A double closing is the simultaneous purchase and sale of a real estate property involving three parties that will close on the same day and at the same approved title company. The three parties that are included is the original seller, an investor (middleman), and the final buyer.
There is three main reasons for a double closing:
1.) Is to allow the Wholesaler / Investor to use the purchasers funds to acquire the property from the original seller.
2.)Another common reason for a double closing is to conceal the identity of the purchaser or seller.
3.) To make money instantly in real estate as an investor and/or wholesaler with minimum financial risk involved.
Typically, a real estate investor first enters into a contract to purchase a property with the original seller/owner and then subsequently before closing the investor enters into a second contract to sell the property to an end buyer at a higher price for a profit). The investor then set the closing for the same date, same title company and same location so that both transactions can close simultaneously.
To simplify the transaction, the first buyer may make one settlement statement directly between the end buyer and seller and take his/her profit as a line item on the settlement statement. This line item is usually on the purchaser’s side of the statement as an assignment or marketing fee.
Each state has different laws or requirements when performing or structuring a simultaneous, double or back to back closing and the laws are always changing. Some states don’t allow simultaneous closings, others do. Some title companies allow this, other’s don’t. However, it’s becoming more and more difficult to do a simultaneous or double closing because of the stricter laws with the lenders, unless you use a hard money lender or private funder. Some of these lenders require you to have some skin in the game and require (wet funds) to stay in the game. But, we as investors always seem to find a way to make it work. It’s still in your best interest to search diligently for a title company that will handle this unique or creative way of closing on a property. They will be able to assist you in making sure it is performed properly according to your state’s laws and regulations.
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