The Ins and Outs of Double Closings for Real Estate Wholesaling

In the world of real estate wholesaling, double closings are a common transaction method. However, they can also be confusing for those new to the game. Essentially, double closings allow a real estate investor to purchase a property and then resell it in the same day. This can be a great option for those looking to make a quick profit, but it’s important to understand the ins and outs of the process before diving in. In this post, we’ll break down the basics you need to know about double closings for real estate wholesaling.

First, let’s review the basic process of a double closing. The investor will find a property that is undervalued or in need of repairs, negotiate a deal with the seller, and enter into a purchase contract. They will then find an end buyer who is willing to pay more for the property, and enter into a separate purchase contract with them. Both contracts will typically include a contingency clause, which allows the investor to cancel the contract if they are unable to find an end buyer.

At this point, the investor will contact a title company or closing attorney to facilitate the double closing. The title company will create two separate transactions – one for the purchase from the seller, and another for the sale to the end buyer. The wholesaler will need to provide the funds for the first transaction, the purchase from the seller (unless the title company or closing attorney allow pass-through funding), which will immediately be wired to the seller’s bank account. Then the wholesaler will complete the sale of the property to their end buyer and they will then receive funds from the second transaction which will be wired to their account. The difference of the purchase price from the seller and the sale price to the end buyer is the “spread” the wholesaler will receive.

One of the benefits of a double closing is that it allows the wholesaler to keep the details of the transaction confidential. Since the two transactions occur concurrently, the seller and the end buyer will not be aware of each other’s information. This can be particularly useful if the wholesaler is concerned about backlash from the seller or the end buyer, or if they are looking to keep their profit margin private.

However, there are also some potential downsides to consider. For example, double closings can be more expensive than other transaction methods. Some title companies or closing attorneys may charge for two separate title searches, title insurance policies and two closing fees among other charges. Though it’s very common for the title company or closing attorney to offer discounted rates to the wholesaler since it’s a double closing. Also bear in mind, some states may have laws or regulations that make double closings more difficult or even impossible.

If you’re considering a double closing, it’s also important to work with experienced professionals who can help guide you through the process. I highly recommend you reach out to other wholesalers to determine with title companies or closing attorneys are “double close friendly”. Experienced title companies and real estate attorneys can provide valuable advice and support, ensuring that all aspects of the transaction are legal and above-board. As a wholesaler you should also be sure to have thorough purchase agreements in place with the appropriate terms to protect your position and earnest money throughout the process.

Overall, double closings can be a valuable tool for real estate wholesalers, allowing them to make solid profits without exposing either party (the seller and end buyer) to sensitive information they don’t want disclosed. However, it’s critical to thoroughly understand the process and potential risks before diving in. By working with experienced professionals and doing your due diligence, a wholesaler can minimize risks and maximize the rewards of this transaction method.

Happy Flipping!