Double closings are a unique and often misunderstood concept in the land-flipping business.

If you can master the nuances of double closings as a land investor, it will open doors to new deals and opportunities. You can make a lot more money without tying up your cash for too long.

But what exactly is a double closing?

Why is it important to understand this process? And how can you find the right people to help you navigate this type of transaction?

Today, we're going to demystify double closings. I'll show you the mechanics of how they work, how to find a capable title company, and the boxes you need to check for a successful transaction.

The Basics of Double Closing

A double closing, also known as a simultaneous closing or “back-to-back closing,” involves two separate property transactions for the same property.

Essentially, it's a relay race of buying and selling the same property in two consecutive transactions. This typically occurs on the same day. But sometimes, it can occur in the same week or within just minutes of each other.

Here's how it works:

Like in every great real estate deal, it all starts with a motivated seller willing to sell their property at a discounted price.

When you find this motivated seller, you get the property under contract at this discounted price, and this is what we call the A-B transaction, where the A seller sells their property to the B buyer (that's you).

Immediately after this, is the second transaction, where the B buyer turns around and becomes the seller, and sells the property to the C buyer. This is what we call the B-C transaction.

Because both of these transactions are happening almost simultaneously, the B buyer/seller (again, that's you) isn't going to schedule either of these closings until they have all three parties queued up and ready to play ball.

This process starts by getting a purchase agreement (or an Option agreement) signed with the A seller. During this closing period, however much time they give themselves in the contract, they can use this limited window of time to find the C buyer who will complete the double closing in the second transaction.

An Easy Analogy: Double Closing

Think of a double closing like finding a rare piece of art at a garage sale for a low price.

You know an art dealer who would pay much more for it. So, you buy the art and immediately sell it to the art dealer for a higher price. You don't hang the art in your home because you never wanted it for yourself; you just recognized that someone else would pay a higher price for it, so you brought them into the deal and quickly flipped it for a profit in two swift moves.

But the key with a double closing is you aren't going to buy it in the first place unless you know someone else who is willing to pay more.

It's not just about finding the deal in the first place. You also need to have a buyer waiting on the back end so you can make both transactions happen quickly, back-to-back. And if you can do it right, you won't need to use any of your own money.

Single Source Funding for Double Closing

In some cases, title companies and closing agents will allow the original B buyer (again, that's you) to use the money from the C buyer to fund both transactions.

This is known as single-source funding, and it's a HUGE advantage for the “wholesaler” (also known as the B buyer/seller in the middle of the transaction) because they don't need to use any of their own money to complete the process.

Unfortunately, not all title companies will allow you to use single-source funding. When you can't use the C buyer's funds to cover BOTH the A-B and the B-C transaction, the alternative is for the B buyer/seller to either:

1. Use their own cash to cover the A-B transaction.
2. Borrow the funds from a transactional funder or alternative source to cover the A-B transaction.

When a real estate investor borrows cash for a double closing, it can technically come from any lender that will allow it. One popular source of these funds is flash cash. People normally only borrow these funds for a short time, like a few days or hours.

Considering the short time needed for the money, transactional funding can become fairly expensive. A common fee structure for transactional funding is anywhere from 1% to 2.5% of the loan amount, but it can cost more if the term extends longer or other risks come into the picture. It ultimately depends on what the lender and borrower negotiate.

So Why Doesn't Everyone Do Double Closings?

The ability to double close is a big deal. When you consider the potential for making substantial profits without tying up any of your cash, it becomes clear why this closing maneuver is so popular among real estate investors who know how to do it.

So, why doesn't every land or house flipper handle every transaction with a double closing? If the investor/wholesaler isn't limited by their lack of funds, and if they can go after ANY deal, regardless of the size, what's holding everyone back?

Double closings may look like the perfect solution on paper, but as with any business strategy, it has some drawbacks that complicate things, like:

• Complexity and stress: Double closings are significantly more complex than standard transactions. They require precise timing and coordination between multiple parties, usually on behalf of the title company (more on this later), which can be stressful and challenging, especially for those new to real estate.
• Dependence on the end buyer: The success of a double closing depends heavily on the reliability of the C buyer. If they back out or their financing falls through (assuming their lender even allows them to close a transaction like this), the entire deal can collapse, potentially leaving the B buyer (middle investor) in a bind.
• Additional costs: While double closings can eliminate some holding costs, they often come with higher transactional costs. These include increased closing fees and potential costs for short-term financing, which can eat into profits.
• Reputation risks: If not handled transparently and ethically, double closings can lead to a damaged reputation. Misunderstandings or misrepresentations can lead to legal issues and harm your standing in the real estate community.
• Legal and ethical scrutiny: Lenders and legal professionals scrutinize double closings more heavily due to their nature and the potential for fraudulent activity. This scrutiny can lead to stricter requirements and the possibility of legal complications.
• Limited lender approval: Many lenders are wary of double closings, and some have specific policies against them. Finding a lender for the C buyer who understands and approves of double closings can be a significant challenge.

If you find a competent, investor-friendly title company that can navigate the challenges of double closings, you can mitigate most of the issues mentioned above.

Finding a Title Company for Double Closings

Because of the tricky nature of double closings, finding a title company or closing attorney to perform this maneuver can be challenging.

Not all title companies are familiar with or willing to facilitate such transactions due to their complexity and the additional paperwork involved.

The first time I tried finding a title company to do this, I had to call several of them until I found one willing to do them for me. Even with the closing agents who will do them, not all of them will allow you to use the end buyer's funds to cover both transactions, so it can require a bit of shopping to find them.

One way to start your search is to get recommendations from local real estate professionals in the area where the property is located, including agents, lawyers, and other investors. Local investor groups on Facebook can be one way to find these investor-friendly title companies. You could also check the list of recommended closing agents from other members of the REtipster Community.

Asking other local investors is usually the best way to find title companies with a track record in handling double closings.

RELATED: Directory of Nationwide Investor-Friendly Closing Agents

When you have a list of potential title companies, it's also helpful to check their website for any mention of double closings. A closing agent that openly advertises its experience with double closings on its website is more likely to provide the smooth and knowledgeable service you need.

Questions to Ask a Title Company

Before you commit to a title company for your double closing, you can ask some key questions to ensure they are experienced and reliable. Here are some questions to consider:

1. How many double closings have you handled?

Experience matters. Ensure the company has a proven track record with double closings and can handle any issues that may arise.

2. What are your fees for a double closing?

Understanding the cost upfront helps in budgeting and avoiding any hidden surprises.

3. Can you explain the risks or problems you've encountered with double closings and how you mitigate them?

A knowledgeable company should be able to outline potential risks and their strategies for minimizing them, ensuring a smoother transaction.

Asking these questions helps assess the company's experience and establishes clear communication, setting the stage for a successful double closing.

Giving Yourself Enough Time to Double Close

When your goal is to do a double closing, you'll need to get the property under contract and give yourself enough time to find an end buyer and close the deal.

If you're working in a hot market where properties are selling fast, and you're willing to do the legwork to find a buyer quickly, you could set the closing deadline for as little as 45 to 60 days.

This is part of where having a buyers list can be extremely helpful. If you have a long list of motivated buyers who have cash and are ready and waiting to buy from you, you can find your end buyer and make the deal happen very quickly.

If you don't have a buyers list, you'll be at the mercy of the market, where you can list the property and who you can call, text, or email to see if they want to buy it from you. A buyers list isn't required to make a double closing happen, but it can surely help!

I like giving myself as much time as possible (120 to 180 days would be my preferred scenario), but not every seller will be patient enough to wait this long.

The length of time you're able to negotiate will depend on a few things:

• The market conditions and perceived desirability of the subject property.
• Whether the seller has other offers on the table and how high those offers are.
• What the seller needs and how quickly they need to get their money.

In short, it depends on the seller's level of desperation.

When the real estate market is slow and terrible, it's not unusual for sellers to accept less than 50% of fair market value and wait six months to see if you can make the deal happen. I've made offers like this many times in a depressed economy, and people have accepted them.

When the market is hot and properties are selling fast, you don't necessarily have to offer more and make it happen more quickly, but you should be ready to go there if the seller isn't willing to budge.

Keeping the Seller Informed

One of the biggest risks in a double closing (aside from running out of time to close the deal) is that either the buyer or seller won’t follow through.

Even if they’ve both signed purchase agreements and earnest money deposits have been put down on both transactions, when huge profits are at stake, it’s not unthinkable for either party to change their mind, walk away, or even try to cut you out of the deal.

One of the best ways to avoid this problem is to keep the seller informed about what’s happening. From the moment your contract is signed, there should be no confusion about what you’re trying to do, and they should be hearing from you regularly as you do or don’t make progress toward finding an end buyer.

This is the same concept that applies when trying to assign a contract. ​

When your objective is to find another buyer and not close on the A-B transaction until you have another party to complete the B-C transaction, this is a very different situation than buying a property outright with a traditional closing.

What the Seller Needs to Know

The Seller needs to know what you’re trying to do because your Purchase Agreement probably won’t tell the full story.

If you don't explain your intentions to the Seller, they will probably be confused and upset when it takes you forever to get the deal done.

All it takes is a clear explanation from you so they understand what to expect.

There are a few key points your seller needs to know:

1. You don’t intend to buy and hold their property long-term. Your goal is to find another end buyer and do a simultaneous closing.
2. It will take you some time to find this other buyer, which is why the term of the Purchase Agreement is longer than usual.
3. You will communicate with the seller throughout the process, giving them regular updates every other week so that they won't be left in the dark and they’ll know where things are at. They can also contact you if they have questions, and you will be responsive.
4. If you can't find an outside buyer for the property, the contract will expire, and the transaction won't happen.

Given that a double closing involves these additional steps, it might be tempting to over-complicate this explanation as you're trying to explain things to the Seller, so it’s important to avoid “information overload.”

Avoiding Information Overload

Explaining all the basics to the seller is important, but you don't want to bombard them with information they don't need to know.

My explanation to the seller might sound like this:

“Thanks for contacting us! After reviewing the details of your property, we would be interested in marketing it to our nationwide network of real estate investors.

For the next 180 days, we would be willing to invest our time and resources to find a cash buyer at no cost to you. If we can find a buyer, we will coordinate with you and the buyer to schedule a double closing and ensure you are paid the full amount listed in this purchase agreement.

We will be compensated by the buyer (which we will find), and when the transaction is closed, you will receive the full sale price stated in the attached purchase agreement.

A double closing has two steps. First, we will buy the property from you at the price listed in this purchase agreement. You will not incur any costs in this process. Then, we will sell it to a buyer that we find for a higher price. This way, you can relax, and we will take on all the risk and work of finding this person. If we can do it, we’ll make whatever profit we can for arranging everything.”

Getting the property owner’s written permission to do this is also helpful. There are many ways to state this in your contract, but if you need an example, you could include a clause like this:

MARKETING: The Buyer is authorized to list and advertise the property for sale before closing this transaction. This includes executing listing agreement(s) with licensed agents, listing agreement addendums(s), disclosures, and sales contracts.

Reminder: Whatever documentation or language you use, you'll want it run by an attorney in your area to ensure it's valid and abides by local and state laws.

Focus on Profits Instead of Percentages

Most land flippers fixate on offering a certain percentage of market value for every property they buy. For example, a land flipper might offer 20% to 50% of a vacant lot's value (depending on how easy it will be to sell and the motivation of the seller), and after taking title to the property, they might list it for 70% to 100% of its value.

The beauty of double closings is that you can focus more on profits instead of percentages.

Since your capital isn't tied up with each property you buy, it doesn't matter if it fits your budget! It only matters if you can find someone else who is willing to pay a high enough price to earn you a profit above what the seller is willing to accept.

This means you can pursue larger properties with much higher values, and you don't have to be so concerned with getting each property at 50% or less of its market value.

Heck, you could buy a property at 90% of its market value, and as long as someone else buys it for 100%, you can make money. Sometimes, even a lot of money!

For example, in a conventional land flip, you might buy a property for $20K and flip it for $40K. That's a good deal… but what if you used the same $20K and put it down as an earnest deposit for a $1 million property, and then do a double closing to someone who pays $1.5 million?

Instead of using your original $20K to make another $20K, you used it to make $500K!

The Role of Financing in Double Closings

When the end buyer uses a bank to finance their purchase in a double closing, it can introduce some complications, but this is where your closing agent's competence comes into play.

In the ideal double closing scenario, the B buyer (that's you) does not use their funds but rather the funds from the C buyer to complete the first transaction. This means all the documents for the A-B transaction are signed, but the funding of the A-B transaction doesn't happen until the closing agent receives the funds from the B-C transaction. This means the timing and receipt of those funds are crucial.

When the purchase agreement is signed between B seller (you) and the C buyer, and when you send the executed purchase agreement and any pertinent details about the double closing to the title company, it's helpful to also copy the C buyer and C buyer's bank in the same email. This should help keep all parties involved on the same page so there is no confusion about what is happening in the transaction.

If the end buyer gets a traditional mortgage from a bank, the bank or borrower may push to use their preferred title company to close the transaction. Since the title company plays an important role in understanding and facilitating a double closing, if the transaction cannot go through your trusted and vetted closing agent, you'll be at the mercy of the end buyer's title company to get the job done. This doesn't always spell disaster for the deal, but sometimes it can complicate things.

One way to incentivize the end buyer to use your title company is by offering to pay some or all of their closing costs.

Another thing to consider is that when bank financing is used, they may require a “cooling period” before the property can be re-sold in the B-C transaction. Understanding these restrictions is important to ensure the C buyer's financing doesn't fall through. This cooling period can also put you at risk because every extra day you have to wait for the B-C transaction is a day the end buyer could flake out and walk from the deal, or the lender could find some reason not to perform their duties.

In these cases, getting a substantial earnest deposit from the end buyer can be helpful to ensure they have some skin in the game during this waiting period, as it will help avoid any cold feet or backing out of the transaction while they're waiting.

Legal Considerations and Compliance

Understanding the legal landscape is crucial in double closings. Laws and regulations can vary significantly by state, so knowing your area's specific legalities is essential.

Here are some considerations:

• State laws: Some states have specific laws regarding double closings, including disclosures and waiting periods. Ensure you’re compliant with local regulations.
• Disclosure: Full disclosure to all parties involved, especially lenders, is crucial to avoid accusations of fraud or deceptive practices.
• Legal advice: Consult with a real estate attorney experienced in double closings. They can provide valuable guidance and ensure that your transaction is legally sound.

Potential Risks and How to Mitigate Them

While double closings can be an amazing way to make a great profit, they're not without risks. Here are some common risks and strategies to mitigate them:

• Title issues: Do a thorough title search before you get to the closing table. Any respectable title company will do this as part of their regular practice, but the last thing you'll want is to find liens or claims on the property that complicate the transaction at the eleventh hour. If these issues exist, you'll want to identify them immediately.
• Timing and coordination: Delays can derail the whole process. Ensure all parties are coordinated and aware of the tight timeline. Again, a good closing agent will play a big role in this, but if you're working with a closer who isn't particularly good at keeping people and schedules on track, you may want to step in and send some reminders to all parties, to make sure things are happening when and where they should be.
• Either party backing out: Every double closing requires three to tango. The original seller and the end buyer need to cooperate and perform as agreed for you to make both closings happen on time. There is a risk that either party could get cold feet and back out of the deal. You can minimize this risk by communicating frequently with both parties so they understand where things are, what they need to do, and when. You can also help secure your original contract with the seller (for the A-B transaction) by putting down an earnest money deposit and requiring the end buyer to put down their deposit while waiting for the deal to close. This is standard practice with almost every “normal” real estate transaction, so this won't surprise anyone.
• Disclosure and legal risks: Always practice full disclosure to all parties to avoid legal repercussions.

Double Closings vs. Assignments

If you've already been through the lesson on how assignments work, you may be wondering:

“Why overcomplicate this process with two separate transactions? Why not just get a purchase agreement and assign it to the end buyer and collect an assignment fee along the way?”

It's true; assigning the contract is another way to handle this type of transaction.

The one big difference between a double closing and an assignment is that when assigning a purchase agreement to your end buyer, the end buyer will see exactly how much money you make in the deal. Your assignment fee is printed on the Assignment Agreement, which the end buyer signs, so there's no way to hide this from them.

Assignments are a great solution for making a small or modest assignment fee. All parties understand how much you're getting paid, and nobody has any problems with it.

By contrast, in a double closing, the end buyer shouldn't be able to see anything revealing how much you're making on the deal (and if they do, you're probably working with the wrong title company). The only price they should see is the price they are purchasing it for, which is listed on their closing statement.

Likewise, the original A seller won't know how much you're selling the property to the C buyer. In a double closing, the A seller and the C buyer never communicate, so however much profit you will make in this transaction will be hidden from both parties.

Because of this huge benefit, double closings usually make more sense when you know you will make a LARGE profit, and it's worth the extra effort to keep separate lines of communication between each party.

As you can probably imagine, sometimes, people get funny ideas when they see how much money you're making, even when you're providing substantial value. If you want to avoid tempting either party to go behind your back and cut you out of the deal, double closings are often the way to go.

Conclusion

While double closings are more complex than the traditional closing process, they offer some big opportunities for those with capital constraints (and let's be honest, everyone has capital constraints at some point).

If you're willing to learn this process and find the right team members who can help make them happen, you'll be able to pursue many more opportunities than those who have to hold title to each property while they work to sell it.