The Ultimate Guide to Double Closings in Real Estate

What is a Double Closing?

Have you ever considered buying and reselling a property in a short time frame? While a traditional sale works well for many situations, real estate investors who want to buy and resell quickly while being discreet about their profits can utilize a strategy called a “double closing”.

In essence, a double closing is when someone, a wholesaler or investor, purchases and then sells the same property in a short amount of time, often on the same day.

How Does a Double Closing Work?

A double closing, also known as a simultaneous closing or back-to-back closing, is a strategic maneuver employed by real estate investors to quickly purchase and resell a property for a steep profit. In essence, a double closing involves two separate but synchronized real estate transactions. The first occurs between the original seller (Seller A) and the investor (you, Buyer B). The second transaction takes place after, sometimes on the same day, between you (Seller B) and the final buyer (Buyer C).

Steps in a Double Closing

• Finding the Right Property: You, the investor, identify a property with the potential for a quick turnaround and profit. This often involves properties that may require some minor renovations or are priced below market value.
• Negotiating Contracts: You secure a purchase agreement with Seller A, potentially with contingencies that strengthen your negotiating position. Simultaneously, you line up Buyer C, who is prepared to purchase the property at a price that allows you to pocket a significant profit.
• Double Duty Closing: The magic happens here! Both closings occur sequentially, often at the same location with the help of a title company like Empora. In the first closing, you finalize the purchase from Seller A. Immediately following, the second closing takes place where you sell the property to Buyer C.

The streamlined nature of a double closing allows you to minimize vacancy periods and potentially generate higher returns on your investment. However, it’s crucial to remember that double closings require meticulous planning and adherence to strict timelines. This is where Empora’s expertise comes in. We’ll guide you through every step of the process, ensuring a smooth and successful double closing.

Assignment Deals vs. Double Closings: Choosing the Right Strategy

Both assignment deals and double closings are valuable tools for real estate investors and wholesalers, but they cater to different situations. Here at Empora, we want to ensure you have the knowledge to choose the best approach for your next investment.

Assignment Deals:

• Act as a middleman, connecting a motivated seller with a qualified buyer.
• Assign your purchase agreement to another investor for a fee.
• Requires minimal upfront capital and a shorter timeline.
• Ideal for quick transactions where you can find a willing buyer before closing on the property yourself.

Double Closings:

• Involves two separate, simultaneous closings on the same property.
• You purchase the property from the seller and then immediately resell it to an end buyer.
• Allows you to potentially earn a higher profit by capturing the spread between your purchase and resale price and keeping your fee hidden.
• More complex and time-sensitive, requiring precise coordination and potentially transactional funding (funding to finance the initial purchase).
• Best suited for experienced investors comfortable with stricter timelines and a higher level of involvement.

Take a look at this graph to better understand the differences between assignment and double closing:

Benefits of a Double Closing

Because double closings are back-to-back, you, the investor or wholesaler does not need to take the time to renovate or make improvements on the property. You can immediately sell and collect your fee. This eliminates the need to hold onto the property yourself, freeing up capital and accelerating your deal flow. Your potential profit is also much higher.

Here’s how double closings benefit investors:

• Faster Transactions: With a double closing, there’s no need to wait for a traditional buyer to secure financing. You can act swiftly, secure the property, and find your end buyer simultaneously.
• Hidden Profits: Both the seller and the end buyer are unaware of your profit margin, allowing you to negotiate the best possible price on both sides. By streamlining the process, you can potentially close more deals and maximize your returns.

Although double closings might not be right in every situation, as Jerry Norton from Flipping Mastery TV states, “You don’t want to be a one-trick pony in this business.” It’s important to know multiple ways of closing a deal, in order to adapt and grow your business.

Consider the Drawbacks of Double Closings

While double closings can offer higher profits for real estate investors, it’s important to weigh the potential drawbacks before diving in. Double closings involve two separate transactions – one between the original seller and the investor (wholesaler), and another between the investor and the final buyer. This can lead to:

• Increased Costs: Each closing incurs its own set of fees, including title insurance, escrow, and attorney fees. These doubled costs can eat into your profit margin. In addition, you may have to provide funding in order to purchase the property you plan on immediately selling, requiring more capital upfront.
• Coordination Challenges: Managing the logistics of two closings simultaneously requires meticulous coordination. Delays or miscommunications in one transaction can disrupt the entire process.

“Double closings can be complex and introduce additional risk factors,” says Craig Bowman, an attorney and real estate professional. “It’s crucial to have a clear understanding of the legalities and ensure all parties involved are experienced and reliable. Proper planning and working with an experienced title company like Empora is critical.”

Navigating the Legalities of Double Closings in Real Estate

Double closings can be a valuable tool for real estate investors, but it’s important to understand the legal landscape before getting involved.

• Legal Considerations: Double closings involve multiple parties and agreements, so clear and concise contracts are essential. Disclosures regarding property conditions, financial details, earnest money, financing, and the wholesaling process (if applicable) should be transparent.
• State-Specific Regulations:  Double closing regulations can vary by jurisdiction. Some states may have specific requirements or limitations. Always consult with a real estate attorney to ensure your transaction complies with local laws.
• Potential Risks:  While double closings can be beneficial, there are potential risks to be aware of. These include issues with title clouding, complications with financing for the end buyer, and the possibility of fraud if proper disclosures aren’t made.

By working with experienced professionals and a qualified real estate attorney, you can navigate the legalities of double closings with confidence and minimize potential pitfalls.

Should You Consider a Double Closing?

Double closings aren’t a one-size-fits-all solution, but they can be a valuable tool in an investor’s belt. Here are some scenarios where a double closing might be the perfect fit for your next deal:

• Fast Turnarounds: Investors looking to move quickly can benefit from a double closing. By purchasing a property from the seller and then immediately reselling it to an end buyer, you can capitalize on time-sensitive opportunities without waiting for a traditional buyer to secure financing.
• Distressed Properties: Sometimes, motivated sellers of distressed properties need to close quickly. A double closing allows you to act as a bridge, buying the property from the seller and then finding a rehabber or investor willing to take on the project at a higher price point. This can be a win-win for everyone involved.
• Avoid Common Wholesaling Regulations: Assignment deals, a common wholesaling strategy, are facing stricter regulations across the country. By choosing a double closing over an assignment deal, you may accrue more costs but you will avoid possible complications from local regulations.

In conversation with Jerry Norton on Flipping Mastery TV, Pace Morby, a well-known real estate investor, pointed out that double closings might not make sense if your deal has a smaller margin, but if you’re looking to take a large fee from a transaction, than double closings might be right for you, “If I’ve got a deal I’m only making a $3,000 assignment on, it’s probably not worth it. But if I have a $50,000 assignment, do I feel like I could walk away easily with $45,000? Or more, yeah. Yeah.”

The Future of Double Closings: A Look Ahead

Double closings have become a valuable tool for real estate investors, and their future looks bright. Here at Empora, we’re constantly keeping an eye on industry trends, and we see double closings continuing to be relevant for a few reasons:

• Streamlined Technology: Advancements in online platforms and digital document management could significantly expedite the double-closing process. Imagine quicker coordination between all parties involved, leading to smoother transactions and faster closings
• Regulatory Clarity: While regulations can sometimes create hurdles, potential future clarifications on double closings could provide more certainty for investors. This could lead to wider adoption and a more standardized approach to this strategy.
• Enduring Investor Demand: As real estate markets continue to evolve, the need for creative investment strategies like double closings will likely persist. For investors seeking to maximize their returns and navigate a competitive market, double closings offer a viable option.

We believe that with ongoing innovation and clear regulations, double closings can play an even bigger role in the future of real estate investment.

Key Takeaways: Double Closings Explained

Double closings offer a powerful strategy for experienced real estate investors to maximize profits. However, they do involve strict timelines and require meticulous coordination. Here’s a quick recap:

• Fast-Track Transactions: Double closings allow you to purchase a discounted property and sell it for a profit simultaneously, minimizing vacancy periods and maximizing return on investment.
• Strategic Flexibility: Double closings enable you to leverage contingencies within your purchase agreement, potentially strengthening your negotiating power with the seller.
• Expertise is Key: The success of a double closing hinges on careful planning, precise execution, and adherence to regulations.

Let Empora Be Your Guide

Considering a double closing for your next investment property? Our team of experienced title and escrow professionals can guide you through every step of the process, ensuring a smooth and successful transaction. We’ll provide clear explanations, manage timelines, and handle all the intricate paperwork so you can focus on maximizing your real estate goals.

Ready to unlock the potential of double closings? Contact Empora today for a free demo. Don’t forget to read our blog for ongoing insights on real estate strategies, market trends, and valuable tips for savvy investors!