Rental Property Investor · Colorado Springs, CO · Member since 2010 · 476 posts · 305 votes
14y
The bank may have a restriction as well. Most banks will have you sign an addendum to the contract or an anti flip affidavit. I typically don't wholesale my short sales because this will be a big problem. the short sale banks are considering double closing's fraud.
What I would do is one of 2 things. Terminate your contract and submit your end buyers contract in your place for the same amount. Have a separate agreement with your end buyer that they agree to pay you the money as a finders fee outside of closing.
Another way to do it is to buy the house in a disposable LLC. Add your end buyer before closing as a manager to the LLC and then after closing sell all your interest in the LLC to your end buyer. However I'm not an attorney and I'm not giving legal advice. In Colorado this could still be a violation of the Colorado Foreclosure Protection Act.
Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
14y
its pretty much been that way for a long time now. You're gonna have to actually close on it whether its your own funds, hard money lender or transactional lender and then immediately resell it to an end buyer.
Flipper/Rehabber · Atlantic County, NJ · Member since 2012 · 514 posts · 209 votes
14y
In short do a double close. You'll need to show the bank you have the funds to close. So get a proof of funds letter for 1 day. Then get a buyer with proof of funds as well. Find a investor friendly title agency and tell them exactly what your doing. They'll do the rest.
SFR Investor · IN · Member since 2008 · 137 posts · 24 votes
14y
Nicholas,
I'm not sure any title company would be comfy with double closings these days. I used to do them often - just an extra Deed at closing in a 2-part series of signatures. Necessarily, YOU will be on the first Deed as Buyer and the second as Seller, personally.
Do you already have a buyer for the property?
You may want to solicit hard money thru the BP site. Better to close and flip and make SOME cash than to fail to close your deal and make NONE, I suppose.
I'd be interested to know if any BP contributors have been successful recently with double closings.
Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
14y
Vincent D. it is most certainly still possible to do a 'double-close'.
I helped a colleague of mine(I acted as the Realtor) just a few weeks ago. Of course, nowadays, you don't use the end buyers funds to close your A-B and its really no more than 2 separate transactions.
I believe the terms double close and back to back have been synonymous with using the end buyers funds which I agree that no title company would do that anymore. Especially since most lenders restrict your ability to do that through their approval letters. I guess it would be the difference on how the term is perceived.
Commonly, as with my recent transaction. Buyers(the middle men) came in and closed with hard money and then immediately(actually, 31 days later as the lender put a 30 day hold on title) re-sold it. They cleared nearly 30k in profits which is uncommon in my experience as of recent. I think they just got lucky.
Rental Property Investor · Colorado Springs, CO · Member since 2010 · 476 posts · 305 votes
14y
The bank may have a restriction as well. Most banks will have you sign an addendum to the contract or an anti flip affidavit. I typically don't wholesale my short sales because this will be a big problem. the short sale banks are considering double closing's fraud.
What I would do is one of 2 things. Terminate your contract and submit your end buyers contract in your place for the same amount. Have a separate agreement with your end buyer that they agree to pay you the money as a finders fee outside of closing.
Another way to do it is to buy the house in a disposable LLC. Add your end buyer before closing as a manager to the LLC and then after closing sell all your interest in the LLC to your end buyer. However I'm not an attorney and I'm not giving legal advice. In Colorado this could still be a violation of the Colorado Foreclosure Protection Act.
Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
14y
My escrow company and I take the position that as long as you don't sign a deed restriction any document between the borrower and their lender doesn't affect title after recording of the deed.
Naturally some lenders request buyers sign resell limitations however its not a requirement only a negotiated item.
If you have to hold due to a lender you then have to mitigate the cost to hold by a lower value.
The worse the property the more concessions a lender is willing to accept which is why I try to stick to crappy properties on my shorts. However this is all negotiable.
Homeowner · Beaumont, CA · Member since 2010 · 37 posts · 4 votes
14y
Couple things:
1. What is the added cost to double close?
2. Is there a way to double close if you do no thave the full downpayment to close the first closing?
Here is a quick explanation. I put in an offer on a short sale and im looking into the future if it gets accepted. Purchase price 160,000. Its worth at an absolute minimum 210k but more likely 240-270. Its a duplex that is rented out at 2100/mo. Its 4100 sq ft total. This is ca near palm springs. Looks like recently updated and I actually think those rents are about 5-10% under market but thats sort of going off track. Its in good-excellent condition with tenants in place and not too old, like 87. b or b+ neighboorhood. I have 20k but letter says i need 32k down. I really want this for myself but I might lose out completely because I just dont have the money down. If i can make some money instead of no money, that would be good. I think it can be flipped very fast at 210-230k.
Homeowner · Beaumont, CA · Member since 2010 · 37 posts · 4 votes
14y
I disclosed this to my agent so she knows. Wholesalers always make offers, get them accepted then get a buyer for that accepted offer before the contingency period is over. If this a typical short sale in length Id actually have 4-6 months to come up with 12k which i would be able to do. I also can pull 18k out of a credit line if needed but the lender might not like that and i dont really want to do that, but might.
Homeowner · Beaumont, CA · Member since 2010 · 37 posts · 4 votes
14y
Oh I forgot to add that I m working a deal back n forth with someone else and I might end up using most of my money for that before i get a response on this so IF this gets accepted and I no longer have the funds then what kind of options do I have. See what I mean?
Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
14y
I certainly hope that's not the montra for wholesaling. Certainly one doesn't have to have the cash to close however they should have the ability. that ability could be by reselling the agreement to purchase however shame on the investor who has zero clue how or if they can close.
Entering into an agreement to purchase without any idea how to close is unprofessional
Homeowner · Beaumont, CA · Member since 2010 · 37 posts · 4 votes
14y
I dont get what you mean by "Certainly one doesn't have to have the cash to close however they should have the ability." The ability if no buyers come through? That means, you need cash. If you are wholesaling, you cant close every property you put under contract, you can not guarantee anything and are making no gaurantee of the sort. And with trying to wholesale a short sale it appears you DO have to have the cash to close and thats what is being discussed. Anyways, you are derailing my thread which means I probably wont get my questions answered but thanks for your opinion.
Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
14y
I don't think I've derailed your thread. Others most certainly will have their opinion.. I just don't believe someone should sign an agreement without the ability to fulfill it. Certainly situations change however going into an agreement knowingly without that ability IMHO is wrong.
The lender is going to require a POF within days anyway so unless you're going to be able to prove then why start the process.
I've bought plenty of shorts without my own cash however I knew how to obtain it. I wasn't relying on hope. And I wasn't giving false hope to the seller agent or lender.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
OK, so let me go back to your two new questions, since I think your original has been answered:
1. What is the added cost to double close?
2. Is there a way to double close if you do no thave the full downpayment to close the first closing?
1. Best to ask the title company to get specifics. One of the biggies in a RE transaction is always title insurance. Get the title company to do a "hold open" on the owner's policy the seller buys and you can pay a minimal amount to get the new owner's policy. Taxes should be a wash. You might have to buy insurance, if your transactional lender insists. And you will have all the various recording fees and the fees the title co charges for their paperwork.
2. What do you mean by "down payment"? Earnest money? Because if you're double closing a wholesale deal there is no down payment as in the down payment for the loan. But if you can't come up with the earnest money as specified in the contract (typically very shortly after the contact is accepted), the contract will be voided and you'll lose the deal.
Homeowner · Beaumont, CA · Member since 2010 · 37 posts · 4 votes
14y
If you read all the way through you would see I do have the ability to fulfill it right now so im not sure what you are referring to. That is your honest OPINION but legally there is nothing wrong with it. You really are jumping to a lot of conclusions, I gave you a glimpse of something and you made a lot of assumptions. Thanks for the input though.
Homeowner · Beaumont, CA · Member since 2010 · 37 posts · 4 votes
14y
Hey Jon, Thanks for the input. My understanding was I would need the downpayment to do the first closing. The earnest money is not an issue. My offer is I will pay for 20% of the sales price and a loan for the rest. Do I need to actually have that 20% to do the double close?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Originally posted by Nicholas Morris:
If you are wholesaling, you cant close every property you put under contract, you can not guarantee anything and are making no gaurantee of the sort.
Ok now that supper's done, I'll respond to this piece.
IMHO, yes, you are making a promise. When a seller lists a house with an agent, the listing agreement is for the agent to try to find a buyer. When you make a contract to purchase a house, it is just that. A promise to purchase. So, again IMHO, when you are wholesaling, you are agreeing to close every house you put under contract, unless one of the contingencies comes into play. These are people's lives you're dealing with. If you make an agreement to purchase, follow through.
I see you have a new question:
No, you don't need this money. You won't need any down payment at all. The title company will create two settlement statements. Your transactional lender will fully fund the first, less any amount you agree with them to pay. That's between you and them. The seller and seller's bank won't care (AFAIK) as long as they get the amount they want.
Rental Property Investor · Colorado Springs, CO · Member since 2010 · 476 posts · 305 votes
14y
Guys Please be careful double closing any short sale. It is never recommended. Banks consider this fraud and they are prosecuting. They are checking title after closing to make sure title didn't transfer. You need to do full disclosure. And make sure the bank isn't having you sign anything that says you can't resell for 30-90 days. It is just best to stay away from wholesaling a short sale. Plus check your state laws. Colorado had the Colorado foreclosure protection act and on a short sale we can't resell for 14 days if CO foreclosure protection act applies. If you do sell in under 14 days you have to give full disclosure to seller, end buyer, buyers lender and ss bank.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
I activated your link. Interesting. Anyone who has any doubts that "the man" has it out for wholesalers needs only review this new version of "the act".