INVESTORS’ CORNER: Assign or Double Close

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In a conversation I had with a real estate investor regarding the differences between assignments and double closings, we talked about the cost associated with double closing a transaction. When you close two separate real estate transactions involving the same property within a short period of time, say 30-45 days apart, there are certain inescapable costs incurred twice. The title and escrow company or closing attorney is doing almost twice the amount of work.

The general rule of thumb I have given investors has been that if the assignment fee is $9,000 or less, then go ahead and assign the contract so there is only one closing and the assignee (the new buyer stepping into the shoes of the first buyer) completes the transaction with the title company or closing attorney. If, however, the assignment fee is greater than $9,000, then it’s time to examine if a double closing should occur.

In certain jurisdictions, that $9,000 number would change. For example, in Cook County, Illinois, I would recommend it be $15,000 or higher because of the extraordinarily high cost of closing a real estate transaction in that jurisdiction. In some states, many of my clients wisely choose to double close on all transactions due to the large spread between what they are buying it for and what they are ultimately able to resell it for.

In your market, the best thing to do to determine whether to assign or double close is to have conversations with various title and escrow companies or closing attorneys. Do some cost comparison as to the usual and customary fees and whether those fees can be negotiated down. Find out the basic, unavoidable costs of closing a real estate transaction.

Until you have that information readily known to you, you cannot make an intelligent decision as to whether you should assign or double close on a particular transaction. With that extra information, you become more effective in managing your real estate business.

Attorney Jeffrey S. Watson, Esquire is council to the National Association of Real Estate Investors and an advisor to the Metrolina Real Estate Investors Association, www.metrolinareia.org, which provides education, networking, and mentoring to investors in the greater Charlotte area. You may contact Jeff at [email protected].