Double closing is a great way to build wealth if you’re a real estate wholesaler. And within the span of about 30 minutes, you can get your hands on the large sum of money needed to double close. However, it’s not as easy as it sounds. This is a complex process, and you need to be careful at every step to ensure success. Here, we discuss some of the pitfalls you’ll need to avoid when double closing.
Telling The Seller About Double Closing
When you’re discussing things with the seller, you should never mention anything about wholesaling or double closing. They must not know that you’re making thousands of dollars in profit on the same day by selling the property to another buyer. This will make the whole process problematic for you.
If you do want to address the situation, the best way to do so is to inform the seller up front, saying that your intention is to make money from the transaction. Just say you may need to repair, resell, or use it as a rental—after they sell, it’s really none of their concern what you do with the property.
Assigning The Contract
Assigning a contract is usually less expensive, and going this route you only have to close once. But this method is not recommended for wholesalers.
For example, say you’ve spotted a seller who wants to get rid of their $200,000 distressed property. You’ve signed a contract with the seller to buy the property for the same price. At the same time, you’ve found another buyer (an investor or a regular buyer) who’s ready to purchase the property (with a $5,000 assignment fee added on top). All parties to the transaction will be there at closing, so everyone will know who’s getting what from the deal. See how this can make things difficult?
Using A Traditional Mortgage Lender
As a wholesaler, you’ll probably be double closing with mostly distressed properties. A traditional lender won’t want to put up funding for a distressed property, as they see these as long-term risks.
And if your end buyer wants to use traditional financing (a mortgage, a home loan, etc.), you may run into a problem. Usually, traditional lenders will only provide funds if the title has been held by one person for a minimum of 90 days.
Getting flash funds from a transactional lender like DoubleClose.com solves this problem. With them, you can get the money you need to double close successfully in one day.
Familiarize Yourself With How Things Are Done
You must also familiarize yourself with local laws, as in some states double closing is illegal. Let the title companies and closing attorneys you’re working with know that you’re double closing. Closing shouldn’t be a problem as long as the funds are with the attorney or title company for the duration of the closing process. It’s important to note that the money never changes hands until all the documents are signed. Double closing happens in the same place but in two different rooms. Make sure you complete all the paperwork beforehand so you can get the transactions done quickly. If you’re looking for quick transactional funding with proof of funds for real estate, reach out to DoubleClose.com. We won’t charge any fees if the deal doesn’t happen.