REO, double closing process?

Question

When wholesaling a non-assignable reo contract and you have to do a double closing do you have to "buy" the property to close on this from the bank? Then you "sell" the same property to your end buyer, while at the title company? My question/concern is, how does one "buy" the property in the first place in order to close, for the first part of the deal? Cant I just use the funds that would be coming my way from the end buyer in the sell portion of this deal? Or do I actually have to have cash/financing on hand in order to buy on this part of the deal during closing?

Curt Davis · Answer

@Pedro Oliva

Some closing attorneys will allow you to just use your buyers funds so you can in theory " close " on the home for a brief moment.  More closing attorneys will require you to get transactional funding in order to do this.

What I would suggest is see if your closing attorney will make you a " loan " for a brief moment and charge a small nominal fee for doing so, in order to keep everything on the up and up.

Good luck

Shannon Wright · Answer

I am in Cali but I have closed C-A deals with REO as party A, when the REO is Ocwen/Altisource. Not sure what out of state rules are, but I can do it if you ever have a Cali need. :)

GARY LEONARD JR · Answer

You are 100% correct!  I am an attorney in Massachusetts and with all due respect to Alex, you lost me Sir and I’ve been doing transactions since 2008.  As a matter of fact (and no offense to anyone) every person above is 100% incorrect.  I seen one comment mentioning “assignments” then he’s referring to getting hard money lender”? No idea little mixaroo.

Real quick cause I don’t want wrong info on this site for I care about everyone trying to make it in RE.  That also goes for the guys above, please don’t take me words as a insult gents.  Just you are wrong.

In any event REO and double closing- YES AND NO- It depends.  Real quick I don’t feel like typing look below

You = A

Bank= B

C= End Cash Buyer

AB = Banks Closing Attorney

AC= Investor Friendly Closing attorney

A sends offer to B- B accepts whoohoo

Before signing the A and B PSA  A will have to review and sign a addendum that AB issues prior to official acceptance of offer

A MUST REVIEW THIS ADDENDUM VERY CLOSELY - It will def day SHALL NOT BE ASSIGNED.  But what your looking for is a statement that spells out “Upon Purchase New title holder must live at property for 1-2 years prior to selling themselves” (verbiage differs in some states but all the same)

If AB addendum says that- back out kindly from the transaction.  If they try to “sell you” on it simply say you want that verbiage taken out- If they decline back out and go home.

However if it doesn’t have that verbiage (psssst I would say little less than half the 50 states don’t, accept the addendum and get your cash buyer on the line

Dont say anything to the bank about your end of deal it’s nunya

B then meets C and C initial  contract along with marked up Purchase price- “CONTINGENT OF BANK CLOSING”investor friendly attorney, if asked properly and make sure you have a decent rapport with them, ask if you can utilize the proceeds at the banks requested title company.  If the lawyer or investor friendly closing company are “investor friendly” they will let you close that day and let the buyer know exactly what’s going on and that everything is solidified.

Take $$$ from proceeds to close with B the bank then gives you the REO PROPERTY

YOU THEN (preferably same day) plan on doing some back and forth but worth it.  Solidify B C Contract with title transfer of prepaid PSA

You get the spread held in escrow

Buyer walks Away with nice REO investment

Bank is just happy they lessened their inventory

Natasha Walsh · Answer

THE QUESTION I HAVE IS WHEN YOU ARE DOING A DOUBLE CLOSING AND YOU DONT WANT THE BUYER AND AGENT TO KNOW THAT YOU ARE DOING A DOUBLE CLOSING HOW DO YOU SHOW THE PROPERTY. WHAT DO YOU SAY TO THE AGENT DO YOU PAY THEM

Eric M. · Answer

Well you need to do a little googling on it.  It is a way of funding a very fast flip when a property needs no rehab.  It is a way to buy and sell a property with none of your own money.

They are hard to put together though since you need to arrange a buy and sell at the same time.  You are sometimes limited by the purchase contract and also often limited by the end buyer's financing.

Pedro Oliva · Answer

@Eric Michaels  How does, transactional funding work?

Eric M. · Answer

Transactional funding has been well below 2% in costs for a few years now.  It is possible to get it as low as 1%.

Wayne Brooks · Answer

@Alex Bezu I realize you are an attorney, but you are dead wrong on that.  A double closing, 2 different HUDs are required, as the contract can Not be assigned.  The buyer on the HUD from the bank must be the buyer named in the original purchase contract.  REO purchases specifically prohibit assignments.

Ted Akers · Answer

@Pedro Oliva

More REO's these days are being approved under contracts that preclude assignment of the contract.  If assignment is prohibited major title companies will not allow the use of the end-buyers funds to be used for your purchase because assignment violates terms of the contract.  In these scenarios you typically will need to fund your purchase or use a private funder or transactional funding.  Transactional funding costs have decreased over the past few years and are less than 2%.

Alex Bezu · Answer

You should find a investor-friendly escrow company that would agree to do "two closings" in one transaction. Technically it will be only one closing. For you it will be an assignment where on HUD-1 you will be paid a pay-off as a lien holder. Double closing always require two separate transaction, even if both are done on the same date. Some companies provide transactional funding for this one closing day at a 5-7% fee. I don't know if an attorney will provide as transactional funder unless he is allowed to do that in your jurisdiction.

REO, double closing process?

Most Popular Reply