Real estate wholesalers use a variety of strategies to secure profitable deals, and one strategy is double closing.
This method involves two separate transactions: a purchase from a seller and a subsequent sale to an end buyer.
Now, double closing can be quite rewarding, but there are some notable risks that real estate professionals should know about before they attempt this method.
In this blog post, we’ll explore the main risks of double closing wholesale real estate deals so you can stay ahead of the game and make the most of every opportunity that comes your way!
Title Company Cooperation
Not all title companies are willing to facilitate a double closing transaction. Therefore, a wholesaler must establish a relationship with a title company that’s experienced in double closing.
Without a cooperative title company, the wholesaler may face delays and complications when they’re trying to close a deal.
Lender Restrictions
Some lenders have clauses in their loan agreements that prohibit double-close transactions, and failure to adhere to these restrictions can jeopardize a deal and harm a wholesaler’s reputation.
To avoid legal issues, a wholesaler must carefully review their options before choosing a financing arrangement.
And if they can’t get approval from a regular lender, they must seek an alternative solution. For example, they can get funding from a reliable transaction lender that specializes in funding double-close transactions without any complex procedures.
Financial Implications
Double closing demands a considerable amount of capital, so wholesalers have to be financially able to temporarily acquire properties before selling them to end buyers.
In other words, they need to be able to cover the purchase price, as well as closing and holding costs. And, of course, they must remember that closing costs have to be paid twice in this kind of deal.
Disclosure Issues
For a double-close deal to work out successfully, the initial seller has to know that an end buyer will be purchasing the home from the wholesaler at a higher price.
And failing to disclose this information could lead to legal issues. So, to address this risk, a wholesaler should prioritize open communication. Remove this highlighted portion – Disclosure would be regulated on a state level and in all states that I operate in I am unaware of disclosure requirements in a double closing.
Sure, double closing can be a powerful tool in a real estate wholesaler’s toolkit, but they need to know the ins and outs of these deals before they try to profit from them.
It goes without saying, but if a real estate wholesaler can avoid the pitfalls of double closings, then chances are they’ll do quite well in this business. And if you’re looking for a reliable and hassle-free way to get transactional funding for double closing, get in touch with DoubleClose.com.