Can someone explain the different between a "dry" and a "wet" double closing. For those of you who do double closings, which version do you use mostly?
Dry and wet refer to whether or not the funds from the end buyer (C) are also used to cover the wholesaler's purchase from the seller (the A-B transaction). These are just made up terms with no official meaning, so I'm not sure which is which. I think "dry" means to use the end buyer's funds and "wet" means using a transactional lender to fund the AB transaction. But could be the other way around. If you use that terminology on a title company they're likely to be confused, too.
Double closings using just the end buyer's funds are much harder to do now. The title company wants to avoid any appearance of fraud.
Jon Holdman, Flying Phoenix LLC
@Jon Holdman Thanks for clarifying.
Can you or anyone else give me an idea of the costs associated with double closing compared to just a single(?) closing?
Also since no title companies do "dry" closings now, what does this mean for a wholesaler? Does this mean he must have enough funding for the entire purchase price of the deal?
@Brandon G. most of the time we are seeing the wholesalers who can do two things:
1. Assign the contract, take a fee and let the end buyer close
2. Use transactional funding, pay 1-2 points, and make sure you have the profit in the deal to have the cost of doing business
Jon's explanation is correct. "Wet" closing refers to you bringing funds separate from the end buyers funds. You can either assign the contract, bring your own funds, or use transactional funding. More REO's than in previous years, but not all, are prohibiting assignment which is where transactional funding come into play. Also most title companies have been moving away from using the end-buyer funds for the past couple of years. If you plan to double close when speaking to the title company tell them you are wanting to do "back-to-back" separately funded transactions and you should get a better reception from most of them. You do incur two sets of closing costs, with the seller paying title fees on your purchase and you paying them on your resale. Most transactional funding companies are charging 1.75 pts. for use of those funds.
Ted Akers, Transactional Funder
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