Lets Clear Some Things Up: Closings
What is the difference between a simultaneous close and a double close?
When you're closing a wholesale deal, I have heard people say they just asign their contract and let the seller and buyer close.
What is this called and some of you guys have me wondering if this is illegal or something, lol, ...not panicing!!
but yea what is this called.
1st. Where the buyer comes into your attorneys office, and closes...funding the deal.
2nd. Your seller comes in (later that afternoon or the next day) and you fullfill your contract with the seller, using your buyers funds
3rd. and then convey title and property to your buyer, collecting your check.
4th. There will be two separate closing statements issued, one to your buyer (with your fee showing up as an "assignment fee"
And another closing statement with only you and your sellers transaction on it.
This was my game plan...and I think it still is the way I want to do this...unless someone can tell me why it is wrong or why it may get someone i trouble doing it this way.
I'll be awaiting everyones feedback...I am prepared to be wrong about all this, but this is the way I was taught how things should be done.
JB
[addsig]
At a simultaneous close you actually take title to the property (albeit only for a few seconds). The only difference in this transaction and a deal where you hold the property for years is the length of time that you actually owned the property.
There is absoulutly nothing wrong, illegal or unetical about simultaneous closings. In a perfect world every REI deal I do would be a simultaneous close for a gizzillion $$$. I have done several; but they are hard to come by. Mainly because of timing. Most of my deals just take time (clean-up, adding value, marketing, finding a buyer, etc).
Make sure you leave enough time to manuver if the simultanous close falls apart. Don't shcedule this closing too close to the closing deadline of your original contract.
I always convey title by Limited Waranty Deed. Also, I get title insurance. Since I am in the chain of title this will protect me if a title problem comes up in the future.
Some people will have a problem with you making money so keep both sides of the closings as confidential as possible. Remember it is nobody's business ececpt your Uncle Sam's on how much you made.
With an Assignment you never take title. You are never in the chain of title so you want have any liability to defend that title. Once you assign the contract you are done. Make sure your Sales Contract has language that allows you to assign the contract.
The person that you are assigning to will know all the terms of your contract. The Contract is what he is buying and he will want to know what he is buying. Therefore, it is impossible for you to keep your profit/margin from the assignee. This is not neccesarly bad, but some people will try to use this information against you during negotiations. Just be strong and don't let them do it.
Both simultaneous closings and assignments are great when you find a deal where they are possible. Each has its advantages and disadvantages. Use which ever makes the most sense for a given situation.
Great explanation
I feel much better now, thanks
JB
[addsig]
A simultaneous close and a double close are the same thing, just different names. Unfortunately, it doesn't quite work the way you laid it out. You first have to close with the seller, then you close with the buyer. You can't close with the buyer first because you don't yet own the property. As far as funding goes, you can have the seller owner finance it (for a few hours), get a short term bank loan, or have the closing agent fund it. The point is, you have to show funds/financing to close the first deal.
An assignment is simply where you assign your interest in the deal to another investor for a fee. That fee may be collected either upfront or at closing.
Roger
Yes you can close with the buyer first. It is simply the funding issue, and a good title company will let you close both one after the other and then take the check from the buyer to fund the seller. It is done all the time. Sometimes due to time conflicts, the title company will let the buyer and you close before the seller and you, since the paperwork is not filed until both closings are done.
Roger,I am working on purchasing a single family home.An investment co. has it under contract with the seller.They want their assignment fee upfront.How would you go about doing it this way?I would hate to lose 6,000.
:-?
Roger, would the profit be the same either way you went? (Sim. close or assignment). Or would I expect to get a smaller profit (assignment FEE) using the assignment method?
trn2,
If I assign my deals, I expect to be paid the assignment fee upfront as well. The simple reason is that you are buying the contract, so I shouldn't have to wait and see if you will close the deal. In your position, though, I would want a title search before handing over any money. You can also have it held in an escrow account, paid only after a clear title search is performed.
642freedom,
At least in my experience, double closings are performed because you are either trying to hide your profit from the buyer, or it is a retail buyer, and an assignment may confuse them. Assignments generally are done between investors.
In theory, you could make the same either way. However, you'll generally try to do a double closing only if there is enough profit in it to warrant the double closing fees, etc.
Sunre,
Being "done all the time" and doing it legally are two different things. Yes, some lawyers and title companies will allow you to close with the buyer first and the seller second, however, poses some serious legal questions the Federal inspectors will ask those same title companies if they just happen to investigate. Namely, how can you legally write and transfer a general warranty deed on a property that you don't yet legally own? I can almost assure you that you will not be left out of that legal loop should they be investigated.
Never happen, right? The first time you have a problem closing with the seller 2nd, and the buyer finds out that he just lost his dream home, I think someone will be notified pretty darn quick.
Roger
Roger,
Hey, thanks for answering my question.
Steve