How do you do a double closing when there are two contracts on the house, yours and the new buyer's even though you assigned your contract?
I think I'm missing something.
When you assign YOUR contract, it goes to the new buyer for a fee (that's how you get paid). The new buyer then closes directly with the seller. There is NO double closing in this scenario.
Ok, so say you l/o from seller for 110k then you assign your contract for a fee. Right? How do you determine your fee? Are you paid upon the assigning of the contract?
So, with a wrap around l/o there is a simultaneous closing right?
Quote:
On 2003-12-23 18:33, quinn wrote:
So, with a wrap around l/o there is a simultaneous closing right?
Quinn,
I think what you are referring to is a "sandwich" lease option. If I sign a l/o with a seller , I then turn around and find a tenant/buyer (who gives me upfront money as option consideration). The tenant/buyer is living in the house and making payments to me. I am making payments to the seller.
My option is longer than the new tenant buyer's. When he exercises his option to buy, I then exercise mine and we would do a double close with the seller. I would buy from the seller and immediately sell to the new tenant buyer.
But one more question.
When you're closing with the seller, are you getting a loan to pay them out, then are closing with your new tenant/buyer?
If so, how can this be done with title issues?
I'm probably missing something somewhere, actually, I know I am.
Quote:
On 2003-12-26 23:17, quinn wrote:
Thanks it helps alot,
But one more question.
When you're closing with the seller, are you getting a loan to pay them out, then are closing with your new tenant/buyer?
If so, how can this be done with title issues?
I'm probably missing something somewhere, actually, I know I am.
Thanks guys,
Quinn
No, you do not need a loan. The title company will handle the transaction and shoud go like this....
1) the seller deeds to the property to you which is not delivered but goes into escrow.
2) You deed the property to the new buyer and it goes into escrow.
3) the closing agent delivers the funds from the new buyer to the original owner and the difference goes to you. You brought no money to the table.
4) both deeds are recorded back to back in public record.
You need to make sure the Deed from the seller to you gets recorded before the Deed from you to your buyer.
You will probably want to use the same Closing Co. this distributes all funds and/or differences to the right place, thereby eliminating you from having to bring any money to the table.
The procedure above indicated and diagramed is as we speak being investigated by Hud,FHA and Freddy. Seems there have been some defaults after these affairs and the eliminated parties have been as usual upset and wanting revenge and if possible damages.
You must remember in Transaction that the first out of title always feel that they are entitled to more and if an investigator should trip upon them in his field work, the story is always loaded.
I think the time has come to review these procedures. I think they could be either streamlined a bit or a color of title could be left for an after closing payment to those who are first out of title.
Something similar to the occasion small payments made to an ex wife as a bonus for allowing the children to visit or dinner with ex in laws with which one has been close.
Do you double closing could bring legal implication later? When you say that the "Eliminated party" do you mean the bank that owns the defaulted loan or seller that originally owned the house?
Is this why some lenders are starting to not offer financing to tenant buyers in these situations. The way I understand things is that the Lenders will not lend because the middle-man only is on title for a few minutes at closing. They then classify the whole thing as a flip and then back out. any thoughts?
I have talked to a bunch of different mortage brokers and all have told me that is the case. Double closings are becoming harder to come by. One thing you can do is after L/O for 1 year you can refi the house and than at the end of you l/o with your TB sell to them. I have one going right now that I negoitated the price down to 6k over what is owed , so I will take it sub2 get the deed and sell as owner when my T/B cashes out.
Just my thoughts.
What has been described above is a textbook (ie guru writer) example of a double close and out in the real world, won't work at all. As Lufos said, it is currently being investigated, and is actually illegal in many states (including NC).
The main point which is not listed is that YOU, the buyer in the first closing, have to actually close that deal BEFORE moving on to the next, or second closing. That means that you have to supply some money to the original seller, whether it be cash or financing.
As most lenders will not fund the end buyer's, or second, closing because of title seasoning. Most lenders now want to see a minimum of 6 months (and most 12 months) of title seasoning. Title seasoning refers to how long the seller, you in the second closing, has owned the property. Since by the textbook example, you'll only "own" the property from a few minutes to a few hours, it doesn't quite make the 12 month limit.
n my opinion to solve a seasoning/title issue...just place the property in a land trust.
example:
you have a seller that wants to sell, have them form a "Land trust" and you, your company, or whomever you trust becomes the trustee. Then you give the seller a % of the beneficial interest (say 10%) and you keep 90%. Have the seller sign a power of attorney.
The trust can now do a lease option with your tenent buyer. After the term of the lease is finished, the buyer can purchase/refinance the property from the trust. The buyers lender may request the trust be disolved before the buyer can take title, at that point the trust is disolved and the trustee still has power to complete the sale and distribute the moneis where they need to go.
The land trust does not violate the DOS clause because you and the seller are partners on the transaction. Thats why you give them the 10% or 20% beneficial interest. You are not hiding anything nor are you deceiving the lender. A homeowner can lease out his property for a certain length of time without violating the DOS clause. (I would check on the state banking requirements to be sure)
What if you had the Original seller to sign over a Limited Power of Attorney. This way, couldn't you actually draw up an agreemant between the orginal seller and the TB with yourself listed as a benificiery?? I am still trying to learn how this Power of Attorney thing works. Any thoughts?
Why wouldn't there be a TB at a double closing. After all, they are the end buyer. Let me see if I can clarify. If I have a lease option with original seller and then re-lease-option it out to a TB. I would be the middle man. Having that understood, my question is this. Shouldn't I be able to have the Original seller sign over a limited power of Attorney. Which would allow me to eliminated having to do a double closing. I could sell to property with my name as benificiery of proceeds. That way, the Purchase agreement could actually be between the original seller and the tb. I would still be in the mix, but I wouldn't be in the middle, (in the lenders eyes). I may be way off, I gues I need a better understanding of the Limited POA.
The question was answered, based on what was asked.
A double close is buying and selling at the same time and closing on the same day within an hour or so.
If you have a lease/tenent buyer (I'm not sure where the double close will come in) If the comment is based on (a year or so down the road after your tenent buyer is ready to close) then you will still have a problem if the buyers lender has seasoning requirements. Due to the fact of the seller not transferring title to you in order for you to resell the property.
The land trust came in because there were several comments made about seasoning. Thats why I mentioned the land trust.
There could be, but in the situation presented, the question was how do you buy and immediately resell to a retail buyer, so there will be no tenant in that situation.
As far as your LPoA idea goes, here's my opinion. Yes, if you had one from the original seller, you could act on their behalf and sell "directly" to the end buyer. The problem comes with the benificiery thing (where you get paid). How would you justify a fee for yourself? Likely, anything paid to you in this scenerio would be considered a fee/commission for selling, which would be illegal unless you happen to be a licensed real estate agent. And if so, the LPoA would be unnecessary.
rcummings,
Again, no tenant/buyer here, just an immediate buy and resell. Personally, I believe a land trust would just further complicate matters in this situation and really be an unnecessary added expense due to the fact that, if the deal is completed, the land trust would only be in existence for a few hours at most.
I only mentioned land trust because the term t/b was mentioned. I suggested land trust with the notion of it being a distant sale of a year or so (which will still be considered as a double close in the future)
In a present day double closings which I use to do until the seasoning issue came about (you wouldn't need a land trust) and I agree with raj, you would have to explain yourself on how you would expect to get paid (without being a licensed agent) it can be done, but you could suffer down the road if you get caught.
Best bet would be to assign the deal to your new buyer.
Quinn,
When you assign YOUR contract, it goes to the new buyer for a fee (that's how you get paid). The new buyer then closes directly with the seller. There is NO double closing in this scenario.
Hope this helps !
Jason
Ok, so say you l/o from seller for 110k then you assign your contract for a fee. Right? How do you determine your fee? Are you paid upon the assigning of the contract?
So, with a wrap around l/o there is a simultaneous closing right?
Thanks for clearing things up for me
Quinn
Quote:
On 2003-12-23 18:33, quinn wrote:
So, with a wrap around l/o there is a simultaneous closing right?
Quinn,
I think what you are referring to is a "sandwich" lease option. If I sign a l/o with a seller , I then turn around and find a tenant/buyer (who gives me upfront money as option consideration). The tenant/buyer is living in the house and making payments to me. I am making payments to the seller.
My option is longer than the new tenant buyer's. When he exercises his option to buy, I then exercise mine and we would do a double close with the seller. I would buy from the seller and immediately sell to the new tenant buyer.
I hope this helps and is what you are asking.
Jason
Thanks it helps alot,
But one more question.
When you're closing with the seller, are you getting a loan to pay them out, then are closing with your new tenant/buyer?
If so, how can this be done with title issues?
I'm probably missing something somewhere, actually, I know I am.
Thanks guys,
Quinn
Quote:
On 2003-12-26 23:17, quinn wrote:
Thanks it helps alot,
But one more question.
When you're closing with the seller, are you getting a loan to pay them out, then are closing with your new tenant/buyer?
If so, how can this be done with title issues?
I'm probably missing something somewhere, actually, I know I am.
Thanks guys,
Quinn
No, you do not need a loan. The title company will handle the transaction and shoud go like this....
1) the seller deeds to the property to you which is not delivered but goes into escrow.
2) You deed the property to the new buyer and it goes into escrow.
3) the closing agent delivers the funds from the new buyer to the original owner and the difference goes to you. You brought no money to the table.
4) both deeds are recorded back to back in public record.
Hope this helps !
Jason
You need to make sure the Deed from the seller to you gets recorded before the Deed from you to your buyer.
You will probably want to use the same Closing Co. this distributes all funds and/or differences to the right place, thereby eliminating you from having to bring any money to the table.
The procedure above indicated and diagramed is as we speak being investigated by Hud,FHA and Freddy. Seems there have been some defaults after these affairs and the eliminated parties have been as usual upset and wanting revenge and if possible damages.
You must remember in Transaction that the first out of title always feel that they are entitled to more and if an investigator should trip upon them in his field work, the story is always loaded.
I think the time has come to review these procedures. I think they could be either streamlined a bit or a color of title could be left for an after closing payment to those who are first out of title.
Something similar to the occasion small payments made to an ex wife as a bonus for allowing the children to visit or dinner with ex in laws with which one has been close.
Hopefully Lucius
Lufos:
Do you double closing could bring legal implication later? When you say that the "Eliminated party" do you mean the bank that owns the defaulted loan or seller that originally owned the house?
Is this why some lenders are starting to not offer financing to tenant buyers in these situations. The way I understand things is that the Lenders will not lend because the middle-man only is on title for a few minutes at closing. They then classify the whole thing as a flip and then back out. any thoughts?
I have talked to a bunch of different mortage brokers and all have told me that is the case. Double closings are becoming harder to come by. One thing you can do is after L/O for 1 year you can refi the house and than at the end of you l/o with your TB sell to them. I have one going right now that I negoitated the price down to 6k over what is owed , so I will take it sub2 get the deed and sell as owner when my T/B cashes out.
Just my thoughts.
What has been described above is a textbook (ie guru writer) example of a double close and out in the real world, won't work at all. As Lufos said, it is currently being investigated, and is actually illegal in many states (including NC).
The main point which is not listed is that YOU, the buyer in the first closing, have to actually close that deal BEFORE moving on to the next, or second closing. That means that you have to supply some money to the original seller, whether it be cash or financing.
As most lenders will not fund the end buyer's, or second, closing because of title seasoning. Most lenders now want to see a minimum of 6 months (and most 12 months) of title seasoning. Title seasoning refers to how long the seller, you in the second closing, has owned the property. Since by the textbook example, you'll only "own" the property from a few minutes to a few hours, it doesn't quite make the 12 month limit.
Roger
n my opinion to solve a seasoning/title issue...just place the property in a land trust.
example:
you have a seller that wants to sell, have them form a "Land trust" and you, your company, or whomever you trust becomes the trustee. Then you give the seller a % of the beneficial interest (say 10%) and you keep 90%. Have the seller sign a power of attorney.
The trust can now do a lease option with your tenent buyer. After the term of the lease is finished, the buyer can purchase/refinance the property from the trust. The buyers lender may request the trust be disolved before the buyer can take title, at that point the trust is disolved and the trustee still has power to complete the sale and distribute the moneis where they need to go.
That should eliminate your seasoning issues.
hope that helped!
The land trust does not violate the DOS clause because you and the seller are partners on the transaction. Thats why you give them the 10% or 20% beneficial interest. You are not hiding anything nor are you deceiving the lender. A homeowner can lease out his property for a certain length of time without violating the DOS clause. (I would check on the state banking requirements to be sure)
What if you had the Original seller to sign over a Limited Power of Attorney. This way, couldn't you actually draw up an agreemant between the orginal seller and the TB with yourself listed as a benificiery?? I am still trying to learn how this Power of Attorney thing works. Any thoughts?
rcummings,
A land trust is a different beast altogether and really has nothing to do with the question asked which was how to perform a double closing.
Corey,
I can't really follow where you might be going with this and there isn't a tenant buyer in a double close situation.
Roger
Why wouldn't there be a TB at a double closing. After all, they are the end buyer. Let me see if I can clarify. If I have a lease option with original seller and then re-lease-option it out to a TB. I would be the middle man. Having that understood, my question is this. Shouldn't I be able to have the Original seller sign over a limited power of Attorney. Which would allow me to eliminated having to do a double closing. I could sell to property with my name as benificiery of proceeds. That way, the Purchase agreement could actually be between the original seller and the tb. I would still be in the mix, but I wouldn't be in the middle, (in the lenders eyes). I may be way off, I gues I need a better understanding of the Limited POA.
Raj,
The question was answered, based on what was asked.
A double close is buying and selling at the same time and closing on the same day within an hour or so.
If you have a lease/tenent buyer (I'm not sure where the double close will come in) If the comment is based on (a year or so down the road after your tenent buyer is ready to close) then you will still have a problem if the buyers lender has seasoning requirements. Due to the fact of the seller not transferring title to you in order for you to resell the property.
The land trust came in because there were several comments made about seasoning. Thats why I mentioned the land trust.
Why wouldn't there be a TB at a double closing
There could be, but in the situation presented, the question was how do you buy and immediately resell to a retail buyer, so there will be no tenant in that situation.
As far as your LPoA idea goes, here's my opinion. Yes, if you had one from the original seller, you could act on their behalf and sell "directly" to the end buyer. The problem comes with the benificiery thing (where you get paid). How would you justify a fee for yourself? Likely, anything paid to you in this scenerio would be considered a fee/commission for selling, which would be illegal unless you happen to be a licensed real estate agent. And if so, the LPoA would be unnecessary.
rcummings,
Again, no tenant/buyer here, just an immediate buy and resell. Personally, I believe a land trust would just further complicate matters in this situation and really be an unnecessary added expense due to the fact that, if the deal is completed, the land trust would only be in existence for a few hours at most.
Roger
I agree raj...
I only mentioned land trust because the term t/b was mentioned. I suggested land trust with the notion of it being a distant sale of a year or so (which will still be considered as a double close in the future)
In a present day double closings which I use to do until the seasoning issue came about (you wouldn't need a land trust) and I agree with raj, you would have to explain yourself on how you would expect to get paid (without being a licensed agent) it can be done, but you could suffer down the road if you get caught.
Best bet would be to assign the deal to your new buyer.
****************************************************************************************
Stock,
you know the rules here. Either explain it to all or not at all, okay.
Roger Johnson
TCI Moderator[ Edited by rajwarrior on Date 01/14/2004 ]