double closing (does this actually work?)
I'm very interested in real estate investing but have no earnest money to begin. Is it actually true that you can do a double closing and bring no money to the closing?
Mick
Greenville, Texas
Mick,
I've asked this question myself a couple of times. My attorney told me he simply did not know how to do a double closing legally, so I posted the question here for someone with experience in it for my area. Got no responses, so good luck.
They say it can be done, but I have yet to meet anyone who has actually done one.
Roger
Thanks Roger. Then why do so many books and courses say it can be done and actually show the steps? Like the book Flipping Properties, by William Bronchick tells you step by step and seems to be great book. What do you suggest?
Mick
Hi I'm sure some more seasoned investors will respond but what I've learned lately is that it is a good idea to interview your attorny and pick one who does REinvesting themselves. One way would be to join a Real Esate Invesmt Group . you will have much access to those professionals that are invester friendly.
If you visit some archives in the article postings , one that I recall is by Scott Rister who addresses the subject
Hey LynLinz, no offense meant, but I am an experienced investor. Not a guru, or even a veteran, but I'm pretty confident in my know how. That said, my attorney specializes in real estate law ONLY, and is very knowledgeable. He called several other, even more experienced lawyers, and couldn't find one that had actually done a double closing legally.
And since I've asked this question myself at least three times on this site, and have gotten no responses, I can only assume that no one here has done one either.
Mick, my theory on why it's in so many books and courses is because it reels in the newbie with a "little effort, no money down, get cash back at closing" deals. Notice, my attorney said that he couldn't do it legally by following the method that is usually presented. You (the flipper) have to show funds to purchase. He suggested getting an overnight loan from a bank for the purchase price. Also, the end buyer will have to either have all cash or be able to obtain a "no-seasoning" loan.
Roger
When I first started investing this was not a problem. But things have changed it is harder to find lenders that will loan without a 24 month chain of title.
FHA/HUD now have a 90 day rule on resales. If you have owned it less than 90 days they will not insure it.
It still gets done but you will have to use an Alt A lender so the rates will be higher. Try explaining that to your perfect credit buyer.
Other than Hard Money I only know of one lender that will do no seasoning loans. And they look carfully at the deal.
Not sure what you're trying to do, but I can't help but ask myself if you could accomplish whatever you're tring to do by:
#1. Selling the contract
#2. Receiving a finders fee
#3. Sell the property "subject to" assuming your financing with a 1-2 year call.
The double closes that are legal are based on lenders knowledge and consent to the the double transaction. 99% of the lenders out there will not allow this to happen, and chain of title is part of the criteria from lending, and sticking point...however dependent on the what level you are looking to flip the property, and the strength of of your end investor it is possible...still would need more details of what type of property you are trying to flip, one as is ready to move in, with final borrower in place or one the needs repair, being wholesaled to another investor.
Thanks for all the help you all. I don't think I would qualify for a loan and even if I did, would I have to get a loan for the entire purchase price? I'm planning on flipping a property ands making atleast $2000. But if I have to pay back all of the loan, then I would still make no profit right, plus, I would still be paying back the loan?
And I hope I get most of my questions answerd here so I won't get myself in a bind...
If I find a property, put it under contract, are very many ppl. willing to buy contacts?
I don't mean to sound so "green" but if you are, you are
Mick
Mick,
What you're usually doing when assigning or flipping a property is selling to another investor. That being the case, you're willing to take a small % of the profit in return for a quick sale. Most retail buyers would probably not want to buy out your contracts.
In order to do this effectively, you already need a good list of investors that may be willing to buy you're contracts. Birddogging is a great way to start in this business without any money. You might want to check in to that.
As far as the double closing goes, I guess we'll have to put it up there with Big Foot and the Loch Ness Monster. Several sightings, but no proof of existance.
Roger
Please explain 24 m chain of title
Are you saying that you would have troube reselling a property that you have only held 6 months?
Quote:
On 2003-05-12 06:06, lacashman wrote:
When I first started investing this was not a problem. But things have changed it is harder to find lenders that will loan without a 24 month chain of title.
FHA/HUD now have a 90 day rule on resales. If you have owned it less than 90 days they will not insure it.
It still gets done but you will have to use an Alt A lender so the rates will be higher. Try explaining that to your perfect credit buyer.
Other than Hard Money I only know of one lender that will do no seasoning loans. And they look carfully at the deal.
I'm not sure about the "chain of title" cashman is referring to, but I do know that most lenders now require 12 months of seasoning on title before they will loan against the property. That means that the seller must have owned the property for at least 12 months prior to selling.
This can cause problems with selling in less the 12 months from your purchase date. Your buyer will likely have to find a lender that loans with no seasoning, but the interest rate will likely be higher. If the property has been seriously rehabbed and can be documented as such, some "seasoning required" banks will forego the rule and loan money against the property, but this too requires work paperwork than normal.
Roger
I guess I'll have to change my moniker to "bigfoot"! !!
To be honest I didn't think much of it when I did it. A double closing was not my choice in fact but I left myself at the whim of a Real Estate Agent. (big mistake on my part - no offense to present company intended but this guy was not looking out for my interest at all. But that's another story) I specifically told him that I wanted to assign this contract but the buyer's agent balked, my agent bypassed me and agreed, and by the time I got in the loop my delayed sttlement period was up so I had to take it. ( Clearly all my falut for not keeping up with this transaction closely enough.)
Anyway the point is I had no financing at all and in fact brought no money at all but for a brief moment I owned a property for $43,500 that I didn't pay. The end buyer however did have financing and brought $53k to the table and paid off my debt immediately. To be perfectly honest I don't know the mechanism but I promise you that is the effect of the paperwork I signed at the settlement table. (I was so distracted by the fact that I was paying not only closing costs - which I had negotiated away on my end of the first contract but had been re-instaed by my agent - but TWO sets so my $9.5k dwindled to less than $4k.)
My understanding is that this is the only way that the buyer's financing would accept although I didn't understand it then and can't imagine it now.
The way the double closing got done was through the magical work of the title co. This particular title co was crreated by an investor just so he could do his own deals becasue he was doing several hundred year with his note buying and all so the guy is a wiz.
I don't post this as an advetisement (because I know that that is taboo here and I didn't actually enjoy the process of the double closing that they did for me since it didn't benefit me) but as a service to those who seem to need some questions answered: the title co that did the double closing for me was Homemaxx of Baltimore, MD. I don't have the contact info but they shouldn't be too hard to find if you feel compelled to look. I will also look them up for anyone who needs them if you contact me.
I wish I could shed more light on this topic but at least you all have heard from someone who has actually done a double closing even if it was reluctantly.
[addsig]
as far as this is concerned I think the way it may have gone in my deal is that the seller granted me a loan for the purchase price I paid. ( the seller was an older investor trying to retire) Since I was to pay it back immediately it took the form of a one page promissory note. The end buyer had to do extensive demolition and reconstruction (the ARV was $225-250k) so i think he took out either a construction loan, as he was a contractor or a personal loan.
Hope all this helps.
rajwarrior wrote:
You (the flipper) have to show funds to purchase. He suggested getting an overnight loan from a bank for the purchase price. Also, the end buyer will have to either have all cash or be able to obtain a "no-seasoning" loan.
once again I don't recommend this method and from what I'm reading here I now concerned that it may have been quasi-legal.
_________________
Great Luck,
KP
Emerald Investment Real Estate
eiremclaughlin@comcast.net[ Edited by KP on Date 05/14/2003 ]
Hi All,
I've been sort of surfing these for a week or so, but today is the day. The day that I post a reply.
I've been a Residential Mortgage Loan Officer for over 10 years. I'm soaking up everything that I can to slowly change over to full time REI. I can promise you that if you don't commit loan fraud, you can basically close whenever you want. The attorneys' quick responses must be assuming that loan fraud has to be committed to double escrow. I've done so many that I have no idea how many. Not just to investers, but to anyone that is not fnma (fannie mae) qualified. Most sub-prime lenders look at the whole picture. Show it to them. They don't stand to lose anything and, trust me, that's all that they are concerned with.
Hope this has helped. This board surely deserves my help, it's helped me more than once.
Clear2Close
This may be the obvious..however I was involved with a simultaneous/double closing and it went very well. It was my very first investment deal and between the excitement and the fear I may have been in a fog
...Perhaps we did not have a problem because we got the deed tranferred into a deed of trust...it is just something to think about..it can be done legally thru this process..however the seller has to be willing to sign over the deed...and that is possible...I did it
...since then my attorney has suggested: Make the deal with the owner, do the contract for the price that you are buying it for with you as the buyer and add in "OR ITS NOMINEES OR ASSIGNEES" this way you can just transfer the contract to the new buyer. One transaction and you get the difference in the price that you purchased it for and what the new buyer purchases it for....I hope I made sense
...it works for me...
It takes private money such as mine to accomplish this. 99.9% of banks will not lend on this type of deal. lwilkes@lafinancialgroup.com
It takes private money such as mine to accomplish this, and you must offer owner financing. 99.9% of banks will not lend on this type of deal. lwilkes@lafinancialgroup.com
Clear2close, you say that you've done many double closings. Please give everyone here a breakdown of how you do a double close, so everyone can benefit.
RESolutions, sorry, you didn't do a double closing. You did an assignment of contract. It's a whole different method and much easier.
Lafinancial, very poor attempt at hiding an advertisement. Shame.
The key part of a double close that most people leave out is that the middle buyer/seller (investor) must have proof of funds to close the first deal, either a loan or cash. This is the ONLY way that I have found to do it legally. Also, the investor will be responsible for TWO closings and the costs that go along with it.
Roger
Quote:
On 2003-05-13 23:47, rajwarrior wrote:
"chain of title" cashman is referring to, but I do know that most lenders now require 12 months of seasoning on title.
"chain of title" and seasoning on title are very similar.
Most lenders are now looking and all owners for the past 24 months. This is the 24 months chain of title.
As for seasoning on title most are looking for 12 months some 6 months and some 1 month.
Yes double closings are possible. I do about 4-15 a month.
Wow, 4-15 per month is quite a business! Care to share what your No.1 method for the finding the properties is?
clear2close,
Glad to meet you.
I have been saying along you guys are more creative than most real estate investors when it comes to getting the loan through and the deal done.
Welcome on board this board, your input is welcome here it stops the he said she said ideas about what it takes to do a double closing.
There are lenders out there that will do a triple closing if the deal is right.
John $Cash$ Locke
Right on, John!
www.statedloans.com
Creativity is the answer to all of our issues. Try to treat "being legal" as just another detail of your design. Treat it the same way that you would treat title work. --has to be done --can't get around it, --but no need to be so afraid of it. Maybe I feel this way because I'm used to dealing with it, but I have a feeling that a whole lot of deals are being lost from 'rumor' fears.
I think most of the inf that others are giving about the subject are right, but don't stop there. Gain a relationship with your title companies! Super Important! They are a wealth of information about this, right when you need it, IF you are a nice person to work with. Remember, more than one person works there that doesn't have any interest in how much money their title company makes. I'm not suggesting bad stuff, just relationship skills. If you find that doing a bunch of L/O flips works for your situation, line up title companies, investors, and appraisers. If you have one of each of these that are 'stand up' professionals, but creative, hold on to them. Find buyers and sellers 24/7...If you become a marketing type person, you never have to go to work... Just be yourself.
Hope this helps,
clear2close
clear2close
Have to smile on this one, I had about $13M of those little 'no doc' puppies out there in properties.
You are right as long as you are within the guidelines of honesty and fair play and do it legally I find that the creative methods will get the job done.
John $Cash$ Locke
"Way To Go Clear2Close" If you need some additional funding for your next project or rental properties, please call
James Southerland
601-604-0097