I have a couple properties that don’t quite fit my investment criteria, i.e. <30% MV, but are still great deals (50-60% MV). I feel that these properties will sell quickly in their market and that they will be profitable enough to warrant a double closing. I do not currently have a cash buyers list in the area. While I think that the properties will sell quickly, I certainly don’t know that. I never want to sign a contract with someone if I cannot deliver and I want to ensure that I have enough time to find an end buyer. Having said that:
When structuring a purchase agreement with the original seller, how long of a closing period do you usually use for a double closing? I know, typically, a traditional sales closing period for vacant land is 30-90 days and have seen assignments closing periods extend all the way to 180 days.
When you do have a property under contract with the intentions of a double close, can you then legally market the property as your own? If not, how do you go about marketing this property to potential end buyers?
One of my three double closing deals did close very quickly (both purchase and resale), as intended, within 60 days of signing my purchase PSA. Another deal, I put under contract in early September, found a buyer very quickly thereafter (within a week or two), but I’m finally going to close on the purchase (and then the resale) this coming week – probably just at or over the 180 day mark. The third deal, after about 4 to 6 weeks of trying, I was unable to find a buyer due to particular attributes of the property that I was unaware of prior to putting it under contract (particular HOA restrictions that were very unpopular with prospective buyers), so I pulled out of the purchase contract, after incurring costs for title research only. I was very glad that I, in effect, used the option / double closing approach for that one, rather than closing on my purchase before marketing it, only to find out then that the value was not what I’d hoped.
Based on those experiences, at this point I’d recommend:
Having 180 days on both your purchase and resale PSAs – hoping you won’t need that much, but being glad it’s there if and when you do.
Including language in your purchase PSA that gives you solid recourse if your Seller tries to back out after signing (i.e. making them liable for your legal fees if you have to go to court to enforce the contract, and you prevail). I posted about this on another thread a few months back that I can find and link to if you’re interested.
Having language in your resale PSA that ensures you’re not liable if you’re unable to acquire the property and are therefore unable to sell it to your Buyer. In my view (as a non-lawyer and non-expert), this one seems like the most important point out of all these. Check out the specific advice Braden C gave me on this point in that thread I linked to above.
Lastly, to your second question, about how you market a property that you don’t own, when you don’t have a cash buyers list. I’m very interested to hear what others say about this too, but from my experience: on one deal I called custom home builders in the area and explained that I had a parcel under contract and would offer it at a very competitive price for a buyer willing to do a double close; the others I posted on Facebook with a title saying “COMING SOON…” or “PREVIEWING - Lot for Sale…”, or the like. With the latter approach, I did find it awkward in communicating with prospective buyers, trying to straddle the line between being honest about the situation, but not over-sharing unnecessary details that would just scare some buyers off (“what do you mean you don’t own it?”). Not sure I’ve found the “perfect” approach for that one yet.
@dl7573 Thank you for the input, great feedback as always! The thread you referenced has some really good information. I’ll be sure to add that clause in my P&S agreement.
As far as question 2, I’ll be interested to see how others approach this as well. I have heard some say that they don’t mention that the property is under contract at all (when talking about closing using a double closing). I have thought about saying something like “This property is coming soon. We have entered into a purchase contract with the current owner to buy the property” (similar to @retipsterseth example in his wholesaling article). But, like you, I don’t want to overshare and scare away would be buyers.
I continue to struggle to find title companies that will continue to do (or do) double or simultaneous closings. I’ve had some that once did them tell me their underwriters will no longer let them do them and require that I wait until the deed on my purchase side is recorded before they will unwrite title insurance on the sell side transaction. And, given the transaction size, the buyers (rightfully) want title insurance. So, I’ve pretty much had to lately resort to closing the other side a day or few later, so long as the purchase deed was e-recorded, or more if not…
I would greatly appreciate names of title companies, especially national or regional ones, that fellow tipsters have used to successfully double close deals in last year+.
@karljames, that is very interesting. The one-woman title company that I’ve used for a few deals before in my state is totally swamped right now with all the market activity and can’t get to my current closing for at least 8 weeks(!) - but at least she was honest with me.
She’s done double closings for me before, but always required that I wire in my own funds for the purchase transaction (no “single source of funds”, I think others have called it).
So wanting to get my deal closed sooner than 8 weeks anyway, I reached out to 14 other title companies today, and one of the questions I asked all of them that I spoke with was, will you allow a single source of funds if I’m doing a double closing, or will I have to wire in my purchase funds, just to have my funds from the resale wired back out to me on the same day?
None of them said yes to the single source, which didn’t surprise me that much since I’ve heard that title companies who will do this are few and far between (I haven’t found one yet, having looked in 2 states), but I was surprised that half to two thirds of them said they won’t do a double close at all. One of those was “unsure, and would have to check with the underwriter.” Another said it can’t be done, because their underwriters need to see the deed from my purchase reflected in the chain of title before the second transaction can proceed…which seems pretty funny because they’re the title company that’s handling that deed (and obviously wouldn’t move forward with the second transaction, if the first one isn’t executed correctly).
I had chalked this up to bad luck today, but based on your comment am now wondering if this is part of a growing trend.