Special offer

Real Estate Transactions: Managing A Simultaneous Closing & Double Closing

By
Services for Real Estate Pros with Supreme Alliance LLC

If you wish to purchase Real Estate Owned (REO) or short sale properties, then one of the essentials you should be familiar with early on is the double closing or simultaneous closing. These will play an important part in how you manage your real estate interests, deals and funding. The double closing happens when the property is transferred quickly from the original owner, to the transaction coordinator and then to the new owner.  This can take place in quick succession, generally in the space of a few hours; hence the term double closing relates to the double transfer of the property in that short period of time.

Managing A Double Closing

Real estate investment in REO properties and short sales often goes hand in hand with 'flipping' the real estate. When this takes place the property investor coordinates the sale of the original property to a new owner eager to buy the property being sold.  This kind of transaction will regularly see the owner sell the property to the investor, who then quickly resells or flips the property to the buyer they have lined up. 

The real estate deal described means that two separate real estate transactions will take place on the day of settlement, often just hours apart. This creates a unique property transaction, called a double closing. To manage this double close successfully, the investor needs to ensure that they have funds in place to cover that short lending period.

Transactional funding is the loan that is used to provide short term financing during the brief transfer period. With the double close there is an opportunity for the lender to also benefit, as this short loan delivers relatively low risk opportunity and the rate of return can be anywhere from 9% to 15% of the sum borrowed.

The double closing should be managed so that the real estate specialist who is flipping the property has the original owner ready to sell and an approved buyer lined up to take on the property with a standard mortgage. Managing this requires a solid understanding of the structure of a double close and will often require access to private funds to facilitate the transfer. 

Managing A Simultaneous Closing

Much like the double closing above, the simultaneous closing occurs when the property is sold and purchased on the same day.  Unlike the double closing where there are two transactions occur several hours apart, with a simultaneous closing this at the same time, just as the name suggests. With this scenario, usually performed on REO or foreclosure properties, the transfer happens from the previous owner to the investor, then to the new owner at the same time. This form of transaction is generally considered slightly more risky than a double closing and is also not a legal option in some states.

An experienced real estate investor will be able to structure a deal based around the double closing or simultaneous closing technique, however it pays to build your knowledge and fully understand the legalities and potential pitfalls of such a real estate transaction prior to entering into this deal.

Once you have mastered these different types of transactions, you could be on track to achieving significant success through real estate 'wheeling and dealing'. It is essential to ensure you understand precisely how the double close and simultaneous closing works, in order to use these transactions for the maximum benefit. Mastering these is a powerful way to build wealth through real estate investment, and to securing your financial security even in tough financial times.

 

John Occhi
AZ Veteran Notary Services - Marana, AZ
Mobile Notary Public/Certified Loan Signing Agent

What I believe to be an issue in both types of closings are the short term capital gains.  Certainly the IRS does not care if I own a property for 2 hours or 2 monthes - they want more than a fair share and this needs to be factored into the transaction in addition to all of the other closing costs associated with 2 separate real estate transactions.

I know it is a valuable tool - but as you advised it must be mastered and it certainly is not for the novice, now is it?

Sep 13, 2009 05:33 PM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

We invite you back to ActiveRain in 2016!

    Much has changed since your last visit to ActiveRain.  I encourage you to take another look at the website. 

    Surf some blogs, leave some comments.

Aug 28, 2016 08:37 AM