How to do Double Closing in Real Estate

Do not get me wrong,Great info! This is a three party deal and title CO.'s are there for a reason, To protect all interest! I get the two closing's in one day, What i do not understand is my seller does not have to be there in the first closing but my buyer has to be there in the second closing...When everybody was up front with each other! Please explain why a seller does not need to be there?

Great info coach

randdee813
P.S.Would not a seller want to be apart of closing they've property.

I agree - in this description it is a little difficult to understand. I would have to say this refers to REO's or other deals that there isn't a particular seller involved just someone managing the deal for the bank. If that is the case often times they will just send over any documents that the Title Company needs and then the Title Company can send them any profits via check or wire.

We have successfully completed 3 double closings with little troubles.
I would agree that step 1 & step 5 are the most important finding a Real Estate Attorney that understands Double Closing, however this is sometimes not even neccessary. (Step 5 - can sometimes cover step 1)All our our double closings occured in Minnesota and Colorado. These states due not require an Attorney to close on real estate. We were able to find title companies that understood the transaction so that saved us some money on closing costs.

Let us know if we can help further. This is a great no $ down strategy, but remember to put some of the profits aside for tax purposes!

First having a closing agent / title company / lawyer is not required. But, I would hate to see what would happen if I did not have one.

As far as having the seller at the first closing: You should have the seller at the first closing if at all possible. Sometimes you will find that the seller can do the closing through fax if the closing company is set up for it. Most of the time though you will have the seller at the closing - This was just an oversight on my part that I did not include this.

I will echo ddowd. I would never do a closing of any type without a third party involved. They are not partial to any side and make sure that anything that happens according to the contracts and in fairness. I have heard of people doing closings without a closing agent and I just fear for their success.

Another tip. I will never purchase property without a title search. I would hate to skip the title search one time and have that time cost me a bundle of money that I could have avoided paying.

ddowd, nstreet, and Chip & Andrea, thanks for the info. I will be closing on my first double-close within the next week or two. It is a short sale that I'm purchasing and re-selling to my niece and her husband. It just occurred to me while reading this thread that the short-sale bank might not be thrilled that I'm selling for $5K more ($58K) the same day when the prop is supposedly only worth what I'm paying them ($53K). I've got my title company set up to do the double-close and they're fine with it. And I'm working with my niece's bank, who is also working with the title company to make this happen for them. They are doing an in-house loan, which will eliminate the seasoning issue. Do you foresee any other complications to this deal? I have an attorney in the same office as the title company, whose legal counsel I sought before pursuing this type of deal. Do you think I need to have him directly involved? Seems to be going smoothly so far.

Thanks,

Rina

It sounds as though your niece is getting conventional financing. If this is the case your niece’s mortgage company will higher and appraiser. If the property appraises under the $58K you are set to close for you may need to re-negotiate the purchase. Outside of this I cannot foresee anything else.

Most of our double closings have been through banks either as a Short Sale or Double Close. You are correct the bank doesn't love the idea of you selling it for $5k more, but frankly they dislike the idea of doing a foreclosures which would cost them much more than $5k.

As long as the financing company for your niece is good with it and the the title company has it in hand you should be set. Congrats and way to check another strategy off your list

Thanks 4 the step by step lay out. I haven't made any deals yet, but i could really use this for future references. I am trying to get as much info as possible!

Thanks,

Ashley

Faith can move mountains!

Nathan, the prop SHOULD appraise for around $90K according to comps. However, I'm sure the short-sale bank had a BPO or appraisal already for the short-sale, which would put it down to the sale price. I'm not sure if my niece's bank will do another appraisal, or how they will determine the value. Guess I'm not too worried about it. We'll make it work one way or the other, and in actuality the kids will have great equity in the property, even if they can't pull it out right away. Thank you for your insight.

Andrea and Chip, I really appreciated hearing the double-close experience you shared at the conference. I found it fascinating that you were able to close on the 2nd transaction before completing the first. Maybe you could share that somewhere in here (DG forums). I think it was very helpful to hear of someone first-hand making it work. Thanks again, and yes, I'll be glad to have this one go through. Makes a person more confident in the next one. I felt a little funny turning in a purchase agreement to my niece's bank with me as the seller of a property I didn't own yet. But everyone involved is determined to make this work. I spoke with Wendy today (title company) and she is going to have my attorney involved just to be on the safe side.

Ashley, congrats on getting started! You're gonna love it!

Rina

We locked up the property (a 4plex) from the bank - it has been on the market for 9 months and they were tired of dealing with it. Additionally, they were not happy with the broker listing it. So they gave us a lower price and in addition took what the broker would have gotten off the price of the property. So we able to wholesale it for a lot less than it had been listed for.

We were double closing it with a friend investor so we only were asking an additional $10k to keep it a great deal for her. The bank wanted to use their title company and had set up the closing for a Friday. Since we were doing a double close and we wanted to use our title company we asked our friend investor to fund a day early.

We met with our B side on Thursday and did the paperwork to sell the property and then did the A side on Friday. Our title company only wired over the money required for our A side purchase and sent the remaining profit to us. It is not usually how the Double works, but we were able to make it happen with a team that understood our vision and strategy.

The key was having our B side understand that we were going to use their money to buy the property. They were willing because we were passing along a good deal to them.

That's the ideal scenario. I'll be planning for that in the future. Thanks. Guess I'll have to do the traditional double-close since the end buyer is being financed by their bank. I MIGHT have to use transitional funding, but I think I have a resource for that. It's nice to have a great team, huh? Can't wait for mine to be "seasoned".

Thanks for sharing all your experiences!

Rina

Hello,

Can anyone recommend any Indiana Attorneys or Indiana Title Companies that are familiar with doing a double close? Thanks

Hi Joe
Just contact Marc Karyo (pronounced carey-yo) or Bob Mittleman at Old School Title. They do double closings in all 50 states and they are so intelligent with all the legal jargon and new laws that have come up lately for escrow agents etc..
They are also investors themself so they know all about wholesaling and flipping etc..
www.oldschooltitle.com

Sissy

Hey randee
When you have your seller sitting there in front of the end buyer on closing day...the end buyer can start trying to ****er the price on down and sometimes it ends in a big ole argument and the end buyer may walk out and the deal is gone.
Leave the seller out of the deal if at all possible.
There are also times where the end buyer starts in on the investor about why he is making so much on the deal. So it is also best if you can stay away from closing. Let the buyer go in there quietly and close the deal....then swing by and get your cash after he is gone! LOL!
Sissy

Thanks for the congrats Rena! i've watched some of your vidoes and they are very inspiring! Your advice is awesome!

Oh and thanks Sissy for the info on Old Title School! i could use that info for future references as well!

Thanks,

Ashley

Faith Can Move Mountains!

I am new to the site and Love all the great info I receive from all of you. Keep it coming!!!!

Wow,you guys have done 3 double closings? I wqould like to do one starting off. I'm able to get POFs and I have a listing agent and potential buyers. From your experience what were your exact steps to complete these deals?
thank you

Just thought I'd pop in and say thanks for all the advice on double-closes. My recent deal ended up going through without a glitch. It actually went better than I could have anticipated, as the title company was able to make it work as a "simultaneous" close, meaning most of the end costs went right through to the original seller, leaving my costs as almost nothing.

We all met at the bank at the same time, took turns using the conference room. First seller, then me, then end buyer and their lender, then me and end buyer. Like clockwork. It was a great experience!

Just look for a title company that is on the ball. Very important for a smooth transaction! Good luck and have fun!

Rina

Hello Rina, I would like to know what steps you took to even get to the closing table for your double close? I'm interested in dealing strictly with REOs for now when it comes to double closing. I can get POFs and I can get a buyer as long as the deal is good fairly easy. I just need the steps in between. Thank you

I'm working on doing a double closing. Seller is REO. Buyer pays cash.
Is it ok if I dont tell the buyer, what I am doing? And what are the county records going to show when it is closed. Will my name and original offer amount appear anywhere?

Also, I often hear abt Capital tax gains. How much % is that.
Isnt there 2 closing costs involved ?

My profit would only be about $2000, and I just want to see, if there is enough money left for me, after taxes, and closing costs. Thanks !

I may be mistaken, but I have heard that when doing a double-closing...One transaction cannot fund the other. They want funds to be available for both transactions seperately. Is that true? Heard that in California if that makes a difference.

Thanks,

Tommy

The best answer is if you get a closing company that will accept the funding from the second closing to cover the first you will be ok. The problem is finding a company such as this that is willing to put their neck on the line for such a paper closing. It is doable but harder. I may suggest that you get financing then try the double closing without financing. This way if the closing somehow has troubles you can still finance. This way the closing company is secure and the transaction will still go through.

If you had the seller sign Dean's investor intent agreement, and told them up front what you're doing, and what your bottom line is, then your seller has nothing to complain about. If you have a signed PA (purchase agreement) with the seller (and you will, otherwise you can't close) no party can change the price at closing unless all parties agree to do so in good faith. To try to is considered attempted breach of contract and/or fraud, depending on the state you live in.

As Rina pointed out from her own experience... If Buyer is financing, their lender has their own requirements, which must also be followed in order for Buyer to use them. Lender may even send their own representative to closing, making it kind of a "double and a half" closing, LOL. This is still perfectly legal, and happens all the time.

Some RE Agents and funding companies will try to tell you "one deal can't fund the other," or "the double close is illegal." THIS IS A LIE -- ask any RE or business attorney licensed to practice law.

Some (like 1 in 100) closing/title companies will tell you "we don't do double (aka simultaneous) closes." That is their prerogative, and they don't have to explain why. You simply find one who will, and it's easier than you think.

Unless it's changed again, the capital gains tax is 20%. Example: If you make $10K on a double close, set $2K aside for Uncle Sam.

Here's what I DON'T know:
1) Is capital gains tax paid to your state gov't., the federal gov't., or both? I'm guessing it's federal only, but don't you have state tax liability somehow?

2) After paying capital gains, do you have to pay income taxes on the remaining money (like the $8K left over in my example above)?

I'm no tax guru, so I'm clueless there. I'm just a taxpayer (aka tax victim, LOL). BTW Rina, I'm jumping up and down in my office chair for joy on your 1st double close! It is a POWERFUL technique which can make anyone who can sign a contract wealthy in a matter of minutes with almost zero risk! I know it feels and sounds weird, but selling things you don't technically own, haven't paid for yourself, or haven't owned for very long, to a 3rd party for a profit TRULY is the American Way! Now I HAVE to go do one myself! Hope this helped...

1) There is both state and federal capital gains taxes.
2) Yes/no. The answer to this all depends on how you file your taxes. You can have your business pay you an income so that you are W-2 employed. If you do this you will often get both taxes.

The best way to understand all this is to higher someone that understands this part of the business. In other words I would suggest that you get a CPA.

This is great info from ddowd, Rina, Chip and Andrea, and I'm sure they'll be more, I'm still at the beginning. I was told about a FSBO that is a short sale. The properties in the neighborhood sold for 285K to 325K within the last year. The short sale agreement is for 150K, supposedly. I'll find out when I get there but that's what my real estate agent told me. I'm going to need to do a double closing and my main concern is knowing what I need to do that. Up until this point I see I need an attorney familiar with double closings and a title company familiar with them as well. On one end, I see this is a no money down strategy, but do I need to pay closing costs? I want to be able to take advantage of this deal if everything goes right. Prayerfully it will and we'll have deal # 1 in the bag. Either way its coming!!!! Thanks for all the insight and any answers are greatly appreciated.

Deshone

This maybe a real newbie question, but is the title company different than the closing company? I would like to know every spoke of the wheel needed to make a double closing go through smoothly. Thanks again!

Yes, on a Double Close you'll have to pay two sets of closing costs unless you write into the contracts that the other party covers the closing costs. You should not have to bring $ to closing if you are making a large enough profit to cover closing costs.

Once you have a title/closing company (yes, I believe they are called the same thing - depending on what area of the country you are in), you will need to make sure you have a solid buyer lined up. Having an end buyer you can count on is key.

Best of luck to you!

Thanks Chip and Andrea, that was very helpful as to what it takes $ wise to make it happen. I have a situation where I have the opportunity to pick up this short sale for 150K, but it must be cash. It needs a lot of work but after rehab we'll be into for under 200K in a neighborhood of 300K houses. If I have a cash buyer can I make an offer to the short sale agent. I don't want to look stupid trying to lock up the property and she tells me it must be cash so I can't purchase it. This will be deal #1 for me so I want to make sure I'm not messing anything up. Thanks in advance for all the wisdom.

Deshone

Make sure she has the funds so you do not get caught in a bad situation. Also make the offer contingent about your partners (the other buyers) approval.

Keep us posted on how it goes.

All great info I'm reviewing above! Thanks to all of you!

So I'm putting a bid in on an REO. If I get it, I plan to double-close.

Question ---in order to make sure my closing costs are covered on both ends of the double-close, would you say what percent of the deal would be closing costs....approximately 1% or so on each side? Is that a high enough percentage? Just making sure that in my price to the buyer, I'm covering it in my profit and making something too of course. (I am using an attorney as they do double-closings often and have an in house title company).

My attorney/title company brings me to another question...

Typically, I understand a bank wants to close with their own attorney/title company and not with mine. So, I'm assuming I can close at their attorney/title company, and then close at my own attorney/title company a couple of hours later?

I love the idea of closing the sale before the buy...that would be icing on the cake!

Thanks in advance for your replies!!
Louisa