Double Closing
Could anyone here help me get a mind set of a double close?
I have a piece of real estate that is locked in at 750k and have a solid 1.25 mill appraisal in hand. I have an investor willing to take it off of my hands for 850k. It is a distressed situation (divorce) and the ex-husband does not want to remit any money to anybody besides for lender fees. The investor has NO liquid cash as of now to pay any sort of fee up front...
Could I execute on my option and then at the same time shortly after sell it to my investor for 850k? I dont mind paying any taxes or anything...
Thanks
How about using a HML to buy the property and then selling it to the investor shortly after? Reason I would use a HML is that my score droppd from 640 to a 511.
I have a parnter who has 725 scores but does not have the income to support a 800k mortgage.
I would be needing a HML that could loan my 75% of ARV with no credit check. I think I have a pretty solid deal going here.
How long of a term until you close? What is the FMV? Why not sell it retail?
So what would be my best move?
There is plenty of equity in the property and I am looking to make a nice chunk, so I take it I would have to do the double close, but what I want to know is if the "middle" investor actually needs to be approved for the loan.
I have about 2 weeks left, then its off to an agent!
You need two contracts one when you buy for 750K and one when you sell for 850K. Take both contracts to your title company and ask them if they could close on both contracts simultanously. You close on the 750k contract first (documents are signed and held) with your seller. Then you close on the 850K contract with your buyer, you now have 850K on the table. Title company will cut two checks,one check for 750K which will take care of your seller and one check to you for 100K the difference. All done with none of your own money or credit. This is the skinny of how this works, a trained title company is key to this type of transaction. Your job is to find one, its being done everyday...
So you are going to buy the property for 750k? Do you have cash, a mortgage - how are you coming up with the funds?
For a double close, somebody has to have the money to buy the property. Somebody has to have 750k at close, preferrably in cash. Double closes are VERY to do with a lender.
Brenda
i believe the end buyer is using a traditional lender that has no seasoning requirements...will that still work? As long as its stated on the addendum/HUD correct?
There may be no seasoning requirements, but the lender is probably not going to approve a loan of 850k to a person who does not own the property. They want to see your name on the title. I have heard of some people getting away with it - meaning the lender did not catch it. But the majority of double closings with traditional lenders will not happen. Traditional lenders definately will not like their money being used to fund the first sell. So now you will have to find a dishonest attorney that will not disclose that to the lender- which is not that hard.
You should not have a problem if your buyer has strong credit ("A" paper). The lender is going to make their decision to lend on a few things. The buyers risk scores, purchase price and appraisal. Seasoning should not be a issue. If it becomes an issue go to plan B, you should start shopping now for a lender for your buyer, find a broker tell him the whole deal. I have a property under contract for 750K, I have a buyer for 850K, buyer has excellent credit do you have a lender that you are APPROVED with right now that will fund this deal. The brokers answer should be yes or no. If the answer is no move on.
One more time….
Some great advice from many people and I think some are making this double closing issue much more difficult than it has to be…. The reason this is an issue is that the title company will not issue a preliminary title report indicating anyone but the owner as being on title. Even though they know they are doing a concurrent closing… It is not about having to have the money from you to close the first escrow before you can sell… As long has they have the funds from the buyer’s lender the transaction can and will close.
Let me outline 4 different methods to accomplish your objective and that is selling and making 100 thousand dollars… By the way CONGRATS
Before I start I want to say that I double close all of the time and rarely have to get creative.. But when you do here are a few ways to accomplish the task.
Method 1) you indicated that you’re buying at 750k on an appraised value of 1.25m or 60%…. There are a ton of hard moneylenders who will finance this deal… The key is to find the one who will finance it for least amount of fees.. The HML I use allows me 21 days to pay back their loan and not have to pay points or interest… Find one of them in your area with a similar structure..
You then buy the property, which will allow the title company to put you on the prelim, which is really what you’re after, and sell to the new buyer. Very Simple.
Method 2) TIC agreement with seller…. Because you now have equitable interest in the property, based on having the right to buy, you simply go back to the seller and enter into a TIC agreement which makes you a owner of the property. This method is great because there will not be a seasoning issue as well. After the TIC agreement you rewrite the agreement with the buyer to reflect the sellers name which will be required. I wouldn’t record the TIC agreement just give it to escrow so they can disburse the funds correctly. If the deal starts going sideways by all means lock th e property up by recording the document. For this give the seller a little of the 100k you would have made.
Method 3) attach the buyer to your contract to purchase.. You will not be able to collect your 100k as quickly this way but the return may be greater down the road… Your TIC agreement with the buyer would call for the 750,000 to the lender first then the 100,000 to you on resell or refinance then the “costs” third the for the balance simply structure a split with the buyer and I would believe that earning 20% of the profit from the rehab and resell would be worth your time and possibly another 100k. You could require the buyer to at acquisition take out a second, which will most likely be a hard money lender to cover your 100k.
Method 4) The sellers sells to the buyer directly for 850,000 and pays you out of escrow as a cost of escrow… They basically tell escrow to pay you. The issue here is the type of cost so it allows the lender to fund and not be a taxable expense to the seller. I always like a rehab cost… The real concern is that you don’t have a security interest in the property and could be hung out to dry. So be careful.
Method 5) a bonus method…. Real creative concept…. Incorporate the sellers name and have that corporation be the seller to your buyer as well as the buyer from the seller…. I will let everyone figure out why on their own…
If you need more help let me know…. There are so many ways to finance a deal you should not let lack of money stop you….Nice to drop back in…
Man, thanks everyone for their insight and information. Highly appreciated and thats why I am always willing to help people also.
I like the HML way because the ex-husband does not want to pay out the 100k. He thinks the money will be going to the ex-wife. He lost custody of the kids and is being very stubborn.
Now, would I need good credit to use a HML? WOuld I need to provide any financial statements and whatnot? I have yet used a HML and very new to the HML world.
Thanks everyone...I only have a few weeks before it expires!
Before you get a HML at maybe 16% and several points, be very sure of your numbers and of your buyer. At 3% cost to buy at 750k and then 3% cost to sell at 850 you stand to make 52k. But 750k at 16% your monthly payment will be 10k.
Did you pay for the appraisal and was the appraiser someone you chose with no input from any other party?
I might be interested in looking at the deal. I have the cash and live nearby on Prior Lake.
Ok, so let me see if I got this right.
A. I go get a PA signed with "seller" for 750k with say a 30 day close.
B. Have my "end buyer" get financing and have a PA them with a 30 day close.
C. Have both parties close at title location same day.
D. Funds from "End Buyer" financing will pay for my obligations to "Seller" and remaining of funds will be dispersed accordingly.
Am I missing anything?
Thanks everyone
There is nothing hard about a double closing. You just need a good honest attorney that will disclose to the sellers the profit that you will make that you will be using the funds of your buyer to purchase the deal. Then your attorney will have your buyer sign some disclosures saying that they are aware that their loan is financing your purchase and will let them in on the fact that you will be making a profit.
That is it. If your buyer has a credit score over 600, there should not be a problem.
Do the dc and have a good time spending the money.
Also your attorney will handle the title issues. Dont worry. Most of these people that are giving you negative advice just cant put the puzzle together. They have not done a dc, or they are just not knowledgeable in that niche.
Pay the none believers no attention at all.
the seller knows that I am doing a double close. I dont want to hide any facts, otherwise when they do find out, it may cause a problem.
thanks for all the insight people!