Real Estate Wholesaling Explained: How a Double Closing Works

Описание: Learn more at https://retipster.com/terms/double-cl...

When we talk about wholesaling real estate through a double close, it's very similar to closing through an assignment — except it has fewer drawbacks.

With a double close, you (as the wholesaler), sell the property to an investor-buyer, and the investor-buyer pays for the transaction between you and the motivated seller.

Let's use the same numbers as the example above.

Say a property owner agrees to sell for $25,000, and you market it for sale for $32,000.

When the buyer agrees to pay $30,000 for it, the main difference is that you send a new purchase agreement to the buyer between you and them (the original property owner is not listed on this contract).

Once this new agreement is signed by you and the new buyer, you send both the purchase agreement between you and the new buyer AND the original purchase agreement between you and the original seller to the title company, so they can process the closing.

If you're working with a good title company (one that understands how this type of transaction works), they will schedule both closings to occur back-to-back on the same day — and this is where we get the name “double closing”.

To be abundantly clear, you have two different purchase agreements in place:

Purchase Agreement #1: Between the original seller and you for $25,000 (A-B).
Purchase Agreement #2: Between you and the new buyer for $30,000 (B-C).
You send both fully executed purchase agreements to the title company simultaneously. If the title company is investor-friendly (and not all title companies are), they shouldn't have an issue conducting a transaction where they use the buyer's funds to pay off the seller AND send the difference to you.

So, in our example, when you meet with the buyer first at closing. They will wire (or bring a cashier's check for) $30,000 to fund the deal.

After all the documents are signed by all three parties, the title company will use the buyer's funds to complete two transactions:

Transaction #1 (A-B): The title company uses the #30,000 funds in escrow to issue the seller a check for $25,000.
Transaction #2 (B-C): The title company issues a second check for $5,000 and pays this difference to you.

Single Source Funding

One helpful practice is for the wholesaler to provide a disclosure form for the buyer to sign. In this form, the end buyer acknowledges and consents that the title company will use the funds from their B-C transaction to pay the seller in the A-B transaction.

This form will also make the buyer aware that to close, they have to wire the funds a day or two before closing to ensure that everything runs smooth and there are no unnecessary delays on closing day.

This disclosure form does not display how much the wholesaler purchased the property for, which is a huge plus!

Using the end buyer's funds to cover BOTH transactions is called “single source funding”. Not all title companies are willing to close transactions like this, so if you're looking around for an investor-friendly title company that does offer this service, you can start the conversation by asking them,

“Can you conduct a double closing with single source funding?”

If they act confused, it may take a bit more explanation… but you also may be talking to a title company that won't be able to close these types of transactions.

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