What finding a wholesaling title company really means

7 Replies

Hello all, I plan to start getting my feet wet in wholesaling sometime this year and I have noticed that many newbies sometimes have trouble finding a title company that is comfortable with double closing(wholesaling). Why do title companies shy away from this type of business ? Also do the title companies that do work with wholesalers not ask for proof of funds ? Is that why they are “wholesaler friendly?”

I would venture a guess that many newbies who have trouble finding a title company to double-close is because they believe that the title company will use the wholesaler's buyer's money from the (B-C transaction) to fund the wholesaler's purchase of the property from the seller (A-B) -- also known as a dry closing.   If you're using transactional funding, have paperwork correct and complete and have your transactions organized, it shouldn't be too much of a hassle to find a title company to work with.  

"Wholesaler friendly" to me means the title company helps the investor structure deals properly. It's so much better to get advice in advance regarding how to structure a transaction rather than screwing things up in the contract/assignment process. 

Being friendly does not involve ignoring the need for funds. If you're double closing you have to have the money... in the form of cash, private money or transactional funding. Otherwise you'll need to assign your contract rights to another buyer for a fee (in which case there would be only one closing).

Anybody who tells you don't need funds to double close either doesn't know the law or is ignoring it.

Some title companies won't touch these types of deals because either they don't understand them, are scared of them, or both.

Thanks Tom, I was unaware of “transactional funding” Just did some research and that solves my problem of having little to no funds. Great advice on the other aspects as well.

@Tom Giner Tom, great advice. If a wholesaler double closes with transactional funding, do the profits become taxable as short term capital gains? Also, would there be two sets of settlement costs that need to be accounted for in the deal? I am prospecting in MD and the settlement costs just for transfer and recording fees seem very high.

Thank you for sharing your expertise.

@Russ McKelvey I don't pretend to know accounting so I can't answer your first question but yes, there would be two sets of closing costs paid in the double closing scenario.

Had a deal the other day where the wholesaler was going to make $35k. Apparently It made more sense to double close than to try to explain a line item like that to the seller, so it was good that the buyer had that option incorporated into the contract paperwork.

MD is certainly pricey (note that county to county, local transfer tax rates are different) but definitely not the priciest.

@ Tom Gimer Thanks again! I sent you a PM.

@Antonio Real , if you are buying and selling in the state of California, the process for "double closing" is different when using Transactional Funding. California does not allow for the conveyance of property from one buyer to another to happen twice for the same property the same day. In order to do this in California, the recording of the sale from A to B must happen one day, and the recording of the sale from B to C must happen the next day. That takes it out of traditional Transactional Funding guidelines -- both closing the same day with the same title & escrow -- but it CAN be done if you are working with an experienced Funder and Escrow Agent.

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