myEmpirePROWhat is Double Closing in Real Estate?
In this episode, you will discover my 7 simple steps guide to smooth double closing as a wholesale real estate exit strategy.I personally prefer double closing my deals to assignment contracts.
By using this strategy, I engage 2 simultaneous closing incurring 2 separate charges for 2 settlement statements. But I also avoid greed driven conversation with any of the parties involved.
But first, what is double closing in real estate?
Double closing, also known as a “simultaneous closing” or “back-to-back closing,” is a real estate transaction strategy involving two separate and consecutive property transactions.
In this approach, an investor purchases a property and immediately resells it to another buyer on the same day, often within a few hours or minutes.
The key aspect of a double closing is that the investor never takes ownership of the property; it merely acts as a bridge for the transaction between the original seller and the final buyer.
Top 1% Secret to Property Investment
However, it’s important to note that the double closing strategy may face legal and regulatory considerations, including disclosure requirements and potential anti-flipping rules in certain jurisdictions.
You can avoid that by always using a real estate attorney and investor friendly title agent.
Therefore, investors should always seek legal advice and ensure compliance with local real estate laws and regulations when utilizing this approach.
- STEP 1: Go under a separate contract (B) with your Buyer
- STEP 2: Confirm an EMD deposit with your closing agent or attorney
- STEP 3: Confirm Funds or Get a Clear to Close from buyer’s lender
- STEP 4: Send the 2 sales contract A and B to your closing agent and inform them that it’s a double close transaction.
- STEP 5: Ask your closing agent if you need a 2nd funding source for transaction A
- STEP 6: If so, send the 2 sales contract A and B and closing agent info to your transactional funding lender. They need to confirm that transaction B is approved for funding.
- STEP 7: Schedule your double closing
How to Double Close – Have an investor friendly title company facilitate the whole process. By doing that, you will learn from experience. As an investor, it’s not your responsibility to know how to double close.
When you contact them, ask if they do double closing. If they say “no”. Don’t engage in educating them. Keep calling the next title company until you find one.
The best way to find one is to network at your local real estate investors association on meetup. Go to meetup.com to find them.
Mastering the Double Close Strategy in Real Estate Transactions
In the realm of real estate investment, strategies and techniques are paramount to success. One such strategy that has gained traction and has the potential to significantly boost your profits is the double close strategy. A double close involves engaging in two simultaneous closings, incurring separate charges for two settlement statements. This technique allows you to avoid potential conflicts or misunderstandings often associated with the financial aspect of real estate transactions. In this comprehensive guide, we will break down and elaborate on each step involved in executing a successful double close.
Step 1: Establish a Separate Contract with Your Buyer (Contract B)
To kick off the double close strategy, the first step is to create a separate contract (Contract B) with your buyer.
This contract will be distinct from the initial sales contract (Contract A) you have with the seller.
It is crucial to ensure clarity and separate agreements for both transactions to maintain transparency and legality.
Contract B should outline the terms and conditions of the sale between you and the buyer, including the purchase price and other relevant details.
Make sure that all parties involved fully understand the terms and conditions specified in this contract.
Step 2: Confirm an Earnest Money Deposit (EMD) with Your Closing Agent or Attorney
Once you have the contract with the buyer (Contract B) in place, it’s important to confirm the earnest money deposit (EMD) with your chosen closing agent or attorney.
The EMD is a significant step in establishing the seriousness and commitment of the buyer to the transaction.
Your closing agent or attorney will help manage and hold the EMD securely, ensuring all legal and financial aspects are in order, setting the stage for a smooth double closing process.
Step 3: Confirm Funds or Obtain a Clear to Close from the Buyer’s Lender
Before proceeding further, it is essential to confirm the availability of funds for the transaction or obtain a clear to close from the buyer’s lender. This step ensures that the financial aspect of the buyer’s end is taken care of, avoiding any unnecessary delays or hurdles during the closing process.
Step 4: Submit Both Sales Contracts (A and B) to Your Closing Agent
Submit both sales contracts (Contract A with the seller and Contract B with the buyer) to your chosen closing agent and explicitly inform them that this is a double close transaction. Clear communication is key to a successful double close, and your closing agent needs to be fully aware of the nature of the transaction.
Step 5: Inquire About the Need for a Second Funding Source for Transaction A
Engage with your closing agent and inquire if a second funding source is necessary for Transaction A.
Depending on the specifics of the transaction and the policies of the involved parties, you might need to arrange for additional funding to ensure a seamless double closing.
Step 6: Coordinate with Transactional Funding Lender (If Needed)
If a second funding source is required for Transaction A, provide the necessary documents – both sales contracts A and B, along with the closing agent’s information – to a transactional funding lender.
It is crucial to obtain confirmation from the lender that Transaction B is approved for funding.
Step 7: Schedule and Execute the Double Closing
The final step in the double close process is scheduling and executing the double closing.
Coordinate with your closing agent, title company, and all parties involved to ensure that both transactions are closed smoothly and in a timely manner.
Double Closing Made Easy – Engage an Investor-Friendly Title Company
Executing a double close can be a complex process, especially for those new to real estate investment.
To streamline and simplify this strategy, it is highly advisable to engage an investor-friendly title company.
These professionals are well-versed in real estate transactions and can facilitate the entire process, providing invaluable insights and guidance based on their experience.
When reaching out to title companies, specifically inquire if they have experience with double closings.
If a particular company does not, simply move on and continue your search until you find a title company that is familiar with and supportive of the double closing strategy.
A great way to connect with investor-friendly title companies is through networking at local real estate investors associations, often organized on platforms like meetup.com.
Attend these events to expand your network, seek recommendations, and discover title companies that are well-versed in double closings.
In conclusion, mastering the double close strategy in real estate transactions involves careful planning, clear communication, and coordination with experienced professionals.
By following the steps outlined in this guide and leveraging the expertise of an investor-friendly title company, you can successfully execute double closings and optimize your real estate investment endeavors.
Stay informed, network actively, and utilize the right resources to enhance your proficiency in this profitable strategy.
Frequently Asked Questions
Double closing in real estate involves two consecutive transactions where an investor purchases and resells a property without taking ownership.
The double close method entails orchestrating two property transactions on the same day, with the investor acting as an intermediary between the original seller and the final buyer.
An example of a double closing is when an investor purchases a property from a seller in the morning and then resells it to a new buyer later the same day or even earlier; like right after.
No, double closing and wholesaling are different; double closing involves (possibly wholesaling) two consecutive property transactions, while wholesaling may be executed with assigning a contract to another buyer for a fee.