A question about double closing on Real Estate

9 Replies

I have a property under a purchase contract in the name of my LLC for $35,000. I put in some sweat equity and had some rooms painted and landscaping. I have buyers interested in the property and the selling price is $58,000.

When they go to get a loan, the property will be under the original owners name even though they will be signing a purchase agreement with me.

Can I still use transactional lending and double close on this property or do I need the original owner to put the property in a land trust with my LLC as the trustee?

Thanks

Talk to a local lender, you're going have problems selling to a financed buyer. FHA will likely be out either way.

Agree. A local lender is your best option in this case. Good luck.
Originally posted by @Donald Williams :

I have a property under a purchase contract in the name of my LLC for $35,000. I put in some sweat equity and had some rooms painted and landscaping. I have buyers interested in the property and the selling price is $58,000.

When they go to get a loan, the property will be under the original owners name even though they will be signing a purchase agreement with me.

Can I still use transactional lending and double close on this property or do I need the original owner to put the property in a land trust with my LLC as the trustee?

Thanks

The numbers sound good but there's always the risk of your end cashbuyer not closing. Then you've just increased the property value on a house that you don't own and aren't able to profit from. Be careful with that method. Prehabbing strategy is an excellent one to utilize when wholesaling but works best when you've closed on it already, put a little sweat equity in then flip it to another investor a.s.a.p for cash. However, to answer your question, yes you can still do a double closing just make sure the check is made out for cash payment. You might want to stipulate that to your end buyer ahead of time so they can inform their lender...

Kudos,

Mary

Originally posted by @Mary B. :
Originally posted by @Donald Williams:

I have a property under a purchase contract in the name of my LLC for $35,000. I put in some sweat equity and had some rooms painted and landscaping. I have buyers interested in the property and the selling price is $58,000.

When they go to get a loan, the property will be under the original owners name even though they will be signing a purchase agreement with me.

Can I still use transactional lending and double close on this property or do I need the original owner to put the property in a land trust with my LLC as the trustee?

Thanks

The numbers sound good but there's always the risk of your end cashbuyer not closing. Then you've just increased the property value on a house that you don't own and aren't able to profit from. Be careful with that method. Prehabbing strategy is an excellent one to utilize when wholesaling but works best when you've closed on it already, put a little sweat equity in then flip it to another investor a.s.a.p for cash. However, to answer your question, yes you can still do a double closing just make sure the check is made out for cash payment. You might want to stipulate that to your end buyer ahead of time so they can inform their lender...

Kudos,

Mary

 Thanks @Mary B. 

I was also thinking about putting a lien on the property for $23,000 but my original owner will know how much I sold the property for. Like I said, I didn't do much but I don't want him coming to closing and say you sold it for $58,000 and that's why I was looking at a double close. He didn't think the property was worth that much so he said he just wanted 35 grand for it. Is there any way to do this without him knowing the price I'm selling it for or should I just tell him and risk losing the property?

Originally posted by @Pari Thiagasundaram :

One more strategy would be to go to your local meetup group to find a CASH buyer. 

 I thought about that too but I know that will mean less money because a cash buyer will not pay $58,000 for it.

Originally posted by @Donald Williams :
Originally posted by @Mary B.:
Originally posted by @Donald Williams:

I have a property under a purchase contract in the name of my LLC for $35,000. I put in some sweat equity and had some rooms painted and landscaping. I have buyers interested in the property and the selling price is $58,000.

When they go to get a loan, the property will be under the original owners name even though they will be signing a purchase agreement with me.

Can I still use transactional lending and double close on this property or do I need the original owner to put the property in a land trust with my LLC as the trustee?

Thanks

The numbers sound good but there's always the risk of your end cashbuyer not closing. Then you've just increased the property value on a house that you don't own and aren't able to profit from. Be careful with that method. Prehabbing strategy is an excellent one to utilize when wholesaling but works best when you've closed on it already, put a little sweat equity in then flip it to another investor a.s.a.p for cash. However, to answer your question, yes you can still do a double closing just make sure the check is made out for cash payment. You might want to stipulate that to your end buyer ahead of time so they can inform their lender...

Kudos,

Mary

 Thanks @Mary B. 

I was also thinking about putting a lien on the property for $23,000 but my original owner will know how much I sold the property for. Like I said, I didn't do much but I don't want him coming to closing and say you sold it for $58,000 and that's why I was looking at a double close. He didn't think the property was worth that much so he said he just wanted 35 grand for it. Is there any way to do this without him knowing the price I'm selling it for or should I just tell him and risk losing the property?

All your seller is concerned with now is you coming up with the $35K per your agreement. Whether you do a double closing or assignment of contract is up to you. It does sound like your seller might have an issue with you making an additional $23K more then them within no time, literally... 

Kudos,

Mary

Go for the trust over the wet double close. It is a cleaner and easier process.

Did you run the comps on the property? What is the FMV? What does the original finance document say about assigning contracts. Check the clauses in the original mortgage make sure it doesn't have an acceleration clause/ due on sale clause. Always check the finance documents before you put property under contract and make sure there aren't restrictions/ limitations on your exit strategy. Always disclose to the seller before you put the property under contract your intentions.

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