A few questions on Double Closing

- Do you have to include any special clauses in your contract when doing a double closing. Also, with the end buyer do you just use a standard purchase sales agreement.

-Do you have to pay capital gains on a double closing?

-What is there to be aware of that would be different from a standard transaction?

Edited: 06/26/2010 at 05:38AM

Jason Cummins

Real Estate Investor · Katy, Texas

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Aug 07 '08, 02:31 AM

I have only done one double closing. So I am not speaking from MAJOR experience here.

1. I did not have to include any special clauses. And yes I just used a seperate standard purchase agreement for the price of the house including the profit.

2. That is actually a great question. I have no idea if I did or not. I will have to ask my accountant.

3. Just be aware that you will eat some of your profits because of the closing costs on both sides of the deal. Also make sure that whoever you are selling to rezlies that it will be a double closing because if they are trying to get traditional financing it may be hard for them to close the deal.

Edited: 06/26/2010 at 05:38AM

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Aug 07 '08, 04:47 AM

Yes, you're going to have to pay capital gains tax on the net gain. You did own it, then sold it. So, its just like any other real estate transaction. It will be short term capital gains, so its taxed at your ordinary income tax rate.

Edited: 06/26/2010 at 05:38AM

Jon Holdman, Flying Phoenix LLC

Terry Royce

Real Estate Investor · Baltimore, Maryland

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Aug 07 '08, 11:56 PM

Jason, why did you have to include the profit?

I thought you could just use a standard 1pg agreement, and did not have to outline your profit.
I thought that was the whole point? To hide it.

Edited: 06/26/2010 at 05:38AM

Matt Faller

· Kansas City, MO

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Aug 08 '08, 01:11 AM

Personally, I include clauses saving me just incase somthing DOES happen and im not stuck purchasing this house if I dont find a buyer.
Things that work are:
Subject to Business Partner Approval
Subject to Satisfactory Financing
you get the idea, theres a few more, but just be creative, and fair.

Edited: 06/26/2010 at 05:38AM

Jason Cummins

Real Estate Investor · Katy, Texas

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Aug 08 '08, 02:21 AM

I didnt mean that I had to show my profit.

I meant that if I got the house for $50,000 under contract

and I wanted $10,000 in my fee

i would add that to the new contract with the end buyer, which is obvious and I dont know why i even pointed it out

didnt mean to confuse you

Edited: 06/26/2010 at 05:38AM

Terry Royce

Real Estate Investor · Baltimore, Maryland

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Aug 09 '08, 08:45 PM

Matt, even if you didn't purchase the property, your clause should state the exclusive remedy is the earnest money deposit. So that you can back out without purchasing.

Edited: 06/26/2010 at 05:39AM

Tyler Thrush

Real Estate Investor · Dana Point, California

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Aug 09 '08, 09:43 PM

I do know that in california you are going to have to disclose what you are making on the deal. We have refused to insure properties because of the fat that there was a double closing and there was no disclosure made

Edited: 06/26/2010 at 05:39AM

M Lang

Real Estate Investor · Providence, RI

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Aug 11 '08, 09:03 AM

Hey Wheatie! Now, if it wasn't a double close and is actually just an assignment, would you have to pay taxes on the assignment fee you collect from the enduser? If so, when do you actually pay the taxes?

Edited: 06/26/2010 at 05:39AM

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Aug 11 '08, 09:22 AM

Yes, you would have to pay taxes on an assignment fee, too. That wouldn't be a capital gain, so it would just be ordinary income.

As far as when, at the least you would need to pay quarterly tax payments in order to avoid penalties at year end. Maybe the title company would withhold the taxes, I'm not sure.

Since you're asking about taxes, do some searching and read up on "self employment tax". If you're self employed, any income you make, like assignment fees, is subject to SET. That's social security and medicare. As an employee, you pay half of this tax (about 7.5%) and your employer pays the other half. When self employed, you pay both halves.

Edited: 06/26/2010 at 05:39AM

Jon Holdman, Flying Phoenix LLC

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Aug 11 '08, 09:23 AM

By the way, I'm not an accountant, so please consult your own CPA.

Edited: 06/26/2010 at 05:39AM

Jon Holdman, Flying Phoenix LLC

Alex Locklear

Real Estate Investor · Raleigh, North Carolina

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Sep 06 '08, 11:07 PM

So are ALL traditional lenders not doing double closings?

Edited: 06/26/2010 at 05:51AM