Wholesale Real Estate Investing: Simultaneous Closing

If you are a real estate investor that buys houses directly from motivated sellers, you will find that you cannot handle all the properties you buy. In such cases, you have to wholesale these properties to other real estate investors.

This is called wholesale real estate investing.
Simultaneous closing or double closing, occurs when you close the transaction where you buy the property, and close the one where you sell the property, usually on the same closing table. At closing, you get a check of the difference between your buying price and selling price less any closing costs.

When is it appropriate to do a simultaneous closing?
If you stand to make a sizable amount from the deal, you do not want the seller or your buyer to know. It is quite common for them to develop cold feet and walk away from the transaction.

To prevent this, a simultaneous closing is the best option.

How does it work?
1) Sign the contract to buy
Sign the contract to buy the property from the seller once you reach an agreement. Take it to your closing agent or title company to check the title.

2) Sign contract to sell
Your buyer will most likely be a real estate investor who buys houses in your market. You must put the property under contract with you as the seller and they as the buyer.

Of course, your buying price must be lower than your selling price to make a profit.

You fax the contract to the closing company. You must make sure you collect earnest money when you sign the contract.

3) Close the deals
The closing company will then prepare two closing statements, one where you buy and one where you sell the property.

Each closing comes with its set of closing fees. Usually, your buyer brings money to the title company, which is also used to close the first transaction where you buy.

Of course, if there is a lender for the second transaction, they must agree to have the funds used to close the first transaction. Your check will be the difference between your buying price and your selling price.

Notice your profit is completely invisible from the seller or your buyer.

Advantages and disadvantages of simultaneous closing
There are two closing costs in simultaneous closing, one when you buy and one when you sell.

Your buyer's lender can refuse to allow their funds to be used to close the first transaction. This means you must find a way to finance the first transaction.

Unless you have cash to do it, you might need to get transactional funding, usually from hard money lenders. Transactional funding never leaves the closing table and enables you to close the first transaction for a fee.

This can be an added cost to the deal.

If your buyer borrows from a conventional lender, the lender might require seasoning for at least 90 days. This means you must get a buyer with cash or whose source of funding will not pose such conditions.

Ultimately, simultaneous closing allows you to make big pay days out of your wholesale deals.

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