Im curious to know what information MUST be disclosed to the buyer and seller in a double closing contract so that I can keep my self out of legal trouble?
As always, this site rocks and you guys have awesome experiential information.
Thanks in advance!
Edward Mitchell III
Well That all depends. Nothing needs to be disclosed to the seller. You are simply purchasing their house. Now are you planning on using the proceeds from your sell to allow you to purchase the house. If you have your own money and you wwill Purchase the house then sell it, NO big deal all it well.
However If your plan is to Sell the property first and then use the proceeds to Purchase the property right after that, then you have research to do. Are you in a Title Company or Lawyer state for who controls the closing. And are you closing both sides of the transaction at the same location. If you are closing in different locations you are involved in a very difficult transaction. If both closings are with the same title company have you asked them how they can closing the deal. They will be your best friend in this deal. Some times they will require not disclosures and will just complete the transaction. Many times when using your buyers money for the purchase you will be required to obtain their permission.
A true double close must happen in the same day. Not important if you are using your own funds. Then you can take as long as you want.
@Tom Spaeth I guess to simplify, what Im saying is, "What information do I, as the wholesaler, need to legally disclose to both the seller and the buyer to stay in line with the law?"
You need to answer the question as to whether you are using the end buyer's money, for the initial purchase. If not, no disclosures. If so, the title co. will provide/advise to the documents, IF they will even do it.
@Wayne Brooks I guess I'm specifically talking about deals where only cash buyers are involved.
Edward based on your prior responses to the question I don't think you understand "what" the other posters are trying to get at.
A double closing is simply a transaction in which you as the wholesaler actually end up on title briefly (the first closing A to B...seller to you) prior to the end buyer taking title (the second closing B to C..you to the buyer). As opposed to an assignment, where you are just assigning your contract to the buyer for your fee and not actually taking title to the property. It seems you understand this part.
There are two "ways" a double closing can happen, a "dry" closing and a...not dry closing.
Let's say you have a property under contract for 90K and are selling it for 100K.
A dry closing is where the end buyer would wire in the funds for the purchase (100K). The title company/attorney would close your B to C transaction. Then close the A to B with the money "you" just received from the other closing. This all happens the same day and a check for 10K would go to you and a check for 90K to the seller, with the buyer ultimately being on title and owning the property. Many title companies will not close these transactions this way for various reasons.
The second way a double close can take place is with either you paying the 90K and closing briefly and then getting a check for the full 100K from the second close (netting the same 10K as above). Or by you getting a transactional lender to fund your close, again briefly until the second close where the lender will be paid off the 90K plus their fee and you will receive the remainder.
The two responses above were asking how you are attempting to do this because in the first (dry) closing scenario you'll have disclosures, in the second you won't.
If your just talking about how much you'll make then you dont have to worry about that if your doing a double close. The whole point of a double close for a whoelsaler is to hide the fee from both parties. Are you using the buyers funds to close or your own funds?
Either way makes no difference, however it is alot easier using your money, but you risk nothing using someone else money. Remeber you'll have two contracts, one with the seller, and one with your buyer..All the seller will see is what you neogotaited. And all the buyer will see is what you negotiated plus your fee. So when you close with the seller thats done, in the same day you will sell the property to your buyer and all your buyer will see or ever even know is the price he sees on his contract.
You've just legally bought a house....its your right to resell it for how ever much you want....
I would be more concerned with making sure you understand how you will pay taxes...if you have a title company that knows what they are doing you have nothing to worry about
Missouri, as well as other states, and federal law requires seller's disclosures. In Mo. you must disclose known material defects, (that doesn't mean a knot hole in a rafter) means significant matters that are not obvious but known to the owner. This includes asbestos, lead paint disclosures, structural defects, health hazards, electrical, plumbing.....there is a list.
You'll be signing the seller's disclosures at settlement. As a wholesaler, you can state that you have never lived in the property and have no knowledge of defects, materials, mechanical equipment or amenities.
If you had a property inspection done by a licensed inspector and have been informed of material defects, you must disclose those issues. The inspectors keep copies of inspections done.
There is no requirement for you to have a property inspected as a buyer, unless your lender requires it.
I suggest you read my posts on wholesaling, in Missouri, license requirements are applicable to anyone "facilitating" any sale, their definition includes causing title to transfer in a timely manner. You can assign a contract, but if you do several is will be viewed as conducting business, even if you take title, you're acting as a dealer. Doing a deal is not really an issue, doing 5 or 12 or 20 can be. Regardless what anyone tells you, dealing in RE in Mo. will be what the RE Commission says it is in reality. :)
@Bill G. Merry Christmas. You have a wealth of knowledge and I publicly appreciate your info and am grateful. You are hitting some points I need answered. I am in the beginning process of creating my LLC as an s-corp and i definitely don't want to get in any trouble as a dealer as I've studied a little bit about refraining from getting the "dealer" tag. I'd really like permission to inbox you and go over some strategies in depth to make sure I'm starting out on the right foot as I dont plan to be a life long wholesaler. I will be building funds to begin making my first purchase, fix up, marketing etc. and use OPM as I wholesale on the front end. In the meantime, can you shoot me to the link to your mentioned post?
Thanks in advance!
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