Assignment vs. Double Closing

You'll hear a lot of names for the same basic idea: two closings on the same house, one right after the other. Fannie Mae's guide lists "back-to-back, simultaneous, double transaction closings, or double escrows" together, so treat them as the same thing unless your closer says otherwise.

• Double closing: you buy from the seller (A to B) and sell to your buyer (B to C). Oklahoma's law defines it as closing "two separate transactions on the same property, one with the original seller and one with the end buyer."
• Simultaneous or back-to-back closing: the same thing, usually on the same day at the same office.
• Double escrow: the same idea with two escrows, the term you'll hear where escrow companies run closings.
• Dry double close: your buyer's money from the second closing pays for the first one. Many title companies won't do it, and Utah's rule bars it. One Florida title company says it needs written consent and underwriter approval, and that a buyer's loan money generally can't be used (secondary source, Atlantic Title ↗).
• Funded double close: the first closing is paid with your own cash or transactional funding, then the second closing happens. This is what most title companies want.

A double close isn't free. Here's what changes. I only list numbers a named source publishes, and the rest is "ask for a quote," because fees vary and are quoted by the lender, title company or closing attorney.

The Pennsylvania note. Under 61 Pa. Code 91.170 ↗, the assignment fee is part of the deed's taxable value, and the person who assigns (you) and the person who takes the assignment (your buyer) owe the tax on it. The seller isn't liable for tax on the fee unless they share in it (91.132 ↗). In Pennsylvania, count that as a cost of assigning.

Transactional funding is a short loan made for one thing: paying for your purchase in a double close, so you can resell to your buyer a few minutes later. You don't need the purchase price in your bank account. You need a signed contract with the seller, a signed contract with a buyer whose funds are verified, and a title company that will close both.

Here's how the lenders describe it on their own pages (secondary sources; naming them isn't an endorsement):

• 1. Two signed contracts. Your contract with the seller (A to B) and your contract with your buyer (B to C), with proof of the buyer's funds.
• 2. The lender wires the purchase money for the first closing to the closing office.
• 3. Both closings happen. The A to B closing, then the B to C closing. DoubleClose.com ↗ requires both to close and fund the same day with the same title company. Roth Capital ↗ says that in most cases both use the same closing attorney.
• 4. The lender is repaid from the second closing, with its fee. What's left after the first closing and the lender are paid is yours.

Some lenders say there's no credit check. Don't assume every lender works that way. Read the terms and get the fee in writing before you sign anything. The example below shows the rates two lenders publish.

Utah's rule. Utah's title and escrow regulator says an escrow on a "land flip" can only go ahead if each deal "stands on its own" and the money used in each one is "separate and distinct" (R592-16-4 ↗). In Utah, separate funding like this is the way to do a double close, and using your buyer's money for the first closing isn't allowed.

Transactional funding is still a double close. It doesn't change the answer in Oklahoma, Illinois or Virginia, and in Louisiana it's unclear whether borrowed money counts as you providing the funds.

Here's how it works. You form an LLC and sign the purchase agreement in the LLC's name. When you find a buyer, you don't assign the contract and you don't double close. You sell 100% of the LLC, its membership interest, to your buyer under a purchase agreement your attorney drafts. The contract stays in the LLC's name. Only the owner of the LLC changes.

The LLC still has to close with the seller, now with your buyer's money behind it. So there's one closing with the seller and a separate sale of the LLC. It's a legitimate structure, and some investors use it on deals where an assignment won't fit. But it comes with five risks you need to know.

• 1. Transfer tax can still apply. New York's tax department says transferring a controlling interest in an entity that holds an option or contract to buy real property is a conveyance, so it can be taxed even when the LLC only holds a contract (NY DTF ↗). Several other states, including Pennsylvania, Connecticut, Delaware, Maryland and Washington, plus DC, tax controlling-interest sales. Whether a contract-only LLC counts there is unclear.
• 2. State wholesaling laws can still reach it. Delaware's official wholesale disclosure form lists transfers "through sale of an entity" (DPR form ↗). Louisiana and Rhode Island's laws say "directly or indirectly," and Pennsylvania's says "or other interest." How those apply to an LLC sale is unclear.
• 3. Your buyer gets the LLC's history. Any debts, claims and contracts the LLC has go with it. Your buyer should have an attorney do their own checks before they buy it.
• 4. Title insurance may not cover what your buyer expects. The title endorsement made for entity sales assumes the LLC already owns insured land. For an LLC that only holds a contract, how that works is unclear. Ask the title company before you plan on it.
• 5. Lenders and sellers. A buyer with a loan usually can't use this structure. And your contract with the seller may limit assignment or a change in who controls the buyer. That depends on the wording, so have an attorney read it.

An LLC sale isn't a way around a license law. Illinois reaches people who deal in contracts "as partners or common owners in another entity." Use it only when an attorney in the property's state sets it up for that deal.

This is my reading of each state's text. Unclear means the law's words don't settle the question. The full rules for every state are on my wholesaling laws by state page.

What doesn't change with any method: the general broker license law in every state, Do Not Call and local solicitation rules, FHA's rules for your buyer's loan, and telling title who's involved. These laws change often, and they vary by state, so check the current rule before every deal. Not legal advice. Confirm with a licensed attorney in your state.