OfflineI know how to double close and I know how and where to get transactional funding if I need it. What I don't know is what to do if I close the A -> B deal and my C buyer backs out at the last minute. If it's a dry closing, the A party wouldn't get their money at the end of the day. If I'm using transactional funding, I would be unable to give the company their money back because it has been spent. What would happen in that scenario?
I understand that I will have to qualify my cash buyers, and I understand that if I do my job, they will come through. That is not the point though. What if my C buyer doesn't come through?
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REALTOR
Real Estate One
Grand Rapids, MI
Usually, the money has already been wired to the escrow company before the closing so you will know ahead of time that B-C isn't going to happen before A-B does.
Karen
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Hmm, ok, thanks. I guess that question would be better to ask my title company since they're the ones that will be handling it.
REALTOR
Real Estate One
Grand Rapids, MI
Matt -
I'm a newbie so please take my advice with a grain of salt. I've been heavily reading and researching and listening for a few months and here's what I tell myself about your question.
Some of the biggest investors are the biggest failures. 99% of the time these worst case scenarios don't happen and when they do, it doesn't matter. So let's kill that "What IF" villain and get out there, make offers and make money!
That being said, the key is to GET A DEPOSIT UPFRONT from your end buyer. This deposit should be 3-5 times any skin you have in the game in the form of earnest money. But, since Dean teaches us so many NO money down strategies, your upfront money is probably $0.
Asking the buyer for an upfront deposit is critical because it significantly decreases the chances of him walking away and also allows you to make money even if he doesn't close.
There is a clause you can add to your contract with the end buyer that is quoted as,
" If the buyer is unable to close on the property in the time specified by the contract, that buyer's deposit will be irrevocably forfeited so long as the seller is not in default.
This addendum is the authorization necessary for the seller to have the closing agent release the Buyer's escrow deposit to the seller, if the buyer is unable to close for any reason including his inability to obtain funding, so long as the seller is not in default.
Likewise, if the seller is unable to close in a timely manner, the seller authorizes the return of the escrow deposit to the buyer without further documentation signed by the buyer or the seller"
(The above "Earnest Money Deposit Clause" was provided by Dave Dinkel, Broward Real Estate Investment group)
In any case, I believe the WORSE CASE scenario for your buyer not coming to the closing table is that the earnest is defaulted. With the above clause in place, the closing agent is able to return the buyer's escrow deposit money to you (which means you MAKE money), and the only person who really looses is the buyer that walked away.
HOPE THIS HELPS!!!
(By the way - I have Dean's assignment of contract document from the links on the left but I can't seem to find a similar contract to use when double closing buyers? Or, do we just write a new contract? If there's an extra form can you please send a shortcut to the link???) THANKS
Kristin
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Thanks for the input. That clause is great!
REALTOR
Real Estate One
Grand Rapids, MI