In this article, we’re going to cover the anatomy of a double escrow and how to do an assignment. We’re going to detail exactly how that works and how you can flip properties using no cash and no credit.
Double Escrow VS Assignment
The rule of thumb is if the potential profit is $5,000 or more, I’m going to do a double escrow. Or if it’s $5,000 and under, I’ll do an assignment.
What is Double Escrow?
There are two escrows involved, meaning there are two different files open. There’s escrow number one, which is between you and the seller. They call that the A-B, between you and the seller. Then there’s escrow number two, which is between you and the buyer, called the B-C. You’ve got the A-B, and you’ve got the B-C.
What’s the common denominator? B, being you—you’re buying and you’re selling. It’s all done on the exact same day. It’s all done simultaneously back to back.
How Does That Happen?
The closing agent will have the buyer come in and sign all of their documents. You’re going to come in and sign all of your documents, typically at a different time. You go in and sign at 9:00. The seller comes in at 10:00 and signs all his documents. Let’s say the buyer comes in at 3:00 and signs his documents and he wires in the funds.
What happens is he’s going to wire in funds to the B-C transaction between you and the buyer. $68,000 plus closing costs, let’s call it $69,000 goes into that escrow, of which they transfer $50,000 plus closing cost to cover the A-B file between you and the seller.
$68,000 plus closing costs, then they transfer $50,000 plus closing costs—because you will pay closing costs on your side between your A and your B. Or you could split it with your seller. It’ll be a couple hundred bucks—say $500 or so. They’re going to transfer $50,500 to the escrow between the A and the B. And then, boom, guess what you have now?
Now the seller sold the property. They record the transaction. Then, simultaneously, the deed records right behind it from the A to B. On the title, it’s going to show from seller to you and from you to buyer. That’s what the chain of titles is going to look like.
The buyer wires in $68,000 of which $50,500 goes to that file, the A to B. The seller walks away with $50,000. You walk away with the difference. What is $50,000 minus $68,000? It’s $18,000. You just made $18,000 by flipping a house with no cash and no credit. How much cash did you bring to the closing table? None. How much earnest money? None. You turn around and can do that over and over.
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