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Author Topic: double closings  (Read 2565 times)

Offline tbuddha

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double closings
« on: February 22, 2006, 11:16:51 am »
I'm sure the laws are different around the country but in Colorado, wholesaling is pretty tough.

The situation is this, you can't assign contracts on REO properties- period. I defy anyone to find a bank that will allow this, I'd love to know. I have heard of doing this as a double closing. You close your deal buying the property with the bank, then you go to the next room and sell to your buyer. Very few title companies will do this, but i have found a few in colorado.

The other problem people run into is that unless you have a buyer who is paying cash ( fat chance ), they have to get financing. In colorado, because of the amount of fraud, most lenders have a blanket policy of turning down financing if the seller hasn't owned the property at least 3 months. I've had lender reps tell me as soon as it looks like a flip they kill it. I may have found a couple lenders that will allow it though.

My question is specific. The bank selling the REO usually wants a loan commitment 2 days before closing to make sure you are ready to go. If I, as the wholesaler, don't even qualify, what do I do?


Offline GoldenKnight

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Re:double closings
« Reply #1 on: March 07, 2006, 01:44:50 pm »
Hi Jeremy!

Do you have a trustworthy buyer who can buy the REO from the bank, instead of you, and who is willing to pay you a good "referral fee" - preferably a percentage, of whatever you two agree to on the day he closes? Who knows? Maybe you can even split the net profits 50-50 of the ARV after the home sells?

This method won't require too much money out of your pocket, except perhaps the usual $10 earnest money to the seller, nor does it require any of your own credit. Depending on your buyer, perhaps you can even work out a deal with him about picking up the cost of the home inspection and appraisal in exchange for a smaller percentage for you. Lots of things you can do here. Just depends on how good you are with your negotiating skills.

Lots of good contracts available that can be written up between you and your buyer regarding the settlement of the referral fee. Or you can even write up your own contract and have it notarized. The trick is to find a rehabber/ buyer that is good and trustworthy. I know it is not a requirement, but perhaps on your first deal together you can accompany him to the closing table to gurantee payment to you. After that, trust shouldn't be so much of an issue moving forward. If he is smart though, he won't burn you anyway what with the possibility of getting more homes from you and all in the future. He'd be cutting his own throat if he did, right? Same holds true for him going directly to your seller and out-bidding you. It only takes once, right? After a few times of pulling that kind of crap on Wholesalers or Bird Dogs, he'll get a bad reputation quick and no one will be willing to deal with him again, especially when you spread the word about him at your local REI Club meetings. Reputation is everything in this business. But if either of these two issues are a major concern to you, I would suggest writiing up those clauses in your contract regarding him forfeiting any paid referral fees to you. In fact, you can even see if he will go for giving you half up front, then the rest at closing. That way, you BOTH have a vested interest in the home and should both feel more comfortable about burning each other.

Most rehabbers will usually take up to 3 months to rehab a house anyway depending on how much of the house needs rehabbed. It also may take that long to sell the house as well. Or a combination of the two.
So that should satisfy the bank's concerns about length of ownership.

Hope that helps.


P.S. - Here's a question: Could that buyer let you sign a contract (ie Intent To Buy, et al) in their behalf (by adding you as an "employee", "representative", et al) so that on paper at least, it won't look like you are a wholesaler?
In the beginning, God created Man. Soon, He soon discovered that Man needed a place to dwell, so he created Real Estate.

Offline Dural

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Re:double closings
« Reply #2 on: March 12, 2006, 02:52:19 pm »
In my experience, performing a double closings is easier said than done.  You have to find a closing attorney that is familiar with them and assume that everything will go perfectly at the closing.  And if you've been in the real estate business for a long, you'll know that closings are highly unpredictable.  It's easy for something to happen and the whole deal to fall apart.

Your best bet is to use hard money or partner with another investor using a JV agreement.

You can also get around the three-month seasoning requirement.  See the article on my site about it.

Offline Redtigress

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Re:double closings
« Reply #3 on: March 12, 2006, 06:04:47 pm »
I won't say this will work for double closings, but it's used alot with short term flips around here...

The key to all of it is the first appraisal... The one you get when you buy it.  What the bank is looking for is a reason that it's worth 150k one minute and 10 minutes later it's worth 220k.  What the investors I've spoken to here have said is make sure your appraiser writes into that first appraisal "Distressed seller" "pre-foreclosure" something... almost ANYTHING to indicate why you're getting it at below it's value.  As long as that is on the first appraisal, and that is submitted with the rest of the paperwork when you sell it very few people have had problems.  Then again very few are doing same day double closings.  
Rebeccah Smith
Cypress TX
A home for everyone. Anything's possible, with time and effort.


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