Double Closing
Hey, I am new to the realstate investing, and about to get my first purchase which I would to flip, what is the exect mechanics of the double closing (I talked to a few lawers were not sure how to help me and told me I still needed to put up my own personal money inbetween the two closings) Any light on the subject would be greatly appriciated!
talk with the title company's escrow officer. they should be able to help you.
nah...none of your money.
If you are in a position to be able to pick the title company this time, this is what you do.
The title company is the most integral part of this. They can make it work wonderfully or can screw it all up while trying not to. Shop for a title company that is VERY VERY familiar with these, not just heard of it. It takes practice. <---Most Important Part
Once you hook up with the title company, watch and learn. Take a close look at each detail that they go through. Ya see, the right title company can do this perfectly and tell You "what to" and "how to" say things and handle situations during the process. The goal is to be able to tell the next title company that you are "forced" to deal with how to make it happen. Many times in your REI career you will be stuck with the seller or final buyer's friend or relative that works for a title company. You want to make sure that you know how to educate them so as not to lose that deal.
A simultanious closing is done with a closing early in the day and another one later the same day. Often your seller and buyer will walk passed each other at the title company and not even know that they are there for the same property. The title company is really taking a risk to do these, but it's real nice money for them so many will do it.
I assume that you may be disappointed that I'm not telling you exactly how to do these, but you'll have to understand that the answer would be a small book, not a forum post. They work, companies will do it, they are NOT illegal, just risky for the title company.
hope this helps,
clear2close
[addsig]
As clear has touched on, double closings are complicated things. If performed correctly, they are not illegal, and they do pose a risk to the title company or attorney (depending upon your state).
The main obstacle to overcome (and the key point left out in most 'how-tos' written about them) is that you have to have separate financing for your 1st closing. None of this "use the end funds to pay the first."
Now, don't confuse financing with $$$$. Financing is a loan of some sort (owner financing?) that is separate from the 2nd closing.
Roger
ES....If you put it together the right way, you can make some good money. I've done around 18 double closings in 9 months and have never had a problem with any one of them (this was done apprx 6 yrs ago and I'm sure you can still do it today) I stopped because of the seasoning issue. And, I didn't use any of my own money or credit. Have your buyers pay for the deposit, appraisal, pest inspection and home inspection. They will be less likely to walk away from a deal if they have money invested -but you never know.
The reason why the others say it's complicated and risky is because you are putting the title company/attorney on the line, and if it all falls apart (meaning your buyer backing out of the deal at the last minute) your title company may be out of some BIG cash. The best way to do it and be safe is to have your buyers show up at the same as the sellers or have you and your buyer close first, then you close with your sellers.
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Thank you for all your information, if you have any more light on the subject I greatlly appriciate it plus I am dealing with empty peices of land buy them from people and sell the to builders just starting in the business so if any one has any light on the subject along with double closings I would greatly appriciate it I am doing this in the North Eastern area were land is more or less scarce then other parts of US
Ok, good explanation about the title company.
What about the buyer's lender?
How will they try to throw a wrench in the plans?
What kind of loan is the borrower able to get?, an A paper loan, a Non-conforming loan, or an FHA or VA loan.
Why is title seasoning not an issue?
I think the greatest concern I have fear is to start on a deal only to have the deal blow up around closing time?
mortgageman is correct. As rcummings touched upon, the end buyer will be dealing with a seasoning issue since you will have "owned" the property less than a day, the majority of lenders will not loan money to the end buyer.
And to elaborate on the risks to the closing agent.
The closing agent is responsible for ALL funds within a closing. So in order for you to use your end buyers money to buy from the seller, the closing agent has to 'create' the financing for you (a short-term loan, in essense). If they do this and the 2nd escrow falls thru, then not only are the out the big money (someone has to pay the seller), there is possible legal problems, too (again, depending on state, and the method in which the escrows were performed).
Due to various new laws and lending practices double closings are not the easiest or best way to conduct business anymore.
It may be a better solution for you to try optioning the properties instead.
Roger
It is so hard to be candid on a forum. I tried to give you a true idea of "A" way of doing double closings in the last post, but everyone is only dealing with the exact wording. Every title company is different and there is more than one way to handle these. Let me put it this way, if the title company wants to put them selves at risk and the risk doesn't seem to transfer over to you or either of the involved parties, would you allow it? I would, some won't. This is basically addressing "mortgageman"'s response.
raj= excellent assessment. If I were the new guy, I would definately assign options here rather than simultanious closings.
rcummings= The changes in the last 6 years would change everything for you. I wish that I were half as creative 6 years ago as I am now. It's a whole different world now. Seasoning issues are standard now, not odd.
mortgageman= I would never want a deal to fall through, I feel the same. Try to keep the creative stuff for your personal ventures or for deals that you may not have any other chance of closing.
Food for thought, "If a title company wants to take a chance with their money or commit loan fraud to close loans, that's up to them". Just watch your own rearend and don't worry about their liability. Creativity, in true essence, is thinking outside of the box. Do it.
hope this helps,
clear2close
[addsig]
Draftee...good observation on my comment about being out of the double closing game for 6 yrs...thats why I mentioned that there will be seasoning issues now....due to a lot of fraud happening around that time, is the reasoning behind the seasoning issue.
If someone wants to do quick deals nowadays, they would have to do some research on what is the best path to go down, based on your financial situation. You can always assign your position to someone else, like another investor that may have the cash to purchase, or you can do a sub2 deal and then turn around and do a lease option to someone else and collect a 3-5% option consideration fee (dwn pmt)
There are a lot of sites that have how to articles and they give good advice on different techniques.
Good luck!
Can you name some of those sites please
Sure. Here's a link
http://www.thecreativeinvestor.com/modules.php?name=News
Roger
Hi
Here in NC you have to close with an attorney not a title company. My experience with double closings is it is up to the attorney if they want to be involved and the more you seem to know about real estate the more comfortable they are. They close with the seller as if you had the money only catch is that the deed actually goes in your name so you cant have any judgements against you. Then they close with the buyer. Some attorney's even agreed to come to the second closing with me at the buyer's attorney office in order to close the deal. I dont know the way things go in your state but be sure to find out from someone there who has done it before.