What Is Double Closing? Real estate investors often choose to double close in order to keep their capital gains under wraps from both the seller and end buyer. The key to the double closing is that it’s two separate transactions, one between seller and wholesaler and another between wholesaler and end buyer.
What is a double closing in real estate investing?
- A double closing gives real estate investors optionality. If assigning a contract won’t work, the ability to facilitate a double closing makes the possibility of a deal transpiring much more likely. In most states, a double close is treated just like a traditional close, which doesn’t require a licensed real estate agent.
- 1 What does double close mean in real estate?
- 2 Is double closing illegal?
- 3 Can you double close with no money?
- 4 What is double selling?
- 5 What is a double contract?
- 6 How does a double escrow work?
- 7 What is a wet closing?
- 8 How does a simultaneous close work?
- 9 What is an end buyer in real estate?
- 10 What is a flash close in real estate?
- 11 What is a pass through closing?
- 12 How do you double end a real estate deal?
- 13 What does buying a house wholesale mean?
- 14 Which of the following is a cost involved in closing the real estate transaction?
- 15 What Is a Double Closing in Wholesale Real Estate?
- 16 A brief explanation of wholesaling
- 17 The double closing in real estate wholesaling
- 18 How a contract assignment works
- 19 Step-by-step list of the wholesaling process using double closing
- 20 How a wholesaler secures funding for a double closing
- 21 Pros of a double closing
- 22 Cons of a double closing
- 23 How investors can decide which process works best
- 24 The bottom line
- 25 What is a Double Closing in Real Estate?
- 26 How a Double Closing Works
- 27 Why Do A Double Closing?
- 28 Funding a Double Closing
- 29 Advantages of a Double Closing
- 30 Disadvantages of a Double Closing
- 31 Double closing – Wikipedia
- 32 The mechanics
- 33 Legal standpoint
- 34 Double Closing In Real Estate: 10 Things (2021) You Have To Know
- 34.1 1. What is a double closing?
- 34.2 2. How does wholesaling factor into double closing?
- 34.3 3. How does a double close in real estate work?
- 34.4 4. What type of transactions can a double closing occur with?
- 34.5 5. Do you need to buy in cash?
- 34.6 6. When should you use a double close deal in real estate?
- 34.7 7. What are the pros of double closing?
- 34.8 8. What are the cons of double closing?
- 34.9 9. Where does the funding come from?
- 34.10 10. How do you find an attorney who will do a double closing?
- 34.11 Final thoughts
- 34.12 Additional Resources
- 35 Would you like to receive an email with our latest blog/properties every Thursday?
- 36 What Is A Double Closing? (Ultimate Guide)
- 37 What Is A Double Closing?
- 38 How Does A Double Closing Work In Real Estate?
- 39 Is Double Closing Illegal?
- 40 How To Do A Double Closing (5 Steps)
- 41 Do You Need Money To Double Close?
- 42 Double Closing vs. Assignment
- 43 Is Double Closing With Title Companies Normal?
- 44 How To Fund A Double Closing?
- 45 Pros And Cons Of Double Closing In Real Estate
- 46 Final Thoughts On Double Closing
- 47 What Is Double Closing in Real Estate?
- 47.1 What Is Double Closing in Real Estate?
- 47.2 Double Closing vs Contract Assignment
- 47.3 The Real Estate Wholesaling Process Through Double Closing
- 47.4 Pros of a Double Closing
- 47.5 Cons of a Double Closing
- 47.6 Bottom line
What does double close mean in real estate?
A double closing is the simultaneous purchase and sale of a real estate property involving three parties: the original seller, an investor (middleman), and the final buyer. Another common reason for a double closing is to conceal the identity of the purchaser or seller.
Is double closing illegal?
A double closing is legal in California. However, the “same day” double close will actually take place over at least two days. The B to C transaction will close at least one day after the A to B transaction has closed. Each portion of the double close must close independently with its own funds.
Can you double close with no money?
While cash is inherently the single greatest way to conduct a double close, it isn ‘t necessary. Wholesalers who don’t have their own cash may try to seek approval for short-term transactional funding (otherwise known as “flash cash” or same-day funding) to secure the deal.
What is double selling?
Double selling is a type of real estate or mortgage fraud that generally involves a mortgage broker. Double selling could also take the form of a homeowner selling a single property twice, obtaining funds from each buyer.
What is a double contract?
Double contract means executing two or more purchase agreements, one of which is not made known to the prospective lender or loan funding entity.
How does a double escrow work?
Double escrow is a set of real estate transactions involving two contracts of sale for the same property, to two different back-to-back buyers, at the same or two different prices, arranged to close on the same day. If the underlying purpose of the double escrow is legal, the double escrow will be legal.
What is a wet closing?
A wet closing occurs when the date to close your real estate transaction arrives and all paperwork, including the disbursement of funds, is finished at the same time. A wet closing is the opposite of a dry closing, and whether or not you’ll need a wet close is determined by your state.
How does a simultaneous close work?
In a simultaneous closing, the seller extends a private mortgage to the buyer so they can purchase their property. Then, the seller immediately sells that mortgage note to an investor. The investor pays the seller cash for the mortgage, and the person who bought the property will make their payments to the investor.
What is an end buyer in real estate?
The end buyer as it is usually called is the individual who will purchase the property at the closing table for their personal use, keep it for rental income or fix and flip it.
What is a flash close in real estate?
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What is a pass through closing?
Pass through is simply a feature of a deposit that directs escrow to release all or part of the deposit to the seller prior to close of escrow. The release is usually triggered by either 1) completing a specified task or 2) reaching a milestone date or event in the purchase schedule.
How do you double end a real estate deal?
A double-ended deal can only occur when the buyer comes directly to the listing agent, and is not working with their own agent. This means the buyer found the property online themselves, took the initiative to connect directly with the seller or their agent, and arranged a showing.
What does buying a house wholesale mean?
In real estate wholesaling, a wholesaler contracts a home with a seller, then finds an interested party to buy it. The wholesaler contracts the home with a buyer at a higher price than with the seller, and keeps the difference as profit. Real estate wholesalers generally find and contract distressed properties.
Which of the following is a cost involved in closing the real estate transaction?
Closing costs are the expenses over and above the property’s price that buyers and sellers usually incur to complete a real estate transaction. Those costs may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, and credit report charges.
What Is a Double Closing in Wholesale Real Estate?
Real estate has traditionally been the preferred investment for people seeking to accumulate long-term wealth for their families and future generations. By subscribing to our complete real estate investment guide, you will receive assistance in navigating this asset class. An aflipperorlandlord.com double closing, also known as a back-to-back closing, is typically the preferred way of moving property from a seller to a wholesaler and then to an end buyer, who is most commonly a real estate investor such as aflipperorlandlord.com When it comes to wholesale real estate deals, the double closing is a frequent method of completion.
A brief explanation of wholesaling
Wholesaling is a real estate investing technique that involves buying and selling properties. A real estate investment strategy that consists of locating and purchasing off-market properties with the intention of reselling them to real estate investors, sometimes known as “end purchasers,” for a profit. Essentially, a real estate distributor acts as a go-between, bringing together buyers and sellers to complete transactions. Wholesalers work with homeowners to negotiate a low purchase price in exchange for a commitment to locate a buyer for the house (typically a distressed home).
After a homeowner accepts a wholesaler’s offer, the wholesaler typically has 30 to 45 days to locate a buyer for the property.
If the wholesaler is successful in locating an end buyer, the wholesaler will conclude the deal using one of two methods: contract assignment or a double closure.
The double closing in real estate wholesaling
Wholesalers that employ the double-close approach really assume ownership of the property and then sell it to an end customer soon after that transaction. Closings are often scheduled one after the other. The way it works is as follows: A double closing occurs when a homeowner sells property to a wholesaler, who then immediately sells the same property to an end buyer, resulting in a double closing – the wholesaler’s closure followed by the end buyer’s closing – and therefore the term “double closing.”
How a contract assignment works
Rather of using a typical purchase agreement, the wholesaler drafts a contract that includes provisions for the assignment of rights. The wholesaler then attempts to locate an end buyer (often an investor with whom they have a relationship) to purchase the property. The wholesaler will sell the contract to the final customer at a greater price than the one that was negotiated with the homeowner in the initial negotiation. The wholesaler would then pocket the difference as his own profit.
Step-by-step list of the wholesaling process using double closing
The double closure entails the participation of three parties: the seller, the wholesaler, and the ultimate customer. The wholesaler’s objective is not to become the owner of the property, thus in a double-closing scenario, the wholesaler will often need to engage with a title firm or real estate attorney that is investor friendly and who is willing to undertake a double-close transaction. Not all closing agents are knowledgeable about the procedure. According to the wholesaler’s perspective, the following is a step-by-step breakdown of how the double-closing process works: Find a vendor to market your product.
- There are a multitude of strategies that wholesalers employ in order to achieve this.
- Decide on a charge.
- Find a buyer for your product.
- The property will be sold to the final purchaser by the wholesaler.
- Purchase the property or obtain financing.
(See below for further information on financing sources.) Selling the property is a good idea. The wholesaler is in charge of selling the property to the final purchaser.
How a wholesaler secures funding for a double closing
In a double closing, the wholesaler really purchases the property and takes title, therefore the wholesaler must be able to provide funding for the transaction. This can occur in a variety of ways, including:
- Through the use of cash
- Through the use of a traditional lender
- Through the use of transactional financing (also known as flash cash)
- Derived from a single source of money
You’re undoubtedly already familiar with the mechanics of a cash transaction and a standard loan transaction. However, you might not be as familiar with the other two alternatives. Here’s why that’s the case.
Transactional funding (flash cash)
Wholesalers who do not have cash on hand want monies, but just to obtain title to the property, not to keep it. They aim to sell the home to the final buyer as quickly as feasible. Wholesalers can get quick access to capital through transactional finance, often known as flash cash, which has the drawback of requiring them to pay back the money nearly immediately. Transactional finance is simply a short-term bridge loan for a company’s operations. However, because this loan is for a relatively short period of time, it must usually be repaid very quickly, usually within one to seven days.
Transactional finance is popular among wholesalers since the money is normally available quickly, is generally easy to get (it is not dependent on creditworthiness), and the lender can lend 100 percent, which means the wholesaler needs no of their own funds in the transaction.
The cost of these sorts of loans vary depending on the lender.
However, this is only applicable if the loan is expected to complete swiftly, often the same day or within three to seven days at the most.
It is possible to use the money from the end buyer to fund both the A-to-B transaction and the B-to-C transaction utilizing the single-source funding scheme. Before the wholesaler can finish the A-to-B transaction, the closing agent must agree to allow the end buyer to sign the closing paperwork and pay for the property before the wholesaler can complete the deal. In this case, after both sets of closing documents have been signed, the closing agent would conduct a reverse closing: the funds would first be used to fund the B-to-C transaction by moving from C to B.
The use of this strategy was more prevalent before to the 2008 financial crisis than it is today.
Pros of a double closing
It is legal (although you should double-check the laws of your state or jurisdiction to make sure). Essentially, a double closing is deemed the same as any other closing in that the wholesaler is really purchasing the property and then selling it, a procedure that does not necessitate the use of a registered real estate agent. When a wholesaler chooses to skip this stage, as is the case in a contract assignment, they must be a licensed real estate agent in order to conduct business. Since wholesalers who are not licensed agents are issuing contracts, accepting money, and brokering real estate transactions without a license, they’re most certainly breaching the law – a conduct that is prohibited by state and federal law.
The only exception is when you are purchasing or selling your own home, which is what happens when you have a double closing.
In the case of a contract assignment, the final buyer is made aware of the amount of profit the wholesaler makes.
However, wholesalers may not want the final buyer to know how much money they’re earning on the transaction, and with a double closure, the end buyer is not aware of the A-to-B transaction that took place earlier.
Cons of a double closing
It’s a tough situation. A standard closing can be stressful enough, especially when the purchase isn’t complete until all of the paperwork is signed and the money is exchanged, which means that one side may decide to back out. The fact that there are three persons engaged in a double closing as opposed to two people in a single closing might increase the likelihood that the deal will not complete. That in and of itself is a problem, especially if the wholesaler has received quick cash that must be repaid soon and the final customer decides not to proceed with the transaction.
- People like to do real estate transactions with somebody they can rely on and trust.
- Double closings might not be permitted in some states or jurisdictions.
- A double closure will not be performed by all closing agents.
- Finding a closing agent who is willing to do a double closing may require some time and effort.
- There are many moving components involved in a double closing, and all parties involved must be able to arrange time to ensure that the process runs well from start to finish.
How investors can decide which process works best
Investors must select whether method of concluding a wholesale transaction is preferable: a double closure or contract assignment. They both have advantages and downsides in their respective situations. Closing charges are incurred. One of the most significant advantages of a contract assignment is that the wholesaler does not have to pay closing fees because the wholesaler is not truly purchasing or selling real estate. However, in the case of a double closure, the wholesaler is likely to incur closing charges twice: once when purchasing and again when selling.
With a contract assignment, everything is out in the open (both the seller and the final buyer are aware of how much the wholesaler is making), but a double closure is more private and confidential.
Due to the fact that the wholesaler does not need to be a real estate agent, unlike in a contract assignment transaction, a double closing is more in compliance with the law.
Earnings that are expected.
In general, the more money that is at risk, such as anything greater than $10,000, the more common the double close is to become.
A double closure may require more time and effort than a contract assignment, and it may also cost an investor more money when closing charges are taken into consideration, but it is frequently the most efficient form of concluding a wholesale transaction.
What is a Double Closing in Real Estate?
It is possible to have three parties involved in one real estate transaction, known as a Double Closing. The three parties involved are: the seller, a real estate wholesaler (who acts as a middle man), and the end-buyer. Double closings, as the name indicates, are transactions that take place on the same day but are different from one another. It is the A-to-B transaction that involves the first purchase and sale between the seller and the investor, whereas it is the B-to-C transaction that involves the initial purchase and sale between the investor and the final buyer.
Many different circumstances can have an influence on the information included in this article.
How a Double Closing Works
When a real estate investor (i.e. –wholesaler) finds a motivated seller who is prepared to sell their property at a price below market value, a double closing is frequently the result.
- The wholesaler/investor locates a motivated seller, and the two parties agree on a buy price that is below market value (the A-to-B transaction)
- After finding an end-buyer, the wholesaler/investor will enter into a new purchase agreement (the B-to-C transaction) to acquire the property at a higher price and close on the same day as the A-to-B transaction. Transactional money is obtained by the wholesaler/investor in order to purchase the property from the seller. If a wholesaler/investor completes both deals, he or she repays the transactional funding loan from the proceeds of the B-to-C transaction and retains the difference as a profit.
Regardless of the type of real estate being closed, double closings are possible as long as the closing agent (such as a title company, escrow office, or closing attorney) is willing to facilitate both transactions and there are no prohibitive restrictions in place from a third-party lender, as explained here. If the real estate wholesaler (middle man) has access to their own cash to close the A-to-B transaction, access to transactional funding (also known as flash cash), access to funding from a third party lender, or if the closing agent is able to close both transactions with a single source of funding, double closings can be completed.
Why Do A Double Closing?
There are a few typical reasons why real estate wholesalers use duplicate closings, all of which are explained here. With a double closing, as opposed to an Assignment of Contract (in which a wholesaler simply sells their rights in their original purchase agreement with the seller and the end-buyer completes their purchase agreement with the original seller in accordance with contract), a wholesaler “middle man” can protect both their own identity and the identity of the original seller from the end-buyer and vice versa.
A double closure also helps the wholesaler to disguise the amount of profit they are collecting from the transaction (from both the original seller and the end-buyer).
The initial seller does not have access to the final purchase price agreed upon by the end-buyer, and the end-buyer does not have access to the selling price agreed upon by the original seller.
It enables the wholesaler to avoid the possibility of being accused of attempting to sell real estate on the seller’s behalf without a valid sales license.
Funding a Double Closing
One of the fundamental difficulties of completing a double closing is determining where the money is coming from, which is particularly difficult in the case of an A-to-B deal. Due to the fact that the real estate wholesaler will only be in possession of the property for a brief length of time, they must either:
- They have access to their own cash reserves in order to complete this initial transaction
- Receive approval for short-term transactional finance (sometimes known as “flash cash” or “same-day funding”) to pay the cost of their purchase
- A separate source of finance to acquire the property outright is available
- Locate a closing agent who is capable of completing the double closing with single-source funding.
This highlights the necessity of selecting and working with an investor-friendly title firm that understands the scheduling, funding, and disclosure requirements that real estate investors must adhere to in order to successfully complete their deals. 085: How Have the Rules of House Wholesaling Changed in the Modern Era
Advantages of a Double Closing
Double closings need a collaborative effort from the seller, the real estate wholesaler, the end buyer, the lender (if applicable), and, most importantly, the closing agent, due to the large number of parties involved and the short amount of time available for completion. Even with the additional work necessary, double closings provide a number of significant advantages.
1. It Leaves a Cleaner Paper Trail
Using a simultaneous closing, you are less likely to run up against any of the same state-specific rules or regulations, financing restrictions, or even legal issues that can arise when using other closing maneuvers to accomplish the same task. A double closing is designed to avoid the communication obstacles and other “red tape” that can arise when a real estate wholesaler attempts to assign their purchase agreement to the end-buyer, rather than purchasing it outright and thawing it out.
2. The Wholesaler Doesn’t Have to Disclose Their Profit to the Buyer
When compared to assignments, the wholesaler enjoys the additional benefit of never being required to reveal how much money they are making to the end-buyer. Without the customer knowing, the distributor can make $5,000, $10,000, or even $100,000, all without the buyer knowing. This makes things a lot more organized and provides a neutral platform for talks.
Disadvantages of a Double Closing
Even while there are several advantages to adopting a double closing technique, there are also some disadvantages to this type of closing motion.
1. Both the Seller and the End-Buyer Need to Perform
Just like any other real estate transaction, the closing has the potential to go apart if either the buyer or the seller decides to back out and walk away at the last minute before the transaction is completed. Typically, a real estate investor may exert control over at least 50% of the process since they are either the buyer or the seller, and they have the ability to direct their own activities and follow through on their promises. In the case of a double closure, however, there are three persons engaged, rather than simply two.
When transactions fall through, it can have a negative influence on the wholesaler’s reputation.
Even if the wholesaler had nothing to do with the incident, this type of failure might have a negative impact on the wholesaler’s reputation in the long run. It is true that real estate is a people-based business, and what people think of one another does matter, at least to a certain extent.
2. An Investor-Friendly Title Company Is Required
In order to successfully complete a double closing, meticulous attention to detail and considerable work must be put into arranging all of the parties involved (not only organizing everyone’s schedule, but also enabling the flow of monies to each party) are required. However, not every closing agent is up to the challenge. Many closing companies would like to concentrate on “simple” transactions involving only two participants, in order to avoid the difficulties that come with double closings.
Legal disclaimer: There are variances in the rules and legislation of each country throughout the world, and double closings may not be in conformity with the laws of every market in which they are used or implemented.
3. Scheduling Two Back-to-Back Closings Can Be A Hassle
One of the most important parts of a simultaneous shutting is the timing of the closings so that they occur one after the other. It is possible that the title company or closing attorney will work with you and be comfortable doing it a few hours apart, but that you will have to arrange with three different parties, as well as with the availability of the title company, all on the same day. It may be a significant obstacle to overcome, and any real estate distributor should be prepared to face it head-on.
Double closing – Wikipedia
An example of a double closing is the acquisition and sale of real estate by three parties at the same time: the original seller, an investor (middleman), and the ultimate buyer. The fundamental reasons for using a double closure system are numerous and diverse. Allowing the intermediary to utilize the cash from the purchasers to purchase the property from the original seller is usually the most pressing and common cause for this arrangement. Another typical purpose for a duplicate closure is to keep the name of the buyer or seller a secret from the public.
The investor then uses a double closure to bring both deals to a conclusion at or near the same time, saving him time.
The mechanics of a double closing differ based on who the buyer and seller are, who is providing the finance, and who is in charge of the actual closing process. When it comes to the most basic kind of double closure, the purchaser would pay a middleman the purchase money and then file a settlement statement (HUD-1) for their transaction. After the intermediary has spent the majority of the purchase money on the property, the purchaser would be required to wait. A separate settlement statement would be completed by the seller and the intermediary for their respective transactions.
The closing may be held in two distinct rooms, or at two different times or locations, in order to maintain the separation between the buyer and the seller.
In order to streamline the transaction, the middleman may prepare a single settlement statement that is shared by both the purchaser and the seller, with his profit appearing as a line item on the settlement statement.
In most cases, this line item appears on the purchaser’s side of the statement, and it is denoted as an assignment fee. This may provide an issue for the middleman, because assignment fees may be taxed at a different rate than short-term capital gains, which might result in a loss for the middleman.
According to the law, the seller has the right to pay encumbrances from the profits of the sale, and most sales contracts include this provision. The fact that the property is still owned by the original seller is unquestionably an encumbrance on the title. Additionally, contracts may be assignable, allowing the intermediary to have the ability to assign his buy contract to the purchaser in exchange for a commission.
Double Closing In Real Estate: 10 Things (2021) You Have To Know
A double closing is a real estate investment method that allows investors to sell their homes rapidly by using two different closing dates. It is an acreative exit plan for real estate wholesaling that, if used correctly, will assist you in keeping your portfolio alive and lucrative. In this article, we’ll go over what double closure is, how it works, and the benefits and drawbacks of using it in your business. Let’s get this party started.
1. What is a double closing?
Double closure is a mechanism that may be used as an alternative to the widely used contract assignment method. This type of closure is most commonly seen when an investor purchases a subject property with the intent of reselling it relatively fast. It is for this reason that it is referred to as a “double closure.” Essentially, the investor closes two separate real estate transactions — one with the original seller and another with the eventual buyer – in one day. While it is not much different from the traditional methods of purchasing or selling a home, it takes place in a considerably shorter amount of time.
2. How does wholesaling factor into double closing?
We need to talk about wholesaling before we can go on to the next step, double closure. Finding and purchasing off-market properties with the intention of reselling them to real estate investors (end purchasers) for a profit is the basis of wholesaling, which is a real estate investing strategy. Wholesalers are intermediaries that bring together transactions between vendors and purchasers. At the end of the day, wholesaling and double closure are synonymous. Back-to-back closings are a term that is occasionally used in the wholesale real estate industry to describe a double closing.
a real estate investor such as a flipper or a landlord).
3. How does a double close in real estate work?
To understand double closing, you must first break up the transaction into two deals. The first transaction is A-to-B: the seller is “A” and the investor (wholesaler) is “B” The second transaction is B-to-C: The investor is “B” and the end buyer is “C” Then, you’ll follow these steps: A real estate investor (wholesaler)finds a motivated sellerwho is willing to sell their property at a price below market value. A-to-B transaction: Both parties thenagree to a below-market purchase price. B-to-C transaction: Theinvestor finds an end-buyerand signs a new purchase agreement to purchase the property at a higher price.
The investor will thensecure fundingto buy the property from the seller. When both transactions are complete,the investor repays the funding loan(if any) from the proceeds of the B-to-C transaction. The difference is the profit.
4. What type of transactions can a double closing occur with?
With any form of real estate, it is possible to have two closings in one day. The only snag is that the closing agent (title company, escrow agency, closing attorney, or other similar entity) must be willing to facilitate both transactions in order for this to be possible. In addition, there must be no prohibitive limitations imposed by a third-party lender on the transaction.
5. Do you need to buy in cash?
Double closings are possible regardless of whether the real estate wholesaler (middleman) utilizes their own funds, loan funds, or the funds provided by the end-buyer to complete the A-to-B transaction.
6. When should you use a double close deal in real estate?
In general, it is preferable to assign contracts wherever it is possible. So it is usually preferable to delay the use of a double close real estate wholesaling approach until the situation calls for it. If you are unable to get into a selling contract, you might consider using this alternative.
7. What are the pros of double closing?
It is permissible to double close a transaction. Double closings are legally handled the same as any other closing, as long as you verify the laws of your state or territory to be sure. The investor (wholesaler) purchases the property with the intention of reselling it. To be certain that you are in compliance with the law, you should always consult with a qualified real estate attorney in your area who is up to speed on the current rules and regulations. Depending on the following factors, your state may permit or prohibit repeated closings in real estate transactions:
- It is important to determine if the investor is a primary in the transaction (ie., acquiring the property for himself or herself). The source of finance that is utilized on both sides of a double closure
- What kind of real estate agent the investor is or is not licensed to be
There are many misunderstandings concerning both wholesaling and double closing that need to be addressed. Make a courtesy call to a real estate attorney to discuss your options. This is the most reliable method of determining what you are legally permitted to do and what you are prohibited from doing in your state. Your profit is kept a secret with a double closure. The ultimate buyer is frequently aware of the amount of profit the investor makes when there is a contract assignment in place.
- The A-to-B transaction is not visible to the eventual buyer in the case of a double closure.
- Instead, have your attorney or a representative from your title firm prepare your papers in advance and go on your behalf.
- The use of double closure results in a more sanitary paper trail.
- Finally, by using a double closure, you may avoid some of the state-specific requirements, finance regulations, and legal concerns that may arise with other closing techniques.
8. What are the cons of double closing?
Double closings can be a source of anxiety. Contract selling is difficult because the transaction is not complete until all paperwork has been signed and funds have been exchanged. Due to the fact that you are completing two distinct transactions, you will be required to perform twice the amount of labor. Both you, the seller, and the ultimate buyer must be present at the closing table in order for the transaction to be completed. If this is not the case, the transaction will not go through. As a result, double closings are frequently more stressful than single closings.
- In addition, if the investor takes out a loan to acquire the property, there are additional issues to deal with.
- Is there any way that the investor will be able to repay the loan?
- In the real estate industry, consumers frequently only conduct business with people they can rely on and trust.
- There is likely to be a great deal of tension until you have officially closed your business!
- The practice of double closings is lawful in numerous states and authorities across the United States, as previously stated.
- It is your responsibility as the investor to thoroughly investigate this deal and speak with a local real estate attorney for guidance in this area.
- When compared to awarding a contract, double closings bring a number of difficulties.
- For real estate investors looking for a closing agent, it may take some time before you are able to locate someone who is comfortable completing a double closing in the field of property investment.
Due to the large number of moving elements and parties involved, scheduling double closings is not always straightforward. The investor must be willing to put in the necessary effort to make everything work and to bring everyone’s schedules in sync.
9. Where does the funding come from?
One of the most difficult aspects of completing a double closure is securing funds for the operation. The investor (wholesaler) must be able to fund the transaction in order to purchase the property and get ownership. Fortunately, even if this is a difficult situation, there is no shortage of alternatives. Cash Taking out a loan from a traditional lender Making use of transactional funds (flash cash) Funding from a single source Traditional financing as well as cash transactions are both quite straightforward.
- We’ll take you through them immediately so you can get a sense for what they’re like.
- flash cash) Investors are not always in possession of cash, but they are need to have cash in order to just obtain the title.
- Their ultimate objective is to sell the property as quickly as possible to a potential end buyer who is interested in it.
- Because they can utilize the cash as long as they pay the money back within a short period of time (between 1 and 7 days), this is classified as a short-term bridging loan.
- The lender can also lend in full, which is advantageous to the investor since it eliminates the need for the investor to utilize any of his or her own funds in the real estate transaction.
- If the loan is expected to conclude within a short period of time, the cost of the loan is typically between 1-2.5 percent of the loan amount.
- Funding from a single source Single-source funding works by using the money from the final buyer to fund both transactions at the same time (A-to-B and B-to-C).
- When both sets of closing paperwork have been signed, the closing agent will reverse the process and complete the transaction backward.
Finally, the investor (wholesaler) would be the one to benefit from the differential. It used to be considerably more usual than it is now to get finance from a single source prior to the 2008 financial crisis.
10. How do you find an attorney who will do a double closing?
In any given location, there are often only a few of attorneys that are investor-friendly and understand how to double close deals effectively (assuming that a double closing is legal in your state). To help you locate these select few, here’s some advice: Reach out to around twenty other real estate investors, network with them, and inquire as to who they employ for their closings. It is possible to discover local investors by searching for “we buy property/land/houses inyour city” on Google and then phoning all of the firms that appear in the results.
Once you have spoken with twenty-five or twenty-five additional investors, you will most certainly notice that a few names will come up repeatedly.
A double closing is a shrewd strategy for real estate investors of all experience levels and backgrounds. If you’re in the business of flipping houses, wholesaleing distressed properties, or selling raw land to developers, you might want to consider going this path. Discovering a trustworthy investment specialization and technique will eventually serve you well, no matter what you’re looking to accomplish. Do you have a tale to tell about a double closing? Please share your thoughts in the comments section.
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- Erika is a former Director of Affordable Housing for the City of New York who has transitioned into a full-time land investor.
- She graduated with honors from the University of Southern California with a Bachelor of Architecture and with a Master of Urban Policy from Columbia University before establishing Gokce Capital.
- Erika presently resides in the New York Metropolitan area with her husband, daughter, and cat.
- She is originally from Chicago and still considers herself to be a midwesterner at heart, despite her current location.
), Erika has a lot of interests. It is now possible to purchase her new book, Land Investing Mistakes: 11 True Stories You Need To Know Before Buying Land, on Amazon. Erika’s most recent blog entries (see all)
What Is A Double Closing? (Ultimate Guide)
Real estate investors must learn and use a wide array of methods and strategies in order to keep their portfolios alive and profitable in today’s atmosphere of historically low inventory and historically high home selling prices. When done correctly, a double closing allows investors to move fast on the acquisition of investment properties while spending the least amount of money possible. Using a double closure as an exit strategy for real estate wholesaling is an innovative approach. Everything you need to know about utilizing the double closure approach will be covered in detail in this comprehensive tutorial to the procedure.
- In this case, you will understand the distinction between assignment and double closure. You’ll understand when and how to take advantage of an assignment or double close to your benefit. As a result, you will have a fresh exit plan to incorporate into your real estate investing strategy.
We hope you find Double Closing: The Ultimate Guide to be helpful. Take the plunge and discover how to close more sales!
- What is a double closing in real estate
- How does a double closing work in real estate
- Is double closing illegal
- And what is the definition of a double closing. Instructions on How to Close a Double Closure (5 Steps)
- Do you require more funds to complete the double close? Double Closing vs. Assignment
- Is it normal for title companies to double close transactions
- How To Raise Money For A Double Closing
- The Advantages and Disadvantages of a Double Closing in Real Estate
What Is A Double Closing?
A double closure is a real estate investing practice that is typically employed by wholesalers in order to maximize their profits. In order to complete an investment transaction, this approach serves as a secondary closing alternative. It is possible to have a double closing if two real estate transactions take place at the same time. A double closing normally involves three parties: the original seller; the wholesaler/investor; and the eventual buyer. At least one of the closings is involving the wholesaler/investor.
There are vendors, though, who are under time constraints and must sell swiftly.
How Does A Double Closing Work In Real Estate?
A double closing is orchestrated and handled by the real estate investor/wholesaler who has purchased the property. This investor effectively serves as a middleman between the buyer and the seller. With so many moving elements to a double closure, the investor must be well prepared, properly understand the real estate market comps, be communicative with all parties, and work with a professional title firm to ensure a successful transaction. Consider the following two transactions: The first transaction (AB) is as follows: The seller is represented by the letter “A,” while the wholesaler/investor is represented by the letter “B.” The second transaction (BC) is as follows: “B” represents the wholesaler/investor, and “C” represents the ultimate buyer.
Alternatively, the funding can be structured so that the cash profits from the investor’s sale to the final buyer (B) can be used to fund the purchase of the original seller (A) from the investor (B) through escrow.
When B C closes, the proceeds are equal to the amount of money the investor makes on the transaction!
The phrase “double closing” was invented to describe the fact that these two transactions are taking place at the same time. In addition to “double closure,” “simultaneous closing,” and “back to back closing” are also terms that may be used to describe this procedure.
Is Double Closing Illegal?
Every state will have its own regulations and laws for completing a double closure, so check with your local government. Having said that, double closure is permitted in several places across the United States. Investors should always consult with a qualified real estate attorney in their area to ensure that they are up to speed on the most recent rules and regulations. While many states do allow for wholesaling and double closure, there are certain restrictions on the following points:
- According to whether the investment is a principal in the transaction, which means the investor is acquiring the property for his or her own benefit, It is dependent on the source of finance that is used for both sides of the double closure transaction. It is dependent on whether or not the investor is a licensed real estate agent.
There are a lot of misconceptions about the ideas of wholesaling and double closure that need to be addressed. This ambiguity has the potential to discourage investors from participating in completely lawful investment opportunities. It’s critical to get legal guidance on real estate transactions and to understand what you can and cannot do in your particular state.
Double Closing In California
In California, it is permissible to use a double closure. The “same day” double closure, on the other hand, will really take place over a period of at least two days. The transaction from A to B will close at least one day after the transaction from B to A has closed. This provides for the minimal amount of time necessary for “title policy procurement” as stipulated by the California Department of Insurance. Each phase of the double closure must be completed on its own, with its own set of finances.
Double Closing In Florida
In Florida, it is permissible to use a double closure. Investors, on the other hand, are no longer permitted to use the proceeds from the end buyer’s purchase to support their purchase of the subject property from the original seller. As a result, investors must contribute their own funds in order to complete the A-B acquisition.
Double Closing In Texas
With a few exceptions, a double closure is permissible in the state of Texas. Investors in Florida and California will no longer be able to use the purchase monies from the C transaction to fund the A and B portions of the double closure transaction. An investor can use transactional finance or hard money to support the initial acquisition of a business or other asset. Transactional funding is sometimes referred to as “flash funding,” “same-day funds,” “ABC funding,” or a “one-day bridging loan,” among other terms.
How To Do A Double Closing (5 Steps)
An outline of the steps involved in completing a real estate double closing is provided below:
Step 1: Find The Deal
When looking for a motivated seller and subject property, the wholesaler/investor will use his or her marketing efforts, the Multiple Listing Service (MLS), investor network, buyer list, driving for dollars, bird dogs, bandit signs, direct mail, or other advertising tactics to identify them.
Step 2: Negotiate The Contract
With the help of the seller, the wholesaler/investor will negotiate a purchase price for the property and secure it with a buy and sale agreement. The A and B parts of the double close are represented here.
An assignment provision would be extremely important to add in the contract if the wholesaler is considering a typical wholesale agreement at this time. Due to the fact that the wholesaler/investor intends to double close, an assignment clause is no longer necessary.
Step 3: Locate An End Buyer
The wholesaler/investor will put out effort to find a new end customer for the property in question. Once a buyer has been identified, the wholesaler/investor will enter into negotiations with the ultimate buyer in order to acquire a separate purchase and sale agreement for the property. The B-C component of the double closure is represented by the letters B-C.
Step 4: Line Up Both Closings
For the purpose of coordinating these closings, the wholesaler/investor will collaborate with an investor-friendly title business and a closing agent. It is preferable if the two closings occur at the same time or within a few hours of each other, depending on the state’s financing requirements.
Step 5: Close The DealsGet Paid!
When the title firm completes both transactions, the buyer becomes the legal owner of the property, the seller receives the profits of the sale, and the wholesaler receives a hefty wholesale fee! Take a look at this short movie to learn more about what occurs during a real estate closing:
Do You Need Money To Double Close?
Whether or not you require money to complete a double closure is determined by the state where you live.
If Escrow Funding Is An Option:
If the law enables the A-B closure to be paid by B-C funds, the wholesaler/investor will not be required to bring money to the closing table. In this instance, the final buyer is ultimately responsible for bringing the funds to close on both transactions. The final buyer delivers the monies necessary to acquire the subject property, and the title firm keeps the funds in escrow until the transaction is completed.
If Escrow FundingIs NotAn Option:
If the state refuses to allow cash from the second closing to be utilized for the purchase at the first closing, the investor will be required to bring his or her own capital to the table to complete the transaction. If an investor does not choose to use his or her own funds, transactional or short-term finance might be used to supplement the funds available.
Double Closing vs. Assignment
In the real estate industry, double closings and assignments are two exit methods that are frequently employed by wholesalers. There are significant distinctions between the two approaches. During an assignment of contract transaction, the wholesaler/investor is never in possession of or ownership of the subject property. Purchase of the subject property under contract to purchase with an assignment clause is obtained by a wholesaler, who subsequently transfers ownership of the subject property to a separate end customer under contract to purchase with an assignment clause.
- Thus, the wholesaler is never the property owner and is never included on the chain of title.
- This implies that the wholesaler/name investor’s will appear on the title’s chain of ownership.
- After purchasing or selling one property in the first closing, the investor will acquire or sell another property in the following closing.
- An investor that uses a double closure will incur charges on two different transactions at the same time.
- This implies that the investor will normally not be responsible for any closing expenses associated with either transaction!
An assignment or a double closure are two options available to wholesalers/investors that wish to take on a higher degree of risk than they are currently comfortable taking on.
Is Double Closing With Title Companies Normal?
Some title firms are capable of doing two closings at the same time. However, due to the particular scheduling requirements and numerous moving elements involved in these sorts of investment transactions, it is critical that the investor collaborates with an investor-friendly title business or a seasoned closing attorney during the process. Many title firms are either unable or unwilling to do duplicate closings because they lack the necessary knowledge. It is critical to interview numerous title firms and solicit suggestions from your investor network in order to identify those that are investor-friendly.
How To Fund A Double Closing?
Obtaining funding for a double closure can be accomplished in one of two ways. When an end buyer brings cash to acquire the subject property (BC), the wholesaler/investor might utilize those monies to fund the first closure at the same time (AB), this is referred to as a first closing. Given that many governments have outlawed this method, wholesalers and investors are left with two options: use their own resources or seek transactional finance. Transactional funding is when a lender will finance the investor or wholesaler up to the entire price of the deal in order for them to execute the A-B acquisition.
- A portion of the loan amount, as well as an origination fee, will be charged by the transactional finance lender in most cases.
- However, if the offer is sufficiently attractive and the investor concludes that the investment makes sense, this money may be worthwhile in some cases.
- As a result, for this financing source to be effective, a double closure must occur as soon as possible, often within hours or within 1-2 working days.
- Do you want to understand how to create a buyer’s list of people who are willing to pay cash?
Pros And Cons Of Double Closing In Real Estate
There are several benefits to using double closings. A double closure, as opposed to a standard contract assignment, provides for greater secrecy. Because of the two distinct closings that will take place, the net profit made by the investor while wholesaleing the deal will be kept private from both the original seller and the eventual buyer. In particular, if you are making more money on the sale of the property or if you were successful in selling it faster and for a greater price than the original seller anticipated, this might be favorable.
Some vendors or end purchasers may become dissatisfied with a transaction or threaten to pull out if they believe a wholesaler or investor “earned too much money” on the transaction. A double closure provides for secrecy, ensuring that these other parties are not aware of your final earnings.
Disadvantages of Double Closing
Due to the fact that there are two closing transactions, rather of simply one, double closings are more expensive than a standard assignment. Consequently, the wholesaler/investor must be prepared to pay for closing expenses on two transactions: the buy-side (AB) and the sell-side (BC) of the deal. A double closing also necessitates extra effort on the part of the investor or wholesaler. This investor is in charge of two real estate deals, as well as two different lines of contact with the seller and the eventual buyer, as well as all of the documentation related with each transaction and its closing.
Final Thoughts On Double Closing
For real estate investors of all levels of expertise, understanding how and when to use a double closing may be a wise strategy. Finding a trustworthy investment specialty and technique can serve you well while you seek for your own real estate opportunities, whether you’re flipping houses, wholesaleing distressed properties, or searching for long-term passive income. Have you ever been in charge of coordinating and executing a double closing? Please share your thoughts and experiences in the comments section below!
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What Is Double Closing in Real Estate?
Closing is the final stage in the process of purchasing an investment property. This is the point at which all of the agreements between the seller and the buyer are finalized, all paperwork is signed, the seller is paid, and the buyer is given ownership of the property in exchange for a down payment. This step also entails the payment of closing charges, which include appraisal fees, origination fees, credit report fees, title search fees, underwriter fees, attorney fees, escrow fees, and recording fees, among other things.
You may be aware with the concept of a traditional real estate closing, but have you ever heard of a double closing?
What Is Double Closing in Real Estate?
Double closing, which is also known as simultaneous closing or back-to-back closing, is a term that is commonly used in the real estate wholesale industry. There are three parties involved in a coordinated real estate transaction: the seller, the investor (wholesaler), and the end-user. When two separate transactions are completed on the same day, this is referred to as back-to-back closing.
Double Closing vs Contract Assignment
In a double closure, the wholesaler locates a motivated seller and negotiates a purchase price that is below market value. The wholesaler then purchases the investment property and promptly sells it to a final buyer at a greater price than the original purchase price. Back-to-back closure refers to the fact that two transactions are completed on the same day, hence the name. For investors who want to sell a house fast and earn a profit right away, buying and selling property at the same time is an excellent technique to employ.
After that, the wholesaler has 30 to 45 days to locate a customer.
If a buyer is located, the wholesaler will sell the contract to them at a greater price than it was originally sold for.
In contrast to the double closing approach, the contract assignment method does not involve the wholesaler actually purchasing the property. Related:The Fundamentals of a Wholesale Real Estate Contract, as Well as How to Draft One
The Real Estate Wholesaling Process Through Double Closing
As previously stated, a double closing entails the participation of a seller, a real estate investor (wholesaler), and an end buyer. Because the wholesaler does not want to become the owner of the income property, they must engage with a title firm or real estate attorney who is sympathetic to investors. In order to wholesale real estate utilizing the double closingwholesale approach, the following procedures must be followed:
1. Find a seller
The wholesaler is on the lookout for a property owner who is ready to sell at a discount to market value. For the most part, this entails looking for off-market real estate opportunities. It is possible to find off-market homes in a variety of ways, including driving for money, reviewing public records, networking with fellow investors, visiting real estate auctions, direct mail marketing, speaking with real estate brokers, and browsing internet resources. TheMashvisor Property Marketplace is one of the most comprehensive web platforms available.
Your search may be narrowed down using parameters such as distance traveled, kind of property, rental strategy, and price range.
Mashvisor is a real estate marketplace.
The letters A and B relate to the seller and the wholesaler, respectively.
2. Set a fee
Typically, wholesalers charge a fee for the service of finding purchasers for their products. Some companies will charge a percentage of the total real estate transaction value. For example, if a property is selling for $100,000, the wholesaler might take a commission of 3 percent ($3,000) of the sale price. Others, on the other hand, charge a certain monetary sum for each transaction.
3. Find a buyer
The distributor is then required to locate a buyer who will finally become the owner of the property. The ‘B to C transaction’ is the name given to this particular transaction (the wholesaler is B and the end buyer is C). Wholesalers can locate customers through obtaining a listing on the Multiple Listing Service (MLS), advertising on Craigslist, erecting bandit signs, running newspaper ads, sending direct mail, using social media, and networking in person. Another alternative is to offer the property for free on the Mashvisor’s Property Marketplace, which is a service provided by the company.
4. Secure funding
Once a buyer has been identified, the wholesaler is obligated to acquire the house from the original seller. If the wholesaler does not get payment in cash, he or she can obtain finance from typical mortgage lenders or transactional funding sources. Transactional finance, sometimes known as flash cash, is a type of loan that is only available for a relatively brief period of time. Typically, such loans are intended to be repaid in a short period of time (within one to seven days). A private hard money lender, as opposed to a mortgage lender or a bank, is often the one who advances the funds.
This means that the wholesaler will not be required to spend any of his or her own money on this transaction.
The interest rate on such loans might range anywhere from 1 percent to 2.5 percent of the amount borrowed, depending on the lender. If, on the other hand, the loan is not repaid on time, the wholesaler will be required to pay extra costs.
5. Sell the property
Once the finance has been secured and the property has been purchased, the following stage is to sell the property to the final purchaser. Wholesalers utilize their profits to pay off their debts, and they retain any remaining funds as profit. An estate attorney will assist with each of these processes through Areal Estate Attorney.
Pros of a Double Closing
- This method of closing helps to avoid legal and regulatory issues that could arise if an estate wholesaler attempted to assign their sales agreement to the end buyer, rather than purchasing and then selling the property in a separate transaction, as opposed to buying and then selling the property in a separate transaction. Regardless of whether the wholesaler only owns the property for a brief period of time at the closing table, the crucial issue is that they do in fact own it. This means that when they sell the house, they are selling something that they genuinely owned. Gains can be kept a secret– The majority of wholesalers would prefer not to disclose their gains to the final consumer. The most effective method of accomplishing this is by double closure, in which the ultimate buyer is unaware of the A-to-B transaction.
Cons of a Double Closing
- When there are so many paperwork to sign and so much money to exchange in such a short period of time, double closing may be quite stressful. There is a danger involved: the wholesaler may be approved for a quick cash loan, only for the final buyer to cancel at the last minute. This might put the wholesaler in serious financial trouble and perhaps cause their reputation to be ruined. Scheduling is difficult — coordinating two different closings to occur at the same time might be a bother
- Nonetheless, it is possible.
Wholesaling is a real estate exit option that should be investigated. A back-to-back closure may be more expensive and time-consuming than a contract assignment since it requires more work and resources. However, there are certain advantages to using this alternative wholesale technique for concluding real estate wholesale transactions for the investor. In related news, here are seven steps to flipping real estate contracts.
In addition to being a HubSpot certified content writer and marketer, Charles Mburugu also works with SaaS firms and B2B enterprises. He enjoys writing on issues that will assist real estate investors and agents in making better decisions in their investments.