Double Closing question
Can someone give me the basics on a double (or collapsed) closing? Specifically, the closing costs amounts. Wouldn't there need to be only one appraisal, title search, termite inspection, etc.? Any info on how this works would be greatly appreciated.
Roger
would someone please answer this guy. I want to know too.
Yeah, Id like to get some info on double closings also.
Heres how a double closing works:
1) You sign purchase agreement with property owner
2) You sign contract with retailer/rehabber for a higher price
3) The retailer deposits funds into escrow with your closing agent
4) The owner signs the deed over to you and its put in escrow
5) You sign the deed to the retailer which is put in escrow
6) Retailer signs loan documents, which makes transaction complete
7) The closing agent delivers funds to the owner for the purchase price, the difference goes to you
The closing agent records the two deeds, one after another, at county land records office
I personally do not pay for a termite inspection or title insurance. You're not holding the property long enough to justify such expenditures. If you prefer to get insurance ask your title company for a "reissue rate" or a "hold open policy." It is also up to you if you want to pay for an appraisal. If you can estimate the fair market value (by using comps), you shouldn't have to spend money for an appraisal.
You should, however, have a title search done as part of your due dilligence. That can run from about $75-200. You can expect right around $100. To estimate any other expenses you should really meet with one of your local title/closing companies.
Hope this helps
-Tony
[ Edited by tonyt33 on Date 04/01/2003 ]
Thanks for the run down, Tony.
Since the end buyer will probably be obtaining a loan, the termite inspection, appraisal, and insurance is usually required here in NC.
This is the first property that I've aquired that has given the chance to try this method. If anyone out there is interested in homes in Alexander county, NC let me know. rajwarrior@yahoo.com
Thanks again,
Roger
Just don't forget some of the "finer" aspects of this:
1. Always try to have the seller sign to you a warranty deed
2. ALWAYS sign a quitclaim deed with the buyer that you have lined up
3. If it is a listed property, a prequalification letter is needed. If your investors pay with cash, this can be a two-sentence letter from the bank with a balance statement attached.
4. Include some sort of contingency clause in your contracts. Something like "contract contingent on final inspection and written approval by buyer (that's you!)" or "contract contingent on proper financing found by buyer." However, you may have a harder sell on that last one with the seller, since if you're coming to the table with cash (which is always recommended), there shouldn't be any need for you to find proper financing.
Tonyt33's got it on the head too, ALWAYS do a title search on the property. I have heard horror stories of people that didn't do that, then discovered the property was all sorts of messed up. I myself was getting ready to do a deal on a house for about $150k, did a title search and come to find that there is a $280k federal tax lien on the property. Not much to be done with that, but I would rather have the $100 title search tell me that than the IRS Hope this helps!
~Ryan
Thanks for the added advice, Ryan.
This property was a HUD foreclosure, and I've already got MY financing lined up, if needed. HUD gave us 60 days to close, and I figure that I can find a buyer before then let them supply the money.
A question though. Why sign a quit claim deed to the end buyer? Can I not give them a warranty deed as well, especially if there is no problem on the title search?
Thanks again, Roger
I just got off the phone with a Title Company and the escrow officer told me that double closes are illegal unless it is disclosed to the seller. How would I disclose it without the seller going to the retailer directly? I would like to assign the contracts, would that require a double close? If not, how would the assignment work?
they're not illegal, just find another title company and ask them if they do double or simultaneous closings.....
I agree,
Contact 1,2,5 more to see if they can help you. If I took what the first title company told me as the truth, I would be flipping burgers because what I wanted to do was not allowed in my state.
Title companies do not make the rules, they conduct business within them. If you want the rule book, go to an attorney, look up your state statutes or ask a CPA etc. But a title company is in no way the source for good information (in my little opinion).
GL
Actually, I have the same problem as dbudda. I asked this question in another post but got no response. Does anyone know of a lawyer that has done a double closing in NC? My lawyer hasn't, and he hasn't been able to find an attorney in the state that has. Any help would be much appreciated.
Roger
I would recommend going to a investors meeting that is local. Look up online or in the phone book for an REI investment group that holds meetings. If anyone in your local area would know, it is fellow investors.
I wouldnt trust a Title company for the final answer, it might be worth calling a lawyer or checking out online sources for real estate law in your state. I dont live there so I dont know how you do that, but my state has many resources and I hope yours does too.
There are many resources online for getting answers about real estate questions, the creative investor is one, you might find answers here or maybe somwhere else.
GL
Note taken...next stop Local REI.