Real Estate Closing DocumentsThere are many ways to close a deal. You probably won’t use all of these but it’s good to know the ways so you don’t miss a deal when it comes along.

Assignment of Contract: The first and easiest way is an assignment. You won’t be able to do an assignment on every deal. Some sellers, especially banks or lenders and most realtors, won’t allow you to put an assignment clause in the contract. An assignment is where you don’t buy and sell the property. You assign your existing contract to another person who’s stepping into your shoes and completing the contract. The person you assign the contract to abides by the terms you have negotiated.

Assignment of Beneficial Interest: This is a way to assign a non-assignable contract. If can’t assign the contract, you can create a trust with you as the beneficiary and then assign the beneficial interest in the trust. The name stays the same on the contract and doesn’t change but you have to list the buyer in the contract as the trust.

Subject To: This is where you buy a property with the existing financing in place and continue making payments on the seller’s mortgage. The reason I’m not a big fan is that anyone can get a property “subject to” by simply talking the seller into deeding the property to you and you continue the payments. I’ve seen many new investors who focused on getting the deed and either couldn’t sell the property or couldn’t find a tenant and had to give the  property back. Many states have enacted laws to protect consumers against investors who buy a property “subject to”. Check your state’s local laws regarding this option.

Options: In an option you don’t have a contract on the property but an option to buy the property at a certain price and for a certain length of time. The money you give the seller as option money is non-refundable as it’s the price you are paying for the option itself. You then decide if you want to exercise the option or not. If you don’t have your option sold to a buyer who’ll actually close the deal then you simply let the option expire. In this type of transaction you won’t need any more cash than the price of the option just remember the option money is non-refundable.

You’ll be limited to the amount of sellers you can use an option with. Most realtors don’t want to submit options as they want an actual contract on the property and don’t want to take the property off the market during the option period. The best types of sellers to use an option with are for sale by owners.

Simultaneous Closing: This is having two closings back to back but your buyer will fund your purchase. You’re closing in your name but you don’t have to bring any funds to the closing. Not every attorney or title company will allow you to do a simultaneous closing. You’ll just have to ask your attorney or title company if they do these types of transactions. Many problems that arise come from this type of transaction. If you don’t have your own funds to close and something happens to your buyer then you can’t close and your seller will be upset, maybe to the point of suing you for specific performance.

Physically Closing: This is when you actually buy and fund the property with cash or financing. With this method you need to have your funding lined up in advance so you can close regardless of what happens to your buyer.

5 thoughts on “Different Ways to Close a Deal”

  1. Good article Larry. It’s vitally important that investors know of and have multiple ways to close a deal.
    This opens the door for a person to complete a deal they may have once passed on.

    1. Thank You! It is our pleasure to provide you with as much information as possible to complete a deal and become successful by disclosing any information that would be helpful to you.

  2. What this does is spell out what is wrong with each method. As a newbie, I’d be scared to try any of them…most are either not acceptable by most sellers or just plain DANGEROUS….

    1. This information has been provided as a general explanation of each type of closing. We have closed in most these options, and as long as you have prepared all of your documents according to your closing process, you should not have any dangers ahead. As a “newbie”, we are prepared to help you to succeed in your investment career.

  3. My team and I are very open to help you with understanding your options further. You may have had a bad experience with these options of closing, but I assure you, each is legal. It is always best to check with a local closing attorney to see what limits you may have on assuming a property “subject to” or even doing a simultaneous closing. Each state varies. I always suggest that you contact a closing attorney/agent in the state to educate yourself on that state’s provisions on closing.

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