RealEstateDoubleClose.com
HOW DOES IT WORK?
How does a Real Estate Double Closing work?
A double closing is organized and coordinated by the real estate investor/wholesaler. This investor essentially acts as a middleman.
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Think of the two deals as:
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The first transaction (A→B): The Seller is “A” and the wholesaler/investor is “B”.
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The second transaction (B→C): The wholesaler/investor is “B” and the end buyer is “C”.
As the investor (“B”), you will purchase a subject property at a discount from a Seller and then immediately sell that property to a new end buyer, “C”.
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The funding can be set up in a way where the cash proceeds from the investor’s sale to the end buyer (B→C) can fund the purchase from the original seller (A→B) through escrow.
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When the title company receives the end buyer funds and closes out the A→B transaction, the investor can then immediately close out the sale of B→C.
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When B→C closes, the excess proceeds are what the investor makes on the deal!
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Because these two transactions are happening at the same time, the term “double closing” was coined.
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Every state will have its own requirements and rules around conducting a double closing. That being said, double closing is legal in many U.S. states. Investors should always work with a local reputable real estate attorney to stay up to date on the latest rules and regulations.
How is a Double Closing Funded?
Funding a double close can happen in one of two ways.
The first way is if the end buyer is bringing funds to purchase the subject property (B→C) and the wholesaler/investor uses those funds to fund the first closing at the same time (A→B).
Many states no longer allow this practice, so wholesalers/investors can either utilize their own capital or find transactional funding.
Transactional funding is when a lender will loan up to the full amount of the deal to the investor/wholesaler to complete the A→B purchase. This allows the investor to close without leveraging his/her own money.
The transactional funding lender will typically charge a percentage of the loan as well as an origination fee.
Transactional funding lenders, unlike hard money lenders, will typically require a quick turnaround time to get paid back. Therefore, a double close must take place quickly, typically within hours or 1-2 business days, for this funding source to work.
Double Closing by State
Double Closing In
California
A double closing is legal in California. However, the “same day” double close will actually take place over at least two days. The B to C transaction will close at least one day after the A to B transaction has closed.
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This allows for the minimum required “title policy procurement” time mandated by the state of California. Each portion of the double close must close independently with its own funds.
Double Closing In
Florida
A double closing is legal in Florida. However, investors can no longer utilize the end buyer’s purchase funds to fund their purchase of the subject property from the original seller. Therefore, investors must front their own capital to close on the A→B purchase.
Double Closing In
Texas
A double closing is legal in Texas with a few caveats. Just like Florida and California, investors can no longer utilize the C transaction purchase funds to fund the A→B portion of the double close.