In part one I discussed exactly what a double closing (simultaneous closing) was and how it all works. Today I want to go over some of the other points such as are there any negatives to doing a double closing and using traditional lenders to fund the closing. If you missed Part 1 of this article you can read it by Clicking Here…..
What Are the Negatives of A Double Closing?
In my part of the country, there just really aren’t any. We use closing attorneys rather than title companies for all of our closings. It only costs me about $300.00 – $350.00 on average for each closing. That comes to about $600.00 – $700.00 for both closings which I think is pretty cheap. Folks in my area are pretty much evenly split on whether or not they buy title insurance on the property. In most cases, I only own the property for about 5 – 10 minutes so I rarely buy title insurance when I am wholesaling properties.
Be sure to familiarize yourself with how things are done in your area. Closing attorneys in my city have no problem with double closings (simultaneous closings). However I have heard that some title companies in some areas won’t do double closings.
Can You Use A Traditional Lender?
If you are wholesaling a house and your buyer wants to use a traditional bank, you will most likely run into a seasoning issue. Seasoning is a term to describe how long a person has owned the house. The majority of banks will not fund the deal unless the title has been held by one person for at least 90 days. Some banks require you to own the property even longer. These rules were put into effect to protect homeowners from that small percentage of unscrupulous investors who were out to take advantage of folks.
Why Not Just Assign the Contract?
How you close your deals is a personal decision. I personally don’t like doing assignments unless my assignment fee is small. In my opinion the probability of the deal blowing up increases when you assign the contract. Your seller and your buyer see exactly how much you are making just for being a “transaction coordinator”. And in most cases, they are not going to be happy with what they see. The larger your assignment fee, the higher the probability this will happen.
As I said before, I always tell my seller from the very beginning, that I am not sure what I will be doing with the property. I let them know that at times I pass on properties to other investors, and they are always clear on the fact that my intention is to make money from this transaction. However, knowing this “intellectually” does not really alleviate the problem when they see just how much you made right there on the HUD-1.
So What’s the Answer?
For me, I almost always do double closings. I have only assigned the contract a few times in my real estate career. The advantages of doing simultaneous closings far out weigh the fact that I have to pay a little more in closing costs. Pick what works best for you, and you have made the right decision.