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Assign or Double Close: The $9,000 Question

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By Jeffery S. Watson

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.

Jeffery S. Watson

Attorney

Jeffery S. Watson is an attorney who has had an active trial and hearing practice for more than 27 years. As a trial lawyer, he has a unique perspective on real estate investing, wealth building and asset protection. He has tried over 20 civil jury trials and has handled thousands of contested hearings. Jeff has changed the law in Ohio 5 times via litigation or legislation:

Smith v. Rudler – 70 Ohio St.3d 397
In re Hugley – 629 N.E.2d 1136
Bahr v. Progressive Insurance – 2009-Ohio-6641
Snyder v. Snyder – 865 N.E.2d 944
H.B. 463 amending the Ohio Civil Rights Act

Jeff has also been a real estate investor since 1994, investing in both residential and commercial properties. He currently represents established real estate investors in commercial and residential matters when the transactions involve self-directed retirement accounts. As a frequent and popular guest speaker and teacher on stages and webinars, he is a recognized thought leader and innovator in the field of real estate investing, wealth building and self-directed retirement account transactions.

He is a nationally-recognized authority regarding regulatory concerns with wholesaling. He was the co-creator of the Option Contract method that revolutionized the short-sale flipping process. Thousands of investors have used documents created by Jeff to flip properties.

Jeff is general counsel to the National Real Estate Investors Association. Jeff is general counsel to and a cofounder of Realeflow, LLC, which made the Inc 500 list in 2011. He currently advises six different national organizations with a combined membership of over 250,000 investors.

From 2010 to present, Jeff has led lobbying efforts in Washington, DC on behalf of real estate investors which has brought about several changes in both government regulation and policy on distressed property purchases and resales. In 2014 and 2015, his efforts on Capitol Hill helped bring about change in the U.S. tax code and helped reinstate the Mortgage Debt Forgiveness Act. Since 2015, Jeff has worked to secure passage of the Seller Finance Enhancement Act.

Jeff’s efforts to secure reform in the real estate arena aren’t just on Capitol Hill. In his home state of Ohio, he has worked with the Ohio Division of Real Estate teaching on the legality of wholesaling.

He is a part owner of Venture Land Title II, LLC, and his law firm prepares deeds and other documents for two title companies. He is also legal counsel to a number of other organizations including Eagleville Bible Church, Inc.

Jeff is the author or co-author of 6 digital books:

  • “Understanding Self-directed Individual Retirement Accounts”
  • “A Guide to Private Lending”
  • “Short Sales Done Right – How to Profitably and Legally Navigate the Short Sale Jungle”
  • “Death of the Land Trust … in Short Sales”
  • “How to Hire Your ‘Dream Team’ ”
  • “Understanding the Foreclosure Process”

In addition to his digital books, Jeff authors an email newsletter twice a week and maintains a blog at WatsonInvested.com on investing, business and entrepreneurship which are read by thousands of successful investors.

The Deal of the Century

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By Alton Jones

Is this your last opportunity to create greatness?

For all we know, it might be. That’s certainly how I live my life. But as the holidays come up, I see more people getting into the slowdown mindset. Thinking they won’t be able to do anything between Thanksgiving and new years, they stop trying. There are no good deals to be had this time of year, right?

This mentality is absolutely wrong. I believe that every opportunity might be the last to create greatness. Life is short and uncertain. We’re always existing in one of three zones — green, yellow, or red. When you’re green, you’re kicked back. In yellow, you’re about normal. But in red, you’re working hard every minute, constantly on the move, looking for the next angle and the next opportunity. I’m always in the red zone, and I hate to see people slack off to green this time of year.

Never get a good deal this time of year? I believe that the deal of the century comes along at least once a week. But you have to be operating in that red zone to get it. You have to be looking for the great seller, the private lender who will bring you the deal of the century. You have to be willing to fight to the end to get it.

You also have to deliver value. On our first Rehabs2Riches boot camp, the hotel practically had to kick us all out at the end. I was delivering high-quality content so impactful that the attendees didn’t want to leave. They were scared they’d miss out on the golden nugget that was gonna put them over the top. They stayed until the last minute, the last second of day three, because I delivered value.

I believe that price is only an issue in the absence of value. People don’t care how much you know until they know how much you care. I’ve had people sell their home to me over other buyers not because I offered more money — I didn’t — but because I created a value for them. The home had been their mother’s, and in the family for over 50 years. They needed to know that it was going to be treated with respect.

I understood the emotions behind that, and exercised the golden rule. I asked a few simple questions about what was most important to them, and then showed them they could trust me to respect the house.

I found that deal by operating in the red zone, and I secured it by delivering value to the seller. And it wasn’t really about real estate — it was about building a relationship, because as I always say, we’re in the people business.

And if we’re in the people business, why wouldn’t you be operating in the red zone this time of year? Holiday events, family get-togethers, and business cocktail parties — they’re all opportunities to build relationships and find the deal that will put you over the top. You’re surrounded by people who you should build relationships with, even if they can’t do business with you right now. They might refer you to someone else down the line. But you can’t be dawdling along in the green zone and expect to find it.

The deal of the century is happening this week. Stay in the red zone and go get it.

 

Approaches To Real Estate Negotiation

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By Bruce Kellogg

Introduction

Negotiation, unfortunately, is not taught much to real estate professionals, or to investors. International, corporate, and purchasing courses exist, even to the extent of Master’s degrees, but real estate has not received the same coverage. This article aims to help that.

Start Out Early

Negotiations begin at the first encounter (e.g., phone inquiry). Many people think the initial pleasantries are just that, and the formal negotiations will begin later. Not so. The superior negotiator will have already begun gathering information and setting expectations. Start early so you don’t have to catch up.

The Three Elements

There are three elements to any negotiation: 1) Information, 2) Time, and 3) Power. These will be described below.

Gather Information

The negotiator who gathers the most information usually has an advantage. Interview people, obtain reports, do inspections, use the MLS (Multiple-Listing Service) and other online resources. Hire a private investigator on the seller if the deal is large enough, looking for vulnerabilities (e.g., bitter divorce). You can’t know too much.

The Factor Of Time

It helps to know if the other party has any time constraints, along with your own, of course. Pending foreclosure, divorce, condemnation proceedings are some examples. If the property is “a steal”, scoop it up fast. If it’s priced at or above “market”, then “grind real slow”. Use time to your advantage.

The Factor of Power

In some negotiations the power levels are uneven. One party has more leverage over the other. Seasoned negotiators assess power levels and devise strategies to take these into account. Then, even the weaker party can optimize its outcome.

Be Generous When Selling

Some sellers believe in “Win-Lose” negotiating. They want “top dollah”. This apparent greed and intransigence grates on everyone involved, sometimes to the extent of legal action or retaliation. Be generous when selling. Paint that bedroom. Purchase a Home Protection Plan for those first-time buyers. You’re on your way to wealth. Don’t be cheap!

Keep Your Word/Perform And Smile

Keep your word. Perform everything you’ve agreed to do. And smile as you do it, even if the deal is going against you and you are taking a loss. Don’t whine. Smile. Builds character….and your reputation.

The “Concession Pattern”

In the back-and-forth of negotiations, your “concession pattern” is very important because it sets up expectations in the other party. Always negotiate fairly tightly. Don’t concede too much because the other party will see that as an opening to seek more. Go back-and-forth more times if need be. Try to set things up so you take the other party’s counteroffer rather than force them to take yours. This way they will feel they won, and you will have less trouble with them the rest of the way. And, please, don’t arbitrarily “split the difference”. Amateur negotiators do that.

“Sharp Practices”

The day will come, if it hasn’t already, when the other party will bring “sharp practices” to the table. If these are illegal (e.g., undisclosed money back after the close), call them on it, and refuse to participate. If these are not exactly illegal, then counter them as best you can, or walk away. Life is too short, and your reputation is too important. Always “take the high road” in negotiations.

Re-Negotiating After Inspections

Y’all know to re-negotiate after property inspections, right? ‘Thought so.

Reading List

Included here is a list of Recommended Reading. Buy all of them, used. Read and highlight them. Then, once a year, re-read the highlights. You owe it to your clients, and yourself, to be in tip-top shape a as a negotiator.

Recommended Reading

Negotiate This, Herb Cohen, 2003

Everything’s Negotiable, Eric Wm. Skopec and Laree S. Kiely, 1994

Guerrilla Negotiating, Jay Conrad Levinson, Mark S. A. Smith, and Orvel Ray Wilson, 1999

The Negotiating Game, Chester Karrass, 1992

The Only Negotiating Guide You’ll Ever Need, Peter J. Stark and Jane Flaherty, 2003

Seal the Deal, Leonard Koren and Peter Goodman, 1991

You Can Negotiate Anything, Herb Cohen, 1980

How to Win Friends and Influence People, Dale Carnegie, 1936