Double closings and what they cost

Bottom line first. A double closing means you actually buy the house and then actually sell it, usually the same day. Because two deeds get recorded, Colorado's documentary fee is charged twice. The fee itself is small. The bigger costs are title, escrow and the money you need to close the first purchase. This lesson is general education, not legal or tax advice.

What a double closing is

In an assignment, you sell your right to buy the house to someone else, and one deed moves title from the seller straight to the end buyer. In a double closing, you buy first and sell second. Call the seller A, you B, and the cash buyer C. Closing one is A to B. Closing two is B to C. Each closing has its own deed, and each deed is recorded with the county clerk and recorder.

Which route is right for a given deal, and where the line to brokering sits, is covered in the licensing lessons. Here we only look at the money.

The Colorado documentary fee

The documentary fee (often called the doc fee) is a county fee charged when a deed is recorded. Here is how the statute puts it: it is imposed on “every person offering for recording” a deed that conveys title to Colorado real property, and it is “measured by the consideration paid or to be paid for such grant or conveyance” (C.R.S. 39-13-102(1)). It is in addition to the ordinary recording fee. All documentary fees are payable to and collected by the county clerk and recorder (C.R.S. 39-13-102(3)).

Consideration just means what is given in exchange for the property. The statute counts the total paid by the purchaser, including the amount of any lien or encumbrance against the property and all charges and expenses required to make the transfer (C.R.S. 39-13-102(2)). A lien is a legal claim on the property for a debt, such as a mortgage.

The rule has two steps:

• If there is no consideration, or the total is $500 or less, no fee is due (C.R.S. 39-13-102(2)(a)).
• If the total is over $500, the fee is “one cent for each one hundred dollars, or major fraction thereof” of that consideration (C.R.S. 39-13-102(2)(b)).

To compute it, divide the consideration by 100 and call each result one cent. So a $200,000 consideration is 2,000 hundreds, which is 2,000 cents, which is $20.00. For residential property, the consideration figure is the amount listed on the deed or conveyance document, with a different rule when nothing or $500 or less is listed and a related declaration was filed (C.R.S. 39-13-102(5)(a)). Use round numbers when you practice, and ask the title company to compute the real figure.

Who pays? The statute does not say

The statute puts the fee on the person who offers the deed for recording. It does not say whether the buyer or the seller carries the cost in a sale. That is settled by the contract, and in practice by local custom and negotiation. So write it into the contract instead of assuming. Do not tell a seller “the law says you pay” or “the law says the buyer pays”. Neither is in this statute.

Why two deeds mean two fees

This is simple, and it is not a loophole in either direction. Each deed transfers title once. The fee attaches to each deed offered for recording and is measured by that deed's consideration. A double closing records A-to-B and B-to-C, so you pay the fee on each. An assignment records only one deed, A to C, so one fee is due on that deed. The consideration listed on that single deed is something to confirm with the title company, because it depends on how the deal is documented. A double closing therefore always costs a little more in doc fees, and that extra is small compared with the other costs below.

Other closing costs you will meet

• Title insurance: a policy that protects the owner or lender if a hidden problem with ownership shows up later.
• Escrow or closing fee: what a title company charges to hold the money and papers and run the closing.
• Transaction funding: a short-term loan, usually for a day, that supplies the money for closing one (A to B) from the money that arrives at closing two (B to C). It is used when the middle buyer does not have the cash. It has a fee.
• Recording fee: the ordinary fee to record each deed, separate from the doc fee.

Every title and funding figure below is made up. Real prices vary by company and by deal. Get written quotes before you promise anyone a number.

Example with real numbers

Jordan finds a house. Everything here is made up except the way the doc fee is computed. Jordan contracts to buy it from Priya (A) for $200,000 and agrees to sell it to Marcus (C) for $230,000. Both closings happen on the same day.

1. Closing one, A to B. Consideration is $200,000. $200,000 / 100 = 2,000 cents = $20.00 doc fee. Made up: $900 title and escrow, $30 recording.
2. Closing two, B to C. Consideration is $230,000. $230,000 / 100 = 2,300 cents = $23.00 doc fee. Made up: $1,100 title and escrow, $30 recording.
3. Funding. Jordan has no cash, so a funder lends the $200,000 for the day. Made up: a fee of 1% of $230,000, which is $2,300.
4. Total costs. $20 + $23 + $900 + $1,100 + $30 + $30 + $2,300 = $4,403.
5. Spread. $230,000 − $200,000 = $30,000 gross.
6. Net before tax. $30,000 − $4,403 = $25,597.

Notice what the doc fees were: $43 of $4,403. The statute-based part is tiny. The made-up funding fee is the big cost, and it is why a double closing needs a real quote before you commit. Taxes on the profit are outside this lesson. Ask a CPA.

If a lien is part of the price

Because liens count, a deed that shows $60,000 cash plus a $90,000 loan the buyer takes on carries $150,000 of consideration, so the doc fee is $15.00 (1,500 cents). The loan counts even though no one handed that money to the seller.

What to do before you sign

• Put who pays the doc fee in the contract.
• Ask the title company to price both closings in writing, including funding.
• Confirm that the A-to-B contract lets you resell before you close, and tell the title company what you are doing.
• Keep a copy of both closing statements.