Purchasing property remains to be one of the most popular methods of investing funds since time immemorial. This is because the value of property often appreciates, making it possible to dispose of at a profit later on.
There are different kinds of contracts that property buyers and sellers can get into. One example of this is the double closing deal. A double closing contract is a transaction that involves buying and selling of a property from a seller to a buyer through a third party buyer.
Simply put, the initial seller of the property sells to the third party buyer who then sells to the final buyer at the same time. There are two buyers and two sellers in this kind of transaction and both take place at the same time. Real estate wholesalers use double closing deals to get small profits off selling lots of property fast.
How it Happens
The process starts when the property investor initiates the first contract with the property seller to acquire their property. In the process of acquiring the said property, the investor then initiates a sale contract aimed at selling the property to the final buyer. Normally, the sale is priced higher than the price at which the investor is buying the property from the initial buyer. This is just so the exchange makes economic sense to the investor in terms of profits made from the double closing deal.
An important part of brokering a double closing deal is to know where the monies will be sourced from. The investor ideally brings no money to the table. Instead, they depend on the buyer putting up the money to then pay the seller. The investor in this way acts as a matchmaker that identifies a piece of property and then links it to an interested buyer.
Procedures of the Double Closing Deal
Before getting into a double closing deal, there are a few key steps that have to be followed. These include:
Identifying the property
There has to be property that is intended to trade hands before any double closing deal can be initiated. The investor plays the important role of finding this property from within the market.
Conducting thorough assessments
This is the point at which the investor carries out a proper valuation of the property. This step of the process includes taking into account the amount of renovations or repairs that the property would require and the potential cost of these. No cost is negligible and everything has to be taken into account. The information acquired at this step will inform the cost at which the seller will sell to the investor.
Drawing up a budget
At this stage, the investor comes up with a clear budget of the cost of the property. They factor in all necessary works that may need to be done to rehabilitate the property and their potential cut after it’s sold to the new owner.
Finding a buyer
Once there is the property and selling price at hand, the investor goes on to find a buyer for the property. The potential buyer must be made aware of all the details related to the property including any construction or repairs needed.
Once the investor has explained clearly to both parties what they need to know and they have come to be on the same page, they then initiate the sale to the seller and the buyer at the same time. The deal is complete when the final buyer releases the funds to the investor who then releases the same to the initial seller, after taking their cut.
When done correctly, double closing deals ensure that the exchange of property for funds happens without the investor having to put down any resources. Because of the dynamics that are involved in the process, it is highly advisable to only go into such business with a confirmed firm that is licensed to carry them out. Landwin Commercial Real Estate has been in the business long enough to know how to match property buyers and sellers without much hassle.