Clarity of "Dual Closings" Legal or Not ?

Asked by Lenard Jones, Fort Washington, MD Sat Sep 19, 2009

I asked a question a few days ago concening dual closing, whether or not if they were legal. Some responded not knowing what a dual closing is. A "dual closings" or "double closings" are two closings, arranged to occur simultaneously, where an investor, using a buyer’s money, purchases property from a seller and immediately sells to the buyer for a profit. By way of example, assume the following: Investor enters into a contract with Seller to purchase his residence for $100,000. Investor then enters into a contract to sell the same residence to Buyer for $125,000. Investor arranges for a “dual closing”. At the closing, the settlement agent pays $100,000 to the Seller, and $25,000 to Investor. My question, would this practice be ethical, from a Licensed Realtors perspective?

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4
William Bron…, , Aurora, CO
Mon Oct 12, 2009
Double closings are done frequently, but title and escrow companies are getting a little gun shy lately to do "dry" closings (using the funds from the 2nd close to fund the first) as opposed to "wet" closings (coming in with funds for the first closing before you complete the second). Full disclosure is the name of the game, particularly if you are a broker involved in the transaction.
2 votes
Leasing To O…, , Dallas, TX
Mon Oct 12, 2009
Wow! Talking about getting the information straight from the source!

I'm very happy and humbled to have Mr. Bill Bronchick now on our little forum answering questions. I personally have ready many of your articles and used you as a great resource for my Real Estate Education.

Thank you for bringing an Investor's point of view with the added bonus of being an Attorney. Sometimes we Investors get outnumbered by all the Real Estate Agents on this forum so it wil be nice to have one more "guy on our side". lol

We're all very fortunate to have you around to answer questions and bring you expertise to all those asking questions and needing assistance.

Thanks and hopefully one day soon, I'll be able to meet you in person and attend a seminar.

Darin
Investor
Web Reference:  http://www.hhiinvesting.com
0 votes
Leasing To O…, , Dallas, TX
Sat Sep 19, 2009
Hey there Lenard....

You may be directing this question to the wrong people (Agents) to answer. Most Real Estate Agents are only familar with doing things the traditional way.....(Have a listing on the MLS...Have a fellow Agent bring an offer from a Buyer...Set up closing with Attorney/Title Company which takes place in 60ish days) Many misinformed lenders, real estate agents and title companies think that since a closing is not done the "traditional" way that it must be illegal, a scam, or unethical.

They are most definitely legal. They are also called simultaneous closings. Any Attorney or Title Company that has a good base of Investors that they have worked with in the past (NOT just doing traditional Agent to Agent transactions) should be familar with this process. You may have to weed through those uneducated people before you get to one that really knows what he/she is doing. Some of the confusion, in my opinion, comes from lenders (and possibly FHA Loans) who have certain underwriting guidelines about "seasoning" of the title. This SHOULD NOT be confused with the LAW.

Here's a link to a VERY well known Real Estate Investor AND Attorney. Bill Bronchick has been at this for a while and is very knowledgable on the subject: http://www.reiclub.com/articles/illegal-flipping-lender-seasoning

Bill also mentions in the last paragraph of his article what to do if you get in a bind with a double closing. (Use an assignment contract)

Hope this helps you out.

Darin
Real Estate Investor
Web Reference:  http://www.hhiinvesting.com
0 votes
J R, , New York, NY
Sat Sep 19, 2009
I've never heard it done that way, but investors do buy homes with the owner holding an assignable mortgage, then flipping it to a buyer of their own after either cleaning, renovating, or clearing title.
0 votes
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