Short Sale Double Closing in Todays Market

[Jack Krupey]

Hi Everyone,

I wanted to post a new thread about how to do these deals given current market conditions.
We have a cooperating seller who would be willing to just give us the deed in liu of foreclosure however we haven't filed due to the short sale.
We have a buyer for the property. Standard financing, non fha. (However for others please note any FHA Differences, I've read they have removed their seasoning requirements for 1 year?)

We have a good price on the short sale negotiated with the bank
What is the best way to set up a double closing so that we can retain the proceeds.
I've read about Land Trusts and Option Contracts and the pros and cons however I know the lending landscape is changing.
Is anyone using one of those double closing funding companies.

Right now two title companies have refused to to double closings. The bank we are short selling wants to see the hud and they obviously don't want to see anyone making a profit on the hud.

I know this thread has been discussed some in the past however with the ever changing market I'd appreciate a new update.

Thanks,

[Scott Hubbard]

Have to agree with Will: Lenders are really opposed to investors making money at their expense. And it is much better to use your own funds.

Double Closings are viewed as as sneaky at best and illegal in some cases.

If your using your own funds, then all that is required is the HUD-1 to reflect the fully funded A to B transaction. The subsequent transaction B to C is an entirely different close and is not required to be disclosed (some title company opinions may vary here). A problem in this scenario might be with the B to C transaction where the buyer's lender may question this transaction since full disclosure will reveal the A to B transaction. In my experience, the underwriter may take a closer look or will scrutinize the preceding transaction . As long as the title company will insure, usually this can be overcome with a quick explanation of the A to B transcation. Usually the larger the margin between the AtoB and BtoC transactions, the greater the chance for scutiny.

Using flash funding or your own funds to close is really called back to back closing as they are really two seperate closings. In trying to effect an actual double closing, your trying to use the end-buyers funding so you do not have to come to the table with any of your money. This is also known as simultaneous closing.

The reason many title companies do not allow this, (check your state laws) is because many states have passed laws that require full disclosure of the transactions. This means that Seller's lender must be informed of this fact. The title company will be required to provide a HUD1 both prior and after the sale. Some lenders they will issue an approval letter with the stipulation that you must close with your own funds, or even that you must be on title for a minimum amount of time.
This approval letter usually will effectively negate any possibility of a double closing. I hear people are still doing double closings and but I have not been so fortunate.

Personally, I lack the capital to close most deals because of various reasons and I use private monies from local investors. I cost me 12% / year plus one point with a minimum of 3%. It is a bit expensive, but I can have access to funds usually within 2 business days and can float for 29 days without having to pay additional fees. This way, I do not have the troublesome double closes to deal with. I can also effect repairs if I need to and can also give the end-buyer extra time if needed.

If there is enough margin in your deals, I would recommend going in this direction. Check your local REIA to see if there is any private money doing this type of lending