What is a double closing?

What is a double closing?


A double closing is the purchase and sale of a real estate property involving 3 parties: the seller, a middleman, and the buyer.

There are several reasons for having a double closing:

1. In real estate, it's not uncommon for people to find deals for other investors with money in exchange for a percentage of the deal, a flat fee, and so on. Therefore as part of this process the first person will make offers on properties they believe are worthy of investing for the investor. Then once they have approval of the investor, they will go ahead and close on the deal. Come the time to actually acquire the property, the original person who found the deal basically becomes a middleman, a pass-through, from the seller to the real investor.

2. Another common use of a double-closing is to hide the protect the true identity of the person who purchases the property. In other words, the identity of the final buyer doesn't have to be revealed to the seller. A good example of this is someone who wants to buy several adjoining properties to merge them into a bigger and better property but doesn't want the neighbors knowing about so that they don't artificially inflate their prices once they know he/she is committed.

3. Double closings are also used in really hot real estate markets. In other words people purchase properties with the expectations that the price will be higher than when they finally sell. For example, in the midst of the last real estate bubble, it was possible to acquire properties and sell them several months later at a profit.

4. Some investors will make an offer on a property knowing that it's presentation is sub-par. In these instances they will improve the cosmetics of the properties (with permission of the owner) before they actually acquire the property. They will then sell the property before they have to actually acquire it.

5. In multiplexes or commercial properties, it's possible for an investor to make an offer on a property that isn't fully rented with the intention of filling it up with tenants and re-selling it before they have to actually take possession of the property. This is done to improve the value of the property and they can make a profit on the fact that the property is now fully rented and thus more valuable.

This is just a small list of reasons why you would want to do a double-closing, but needless to say there many other valid reasons.

Views: 2009        Posted on: Apr 10 2012        Tags: Definitions, Real Estate Agent, Seller, Buyer, Closing