typically, yes, the same day. if you were to close in separate days, you will more than likely have to “CLOSE” on the deal, meaning: bring funds to closing. then, as the mortgage, note, deed and HUD get recorded at the courthouse, you can “then” enter into contract with another buyer (you are “now” an owner). but all of this excercise is futile if you are seeking to “double close”. you are seeking to double close so that you do not “have to close”, and the only way i have seen this “successfully”, is with owner financing, not lender financing.
that being said, i am NO expert. i am SURE many investors here will tell you they have successfully double closed and the end-buyer’s lender had NO problem in the fact “their borrower” entered into contract with a seller that was not a “seller-owner”.
you could also have a “dry closing” with the original seller. meaning, the funds for the seller’s proceeds will not be disbursed right away, giving you time to enter into contract with another buyer and close (fast). however, how many sellers do not want their cash at closing? not many, if any. would you?
I am looking at assigning a contract for the first time as this project is too time consuming for me currently. I would like to keep my assignment fee private to the seller.
Lets say my assignment fee is 50k on a 100k (my purchase) property when fixed up worth 250k+, can I simply have the buyer write me a check, and the buyer steps in and buys the house directly from the seller for the 100k?
And to keep my profit separate from both the buyer and seller, I would have to close with the seller, then complete another close with the buyer, correct?
Re: Assignment fee - how to keep private? - Posted by Joe Kaiser
Posted by Joe Kaiser on August 04, 2006 at 14:02:22:
There is a fundamental defect in the way most people do wholesale
type deals, and this thread is directly on point. Namely, the need to
keep an assignment fee “private.”
There is no such need.
What has to happen, initially, is consensus that you are an investor and
it is a function of your participation in this transaction that an
assignment fee will result.
I maintain if you have the need to keep something private like your
assignment fee, you are putting yourself at risk, needlessly.
There should be no reason here to hide the fact that you’ve made a
profit. It must be everyone’s understanding going in that a profit is the
goal and you achieving that profit, a requirement.
Otherwise, when the seller finds out (and they always do), there will be
hell to pay (there always is).
You’re an investor. Investors make profits. There’s no reason to hide
that fact. Instead, you should make it the core platform from which you
operate your business.
Re: Assignment fee - how to keep private? - Posted by DaveD (WI)
Posted by DaveD (WI) on August 04, 2006 at 09:43:03:
You are mixing up assignment with double closing. They are two distictly different ways of taking down your deal.
Think of assignment as “selling the paperwork.” It’s pretty much a cash transaction. He gives you money, you give him paperwork, along with whatever supporting docs he needs. The buyer will know what you have it under contract for, because he is buying your contract. The seller may not know what you are assigning it for, because he is outside of that transaction.
Once you’ve “sold out your position” you no longer close. You’ve sold the right to close yourself, remember? Your assignee closes in your place because he “bought” the right to close.
Do you think your buyers greed glands will heat up when he sees you are making 50K? You bet. That’s the risk with assignment. So you want to keep that part private? In that case, you might be better off with a double close. That way, your buyer and seller are separate transactions. They can’t determine the amount of your $$$ involvement until after everything gets recorded.
Assigning is way easier… but you need a good relationship with your buyer. Will you?
If you are worried about how someone feels about what you bought it for… or what you sold it for… keep the parties apart. Forget the assignment. Double close.
Appreciate your comments Joe, and agree 100%. That will have to be my approach ‘next’ time. I had intended to close and fix the house and that is what I told the seller. Not that they sold it to me because of that, but my word is on the line. Leaving more flex room would have been wise.
So I simply would take a check from the buyer for 50k. The buyer steps in my shoes at the closing table and buys the house for 100k.
Lets say if I closed, cleaned up the property tying it up for a month, then closed with the buyer. Assuming I don’t have the 110k or so to close and carry, what would be an alternate route? I have relationships with banks, but I doubt they would even entertain a traditional mortgage for 1 month. They would also require an appraisal, and this property is a good ‘deferred maintenance’ study. I know the best option would be to utilize private third party financing, but if that option is not available, where else can one look?
The problem with a double close is that the end buyer’s lender will not allow the double close to occur. Why? Because the middleman investor seeking to flip cannot “legally” enter into contract as a “seller” with end buyer, since he is not able to convey title. One cannot put themselves as owners when they are not owners of the property. And, “at the time of contract” the investor was not an “owner” of the property, thus, the contract is bogus… And this is what the lender will say. It’s occuring more and more.
However, if the end-buyer is seeking owner financing, and there’s a private note to be created and sold simo at the table to a note buyer, then yes, a double close is forseeable, since there is no LENDER involved. It’s a private deal. The investor creates the note, it is discounted to a note buyer, and end-buyer now has payments to be made to note buyer. The seller is clueless of profits made, and so is the end-buyer.
If you are personally double closing deals, I’d love to know which lender the end-buyer used, because there are major flags there. It “could” be construed as fraud and misrepresentation, simply because the investor was not the owner at the time the contract was executed between investor and end-buyer.
Posted by DaveD (WI) on August 04, 2006 at 14:34:14:
Your analysis is incorrect.
When I put my $10 deposit down, along with a signed accepted offer, I have an equitable interest in that property. I have created something of value. I can re-sell, trade my interest for a Harley, trade my interest for other real estate, close myself or do absolutely nothing and let my interest expire.
To suggest that I’m not the seller is laughable. Especially since the title company will report to the new lender I’m in the chain of title (as pending owner). That means I have the ability to convey, once I’ve closed. But then, it probably doesn’t work where you live.
You are saying lenders and title companies have a problem with that. You are correct. Some do. Others don’t. I deal with those who will do business my way.
Does the term ‘double closing’ imply that the two closes occur the same day? Is there a difference from the lender’s view if I was to close with the seller, then close with the new buyer a week later? And, is that still called a ‘double closing’?
Because this is a true investment property (as it needs considerable work), I would be dealing with an investor, and hopefully one who has good financial backing and can close with without a bank’s involvement.
Posted by Ken-Orlando on August 04, 2006 at 20:15:39:
In Florida unless I record the deed or a have an Option I don’t have equitable interest in the property. My remedy if they don’t perform is Specific Performance. I can assign my Purchase Contract, but there is no equitable interest in the property until closing.