add that to @parcel's column. Your end buyer's experience is better, and for the buyers I'd want on a list, repeat business follows from that.

Still working out what my first deal costs and this thread just changed the number.

I had assignment fee minus earnest minus some marketing. Now I'm adding a second set of closing costs, transfer tax twice where my state charges it on both legs, and a funding fee, and I'm going to underwrite to that even if I end up assigning. @sextant's version of it convinced me, which is that the surprise should point up rather than down.

The thing I still can't size is the extension risk. If the second leg slips a day and the funding gets repriced, what does that actually run. I've seen people mention it as a real cost and never as a number, and I'd rather know the shape of it before I'm the one asking.