Double Close Confusion

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Double Close Confusion

Brad T.
Investor · Langhorne, PA · Member since 2023 · 18 posts · 4 votes

Hi Everyone, 

New to BP & Wholesaling and hoping someone can help me understand the double close strategy a little better. I get the general concept.. but struggling to understand all the fees. 

So from what I gathered, you will end up paying two sets of closing costs (A to B, and then B to C).

Questions-

As wholesalers, we also cover the seller's closing cost to make the offer more appealing. So.. are you paying 3 sets of closing costs to get the deal done?

In Pennsylvania, typical closing costs can be anywhere from 5%-6% of the sale price. So would I need to factor in 12%-18% of the sale price into the deal to cover 2 to 3 sets of closing costs? Or am I way off base?

Sorry if this is a dumb question.. Still learning. I just can't wrap my head around the fees.


Thanks in advance.

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Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Brad T.:

Hi Everyone, 

New to BP & Wholesaling and hoping someone can help me understand the double close strategy a little better. I get the general concept.. but struggling to understand all the fees. 

So from what I gathered, you will end up paying two sets of closing costs (A to B, and then B to C).

Questions-

As wholesalers, we also cover the seller's closing cost to make the offer more appealing. So.. are you paying 3 sets of closing costs to get the deal done?

In Pennsylvania, typical closing costs can be anywhere from 5%-6% of the sale price. So would I need to factor in 12%-18% of the sale price into the deal to cover 2 to 3 sets of closing costs? Or am I way off base?

Sorry if this is a dumb question.. Still learning. I just can't wrap my head around the fees.


Thanks in advance.

That's not a dumb question. The idea of real estate investing is to be profitable and you need to know your costs.

If you are covering the seller's closing costs, that is one set of fees.
When you buy the property in the first closing, you are also paying your fees as well. That's fees number 2.

If you use a Hard Money Lender to transact, you will have their fees also. That is added to your fee list.

When you sell, you will have fees, your own, that you pay.
So, you are paying 3 closing costs and your hard money loan costs if you're using hard money. Plus you pay any transfer fees the state charges. Make sure you talk to an escrow agent to get more detailed information.

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  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Brad T.:

    Hi Everyone, 

    New to BP & Wholesaling and hoping someone can help me understand the double close strategy a little better. I get the general concept.. but struggling to understand all the fees. 

    So from what I gathered, you will end up paying two sets of closing costs (A to B, and then B to C).

    Questions-

    As wholesalers, we also cover the seller's closing cost to make the offer more appealing. So.. are you paying 3 sets of closing costs to get the deal done?

    In Pennsylvania, typical closing costs can be anywhere from 5%-6% of the sale price. So would I need to factor in 12%-18% of the sale price into the deal to cover 2 to 3 sets of closing costs? Or am I way off base?

    Sorry if this is a dumb question.. Still learning. I just can't wrap my head around the fees.


    Thanks in advance.

    That's not a dumb question. The idea of real estate investing is to be profitable and you need to know your costs.

    If you are covering the seller's closing costs, that is one set of fees.
    When you buy the property in the first closing, you are also paying your fees as well. That's fees number 2.

    If you use a Hard Money Lender to transact, you will have their fees also. That is added to your fee list.

    When you sell, you will have fees, your own, that you pay.
    So, you are paying 3 closing costs and your hard money loan costs if you're using hard money. Plus you pay any transfer fees the state charges. Make sure you talk to an escrow agent to get more detailed information.

    4Reply
  • Thomas Higgins
    Investor · Pittsburgh, PA · Member since 2016 · 78 posts · 45 votes
    3y

    Hi Brad!

    If you are doing this in Pittsburgh there is likely a way to make this much more cost effective using a drop and swap. Our team hasn’t acquired any properties from whole sellers but I have a feeling the same concepts will apply. DM me I’ll connect you with our attorney/closing company and we can see what they say.


    Also we are very active in acquiring mini-multis if you have any under contract that you want us to take a look at!


    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    This i should be your end buyers expense. 

    0Reply
  • Jesse LeBlanc
    Investor · Atlanta, GA · Member since 2016 · 627 posts · 374 votes
    3y

    @Brad T. great questions for a new wholesaler so you know what to expect going into the business vs get pissed later and mad at someone else for your lack of experience.  So I appreciate great questions. :)

    I believe it's all been explained above already, but always free to clarify anything as I've ran a wholesale company in Atlanta for years, then mentored across the US from 2018-2022 (stopped end of last year to travel and enjoy life every day).

    So IF you choose to double close, then the option of paying for your closing costs on your purchase (the AB transaction) is optional but NORMAL.  IF in your contract with the seller you make them pay, you can but normally you as the buyer would pay for your set of closing costs.  Depending on the state, usually the taxes are a wash as it's prorated, then when you sell same day it's prorated and again a wash.  But your attorney or title fees will be on your if you as the buyer pay for them on your AB side. 

    Then if you double close, when you sell, your end buyer would then be paying for their closing costs UNLESS you already had it in the contract with the buyer that they also pay for your AB closing costs (which I find extremely annoying and rude personally, and if you wanted to do that just build it in the price vs telling them they're paying for your choice to double close when you could have assigned the deal).

    Nice segway, so I'll run with it. If you ASSIGN the contract and are transparent with the seller and your end buyer, you'll never need to double close. There will only be an AB closing, then your asssignment fee will just be a line item on the HUD/Settlement statement and your seller will now be direct with your end buyer and one set of closing costs that your end buyer will be on the hook for usually.

    If you don't have to double close, then don't.  Save everyone time and money.  But if you choose to double close for various reasons, keep seller separate from buyer, keep your fee private, someone refuses to sign an assignment contract, the closing team doesn't approve (stupid) or some other reason, then yes, double close.

    Depending on the state laws or the closing company will also help make your decision on double closing and your additional costs.  Most states you can use "pass through funding" meaning your end buyers funds in escrow can be used to fund your AB purchase.  However, some of what I mentioned above won't allow you to use pass through funding and would require a lender (like me) to fund your AB side if you didn't have your own capital in the bank to fund your purchase before they'll close the 2nd transaction (BC) side.

    With all that said, try to be transparent with everyone and assign.  but if you need to double close as backup make sure to calculate that cost ahead of time and still keep a good spread so you'll make a profit at the end of the day.  Then if you're in a state or dealing with a closing company that requires you to fund your AB side, then hit me up since you'll need Transactional Lending (funding) and I'd love to help you or anyone else out. :) :)

    3Reply
  • Bryant Brislin
    Title Representative · Irvine, CA · Member since 2017 · 874 posts · 519 votes
    3y

    Why are you doing double closings? Aren't you able to do a regular assignment scenario? I try to avoid double closings when I can since there are more moving parts and they can be riskier, but sometimes they are a good option.  Also, you need to make sure the escrow company is okay with that scenario. 

    0Reply
  • Brad T.
    OP
    Investor · Langhorne, PA · Member since 2023 · 18 posts · 4 votes
    3y
    Quote from @Account Closed:
    Quote from @Brad T.:

    Hi Everyone, 

    New to BP & Wholesaling and hoping someone can help me understand the double close strategy a little better. I get the general concept.. but struggling to understand all the fees. 

    So from what I gathered, you will end up paying two sets of closing costs (A to B, and then B to C).

    Questions-

    As wholesalers, we also cover the seller's closing cost to make the offer more appealing. So.. are you paying 3 sets of closing costs to get the deal done?

    In Pennsylvania, typical closing costs can be anywhere from 5%-6% of the sale price. So would I need to factor in 12%-18% of the sale price into the deal to cover 2 to 3 sets of closing costs? Or am I way off base?

    Sorry if this is a dumb question.. Still learning. I just can't wrap my head around the fees.


    Thanks in advance.

    That's not a dumb question. The idea of real estate investing is to be profitable and you need to know your costs.

    If you are covering the seller's closing costs, that is one set of fees.
    When you buy the property in the first closing, you are also paying your fees as well. That's fees number 2.

    If you use a Hard Money Lender to transact, you will have their fees also. That is added to your fee list.

    When you sell, you will have fees, your own, that you pay.
    So, you are paying 3 closing costs and your hard money loan costs if you're using hard money. Plus you pay any transfer fees the state charges. Make sure you talk to an escrow agent to get more detailed information.


     Thank you! This definitely helped. 

    1Reply
  • Brad T.
    OP
    Investor · Langhorne, PA · Member since 2023 · 18 posts · 4 votes
    3y
    Quote from @Jesse LeBlanc:

    @Brad T. great questions for a new wholesaler so you know what to expect going into the business vs get pissed later and mad at someone else for your lack of experience.  So I appreciate great questions. :)

    I believe it's all been explained above already, but always free to clarify anything as I've ran a wholesale company in Atlanta for years, then mentored across the US from 2018-2022 (stopped end of last year to travel and enjoy life every day).

    So IF you choose to double close, then the option of paying for your closing costs on your purchase (the AB transaction) is optional but NORMAL.  IF in your contract with the seller you make them pay, you can but normally you as the buyer would pay for your set of closing costs.  Depending on the state, usually the taxes are a wash as it's prorated, then when you sell same day it's prorated and again a wash.  But your attorney or title fees will be on your if you as the buyer pay for them on your AB side. 

    Then if you double close, when you sell, your end buyer would then be paying for their closing costs UNLESS you already had it in the contract with the buyer that they also pay for your AB closing costs (which I find extremely annoying and rude personally, and if you wanted to do that just build it in the price vs telling them they're paying for your choice to double close when you could have assigned the deal).

    Nice segway, so I'll run with it. If you ASSIGN the contract and are transparent with the seller and your end buyer, you'll never need to double close. There will only be an AB closing, then your asssignment fee will just be a line item on the HUD/Settlement statement and your seller will now be direct with your end buyer and one set of closing costs that your end buyer will be on the hook for usually.

    If you don't have to double close, then don't.  Save everyone time and money.  But if you choose to double close for various reasons, keep seller separate from buyer, keep your fee private, someone refuses to sign an assignment contract, the closing team doesn't approve (stupid) or some other reason, then yes, double close.

    Depending on the state laws or the closing company will also help make your decision on double closing and your additional costs.  Most states you can use "pass through funding" meaning your end buyers funds in escrow can be used to fund your AB purchase.  However, some of what I mentioned above won't allow you to use pass through funding and would require a lender (like me) to fund your AB side if you didn't have your own capital in the bank to fund your purchase before they'll close the 2nd transaction (BC) side.

    With all that said, try to be transparent with everyone and assign.  but if you need to double close as backup make sure to calculate that cost ahead of time and still keep a good spread so you'll make a profit at the end of the day.  Then if you're in a state or dealing with a closing company that requires you to fund your AB side, then hit me up since you'll need Transactional Lending (funding) and I'd love to help you or anyone else out. :) :)


     Thank you for such a detailed explanation!

    1Reply
  • Elise Bickel TauberBusiness Member
    Real Estate Agent · Cranberry Twp · Member since 2017 · 384 posts · 198 votes
    3y

    So this is the big question we actually get a lot. Very rarely do i run into wholesalers who do the double close in Pittsburgh because of what you just said right there. The spread looks so good and then you realize you are paying the sellers fees, your purchase fees, your sale fees, and then lender fees, etc. The profit narrows really quickly. Most wholesalers do an assignment contract but you do have the careful how you do this because if you are representing real estate you don't own as if you are the owner, it is illegal. And if you represent real estate you don't own and act as a real estate agent without a license, it's illegal. But for those who do it correct with an assignment, they usually just have their hand money down (which they get back once the buyer puts down the hand money to go under contract) and then the sellers fees come out of your assignment fee on the deed. Hope that helps!

    1Reply
  • Lydia R.
    Investor · Austin TX · Member since 2016 · 1k+ posts · 2k+ votes
    3y

    Hi Brad! Double closings frequently trip people up the first time. First, let me say that every wholesale transaction doesn't warrant a double closing unless you're in a state where assignments are heavily regulated and double closing is a good sidestep. The best part about real estate is that nearly every aspect is negotiable. Do you HAVE to pay seller's closing costs? No. Should you pay seller's closing costs? Probably, especially if you are getting a good deal. However, on the buyer's side the expectation is usually that they will cover the closing costs. Typically the biggest cost is the title policy and some title companies offer pass through policies that arent as expensive as paying for 2 policies back to back. Not all title companies offer this, so you'll have to have a conversation with your closing agent. It would be very advantageous for you to get a breakdown of the costs involved in a typical purchase and see if there is some room for negotiation. Relationships are everything, the title company I use has closed all my deals for the past 3 years and since I represent repeat business, they work with me on fees and costs when I need them to. Typically a double closing occurs when the wholesalers assignment fee is large enough to be offensive to the buyer and the wholesaler elects to conceal their fee by double closing. To that end, if you follow this logic, double closings should occur when you are making an exceptionally large fee and you can factor in the cost of the transactional funding (you know you need transactional funding right?) and the closing costs when deciding if its worth your while to double close. I learned about double closing the hard way. I made a 40K assignment fee and my buyer tried to sue me because he was pissed about my fee. Ever since then I double close anything above 25K unless the end buyer and I have a good relationship and I know they dont care about my fee as long as they are getting a good deal. I hope this helps you clarify things! Feel free to reach out if you have more questions.

    1Reply
  • Jesse LeBlanc
    Investor · Atlanta, GA · Member since 2016 · 627 posts · 374 votes
    3y

    VERY well said @Lydia R. :)

    0Reply
  • Bryce Axelrad
    Houston, TX · Member since 2025 · 7 posts · 0 votes
    1d
    0Reply
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