Double Closing

4 Replies

Hello everyone,
I have a few questions about double closings, who is actually paying the closing costs for both closings? When I get the buyer do I then contact the title agency and tell them i need a double closing? What do i need to bring with me to closing and do i tell the buyer that im doing a double closing and the seller? Any help would be appreciated, Im in contract with a bank Owned property....got a steal on it.....now want to sell it?
Also I had to put a deposit down when a signed the contract, do i get this back or is it part of my "finders fee"

You are both a buyer and a seller in this transaction.

With the bank (they are the seller) they will have closing costs and you will as well. Who pays the fees is a negotiation. I assume the bank is going to carry the note on this loan (the house they are unloading). Some or all of the closing costs are probably rolled into the new note. Which is a nice way of saying you will pay (directly or indirectly) the closing costs. For the sake of this question, the seller often will buy the title policy for the buyer in a transaction like this. Now, here is the difference with a double close...IF all parties KNOW this is being bought and sold at the same time by you, and they agree to it, THEN the title company can do a simultaneous policy transfer so that YOUR buyer is the recipient of the new title policy and title insurance (with NO cost to you)

Your earnest money will show up on the HUD 1 because that is part of your down payment on this property, if there is a downpayment. If it is 100% financing, then you will get your earnest money back...as you can see it all depends on how you have negotiated your loan.

The title company knows all about this closing and are moving toward a close date, ready to draw up documents for the closing with the bank and awaiting instructions from them as to how to set it up.

Once that is accomplished...

Now, you become the the seller. (just like the bank was above). Same thing happens again, however the cost of title can be Zero this time, and the title work will be be in the name of the new lender and owner.

The title company will receive the money and the instructions from the banks involved as to who gets paid what. Then the Title company will pay you your fees as agreed with both of the lenders and the buyer.

Yes the Title company needs to be brought into the circle as soon as you know it is going to happen so they can get the documentation in order.
Names of everyone who has ever owned the property will be in the title history so there are no secrets to be kept from your buyers.

One thing you do NOT want at a closing is surprises for anyone involved. Tell the buyer upfront how you got the property at a good price and are selling them the property at an exceptional value. If they found out at closing they might feel taken advantage of and walk, unless of course it is a truely exceptional deal for them too.

Danboron, I kind of got lost on the part about the selling bank carrying the note. I would guess normally that would not be part of the deal. On a double closing with an REO, the selling bank will normally require you to provide proof of funds or loan approval from a lender before they will even accept your contract.

As Dan outlined your earnest money will show up on your HUD 1. The HUD 1 is a balance sheet for all expenses and credits in a real estate transaction. Everything will always balance out on the HUD 1. You won't necessarily get back your earnest money, but it will be credited to you on the HUD 1. It will go towards any expenses you have. If your credits are over your expenses then the title company will owe you money on the HUD 1. If your expenses outweigh your credits then you will owe the title company money. Whatever you owe or are owed from the first closing will be combined with your second closing and you will get a check for that amount.

Also as Dan pointed out, who pays closing costs is dictated in the contract. In a double closing you will not be paid a "fee" so to say. You will receive the difference in the two closings as I described above.

Also, when you have a simultaneous title policy pass-through as Dan described, you will still have to pay the difference for title insurance on the difference between what you are buying it for and what you are selling it for. See the price of title insurance is proportionate to the price of the property. So if you are buying the property at 100K then your seller will be paying for title insurance on 100K, but when you sell it for 110K then your buyer will need title insurance on 110K which will be more than what your seller has provided for. You will pay for title insurance on the 10K difference.

In reference to telling the title company, not only does the title company/agent need to know that you are doing a double closing, they need to be an investor friendly title company. Some title companies/agents won't do double closings, and some of them will make it an experience from hell for you to do one. Make sure you find an agent that will be glad to do it for you.

I also personally don't tell the seller what I am doing unless I need to or unless I am doing an assignment, but I always inform the buyer of the situation.

I visited with my title agent this afternoon while I was writing this response so I was quoting her for this discussion...your point is excellent...when there is an increase in the price of the property (which neither she nor I took into account) the title costs will also go up by the difference.

She indicated to me the importance of the selling bank needing to know that this would be a "policy transfer" situation and had to agree to it before it could transpire, something about "full disclosure" laws that had to be met in order for KSBUCKEYES to realize the savings on the title work. Any comment Ryan?

You are absolutely correct, Dan. RESPA laws require the seller to sign off on the fact that the fee that they are paying for title insurance may go to partially fund your title policy to the other buyer. If I have concerns that the seller might be weird about me doing a double closing, then I circumvent this by just eating the title policy or telling the new buyer that if he or she wants a title policy then they will have to pay for it themselves. If the seller is not providing any funds for the title policy pass-through then they are not required to sign any disclosure forms.