Title Company's and Closing Wholesale Deals

[Alan Brouillette]

Ok, so I am wondering in the state of Rhode Island, what are some recommendations for investor friendly title agency's and lawyers. Specifically one's that allow back to back closings, etc. Thanks in advance for your help, and Happy Holidays!! Alan Brouillette

[Anthony Thompson]

Alan, I would recommend attending a local investor group such as RIREIG or Black Diamond REI and asking some members there.

It also depends on what you mean by "back to back closings".

If you mean one closing after another in general, that's nothing special - there's no difference between having closings at 1pm and 2pm vs. 1pm and 5pm.

If you mean that the first buyer doesn't need to bring money to the first closing because s/he is actually using funds from the second closing in the first closing, it's difficult to find an attorney who will do that these days.

Like a lot of things, this is fallout from the financial crisis of 2008-2009 which resulted in things such as the Dodd-Frank regulation.

Cleaning up after bad actors resulted in a lot of examination of closing and mortgage practices, such as The Detection and Deterrence of Mortgage Fraud Against Financial Institutions: A White Paper (2009).

There are a lot of issues here and you might be best establishing a relationship with an experienced real estate attorney as an advisor in general (again, ask around at local investment groups), and then broaching the question of double closings.

In general an assignment is far, far preferable to a double closing. One of the biggest reasons is that at the closing table usually all parties will be present which means everyone will be on the same page with what's happening.

Compare that to most double closings, where the investor/wholesaler usually tries to keep the owner in the dark as to the subsequent closing and real source of funds. To me, when you are trying to hide things from people in a transaction, it already starts to seem like it's getting into the "fraud" area.

It may not be fraud - I'm not an attorney - but it doesn't give me a good feeling and in 95% of the cases the same thing can be accomplished with an assignment and all parties being on the same page at closing.

In particular, I would never, ever do a double closing if the end buyer is using a bank loan to purchase the property (unless you yourself are going to fund the first transaction).

Banks can and have worked with law enforcement to find cases like this and prosecute people, and people have actually gone to jail (yes, in Rhode Island, and yes that has included attorneys involved in various mortgage fraud related schemes).

For some spine chilling reading, for example, see Providence lawyer, five others charged in alleged mortgage fraud scheme. It is just one of many examples in RI I've run across over the years, where attorneys have ended up going to prison.

If you absolutely must do a double closing and an assignment won't work (again, this is very rare), you should research "transactional funding" which is basically where you rent money to actually close the first transaction, and then it's immediately refunded to the lender when the second is closed. It's a little expensive depending on the amount involved, but it may be cheaper than a legal defense team.

Again, I'm not a lawyer so all of this could be wrong. I'm sure people have done double closings just fine in RI and may well continue to do so in the future. I'm just trying to make you aware of some issues to think about if you start working on something and a double closing is one possibility you're considering.

[Steven Leigh]

@Anthony Thompson is correct that double closings are pretty hard to find anymore. I can't speak to Rhode Island specifically, but just wanted to add that if a typical assignment deal doesn't work for some reason and you're considering a double closing, you may want to look into transactional funding for your deals.

Basically, transactional funding is where a lender lends you the money to close the deal yourself for about 15 minutes until the end buyer closes it. You pay about 1-4% for transactional funding typically. It can be worth it as long as your spread is large enough.

[Bob Flynn]

@Anthony Thompson have you used transactional funding before? If so, who provided it and how was the experience?