All Forum Posts by: Shari Peterson

A legitimate double closing is one in which the buyer brings funds to close on the A to B transaction so that it can be recorded before the B to C transaction closes. Those funds can be cash from his own or a friend or partner's bank account, or they can be from a transactional funder. 

Transactional Funding (TF) is different from Hard Money (HM) because: 

1. TF is 100% funding of the purchase price and all closing closes. HM usually requires the borrower put down 10-25% cash toward the purchase.

2. TF is very low cost, usually 2 points. HM is typically high cost, with 2-5 points plus 8-15% interest

3. TF requires that you have a qualified End Buyer who will close immediately after the first closing, usually the same day. HM does not require that you have an End Buyer and you will have the loan for anywhere from weeks to 12-24 months.

One other point -- many of the highly reputable title insurance companies underwrite double closings. I've closed with nationally reputable First American, Chicago Title, Stewart Title, Fidelity, to name a few. These are the companies that underwrite and actually provide the title insurance for the transaction. However, it is less common to find as many agents of these title insurers who will conduct a double closing. Think of the title insurer (e.g. First Amerian) as a country and the individual agencies (e.g. Surety Title) as states within that county. The country sets the rules but each individual state can fine tune and further restrict those laws. 

It is quite possible he is doing a double close, which means there are two separate closings of the same property on the same day. The first closing occurs with funds the buyer brings to closing. The title company records the closing with the county. Then the second closing is recorded with the county after the first closing is complete. 

It sounds like the buyer is getting transactional funding to bring to closing for that first transaction. This is the A to B closing; the second is the B to C closing. A=The Seller, B=The Buyer (wholesaler), and C=The End Buyer (you).

If he is using transactional funding, most if not all of transactional funders require that both the A-B and B-C MUST occur at the same title company. That is what we require for deals we fund. This is because the same closing agent must oversee the proper recording order. Since they are the ones doing it, they can issue the final title insurance policy with certainty, knowing that the B Buyer is indeed the Seller of Record at the time of the B-C closing.

Double closing and assigning are two different things.

When you double close you buy the property at a first closing -- the A to B Transaction. You then immediately sell that property to a new buyer THAT SAME DAY at the second closing -- the B to C Transaction. 

A=The Seller, B=The Buyer, C=The End Buyer.

When you assign, you have a contract with the Seller. This is the A to B Contract. You then find an End Buyer to buy that contract from you for an assignment fee. Now, the deal is an A to C Contract. You drop out of the transaction after you receive your assignment fee. The C End Buyer closes when he buys the property from the A Seller.

Re Q3 and 14 days for the Inspection Period: If you ASSIGN, the one you're assigning the contract to must abide by the original terms of the contract. The 14 days holds

If you DOUBLE CLOSE, it would be best to have the Inspection Period end at least one day before your 14 day Inspection Period ends. That way, you can still exit the contract if it doesn't meet your end buyer's inspection requirements. With a double close, you are creating a brand new sales contract with your end buyer and you set the Inspection Period terms (as you negotiate the agreement with the end buyer). 

@Ned Carey has given a good explanation of the assignment process. Another option is to double close. The question is: When do you Assign versus Double Close?

As a general rule, you want to Assign the contract if the profit spread between the price you have it under contract for and the amount the end buyer is willing to pay is less than 10% or $10,000.

What is a reasonable price to expect the end buyer to pay? 

1. Figure out the After Repair Value (ARV) - this is the amount the house will typically sell for in excellent condition to an owner occupant. Let's say for an example, the ARV is $300,000.

2. Figure out how much Repairs are going to be to get the condition of the house to ARV. As an example, let's say the repairs are $50,000.

4. Subtract the Repairs from the ARV: $300,000 - $50,000 = $250,000.

5. Multiply the price in #4 by .65 to .75. This is the reasonable price range that an end buyer will pay. $250,000 x .65 = $162,500; $250,000 x .75 = $187,500.

6. In this example, to calculate an Assignment Fee of 10% = $16,250 to $18,500. NOTE: The further you get away from $10,000, the less likely an end buyer will pay that for an Assignment Fee.

7. Find out from your end buyer what % of profit do they shoot for in their deals? They will probably express it as 25% to 35% after costs. THIS is the number you use to calculate how much you will either Assign it for or Sell it for.

8. This is where strategy comes into play: How much are you getting it for? Will the buyer accept your Assignment price or perhaps walk, claiming it is too high? Do you want to double close and remove the possibility that they'll walk? How much will transactional funding for the double closing cost you? After the transactional funding and closing costs, will you make more money than if you had Assigned it? When you have these questions answered, you should have a clear idea which direction to go.

I hope this helps with your Wholesaling journey

I can recommend Texas American Title / Patten Law Firm in Irving TX. They are just about 20 miles south of Flower Mound. PM me if you want more info about them (I think BP Forum rules prevent me from posting phone numbers, email addresses, and website addresses.)

Yes, you CAN double close. If the seller wants to use their own attorney, we require that your attorney is in receipt of the 100% of the amount necessary for the BC to close when we provide transactional funding for double closes. In addition. your attorney must be the one responsible for the recording of both the AB closing and the BC closing. In lieu of that, another option is that both the escrow for the AB and BC be held at a title company, and that title company is the one responsible for recording the AB and BC closing.

As a general rule, if your profit margin is higher than 10% or $10,000, you may do better to do a double close rather than the assignment. The reasoning is as follows:

Let's say you can get a property under contract for $100k. Its AS IS value is about $140k. Any rehabber would be happy to buy it for $140k in a BC transaction because they know they can put $40k into it and sell it for $250k. The rehabber stands to make $70k on this deal, and you will profit $40k in a double close.

AB Transaction: Buy for $100k

BC Transaction: Sell for $140k

HOWEVER -- if you ask for a $40k assignment fee, the rehabber will likely tell you to take a hike or demand you lower the assignment fee to $10k or $15k or he will walk away from the deal.

If you double close, he won't know you paid $100k for the deal and he is happy with the good deal HE got for $140k because he will make a nice profit.

On the other hand, you want to Assign the contract if the reasonable profit margin is only $10k-$15k, meaning the AS IS value of the property is only $110k-$115k. Don't waste your money paying for funding.

I can recommend that you contact @Shannon Wright at Casa Bella for all of these types of closings. She is very in tune with the needs of real estate investors. I've funded many double closings with her and she always handles the deals smoothly.