Real Estate Investing Information Blog

A double closing is the immediate purchase and sale of a real estate property involving three parties: the innovative seller, an investor, and the final buyer. The fundamental reasons for having a double closing differ. The most pressing and standard reason is to allow the middleman to use the purchasers funds to obtain the property from the innovative seller. Another general reason for a double closing is to hide the identity of the purchaser or seller. Normally, a real estate investor first enters into an agreement to purchase a property and then consequently (before closing the purchase) enters into a bond to sell the property (optimistically for a higher price). The investor then utilizes a double closing to close both transactions at around the same time.

The mechanics of a double closing differ, depending on who the buyer and seller are, who is given that the financing, and who is conducting the closing. In the simplest form of double closing, the purchaser would pay the purchase toll to the middleman and they would finish a settlement statement (HUD-1) for their transaction. The purchaser would have to stay while the middleman uses the majority of the purchase monies to purchase the possessions from the seller. The seller and middleman would also complete a split settlement statement for their transaction. The middleman would then teach the seller to deed the property directly to the purchaser.

There are potential drawbacks to the use of a double closing. In a state that collects a transfer tax, the county clerk or auditor may thing to the fact that the innovative seller's name is not on the purchaser's settlement statement. The purchaser's lender may do their own closings, and may object to being involved in the transaction among the seller and middleman. The purchaser or seller may criticize of the profit made by the middleman, or they may hate each other. The closing agent may thing to being paid for only one closing while having to do additional work. Real estate agents may dislike that they did not get the highest potential price for their seller. These and further hindrances may require a middleman to be original when conducting a double closing.