Question: “What’s the best way to handle the closing for a wholesale flip?”
Answer: “The short answer is to let the title company handle it. Your job as a real estate investor is to find the deal, get it under contract, and then get the property sold. Focus on finding deals and getting them sold.
That being said, there are two basic contract arrangements for wholesale flips. One is a double closing and the other is an assignment. I use a double closing arrangement 99% of the time when I do a wholesale flip. I’ll describe how to do a double closing in this article.
The reason I prefer this type of closing is that your buyer doesn’t know what you are paying for the property. They may have a big problem if they find out you are making what they think is a lot of money on the deal.
To set up a double closing, you have a purchase contract with the seller. You also have a separate contract with the individual who’s buying that property from you. You can use the same contract for your seller and your buyer.
You take both of those contracts to the title company (the same title company). They will handle all the details of the closing. That’s what you’re paying them to do. You do need to verify up front they are an investor friendly title company. You need to share with them what your intentions are in terms of the closing. Some title companies cater to retail realtor closings, and they will not be familiar with this process. That is a title company to avoid.
When the title company has completed the title work, they will call you to tell you they are ready to close. Ideally, the title company will do the closing with your buyer first. Your buyer will be putting up the cash to pay your seller and you on the deal.
Again, the mechanics of the transaction aren’t as important as being able to find a deal, a good deal and get it into contract. You also need to be able to line up a buyer who has the cash to close quickly.
It’s also nice to give your buyer a shorter time frame to close on that property than you have. For example, if you have 30 days to close, you might want to give your buyer one week to close on the property. That way, if they wash out for some reason, you still have time to find another buyer.
Your buyer will most likely want to close the day your contract is runs out. But you can’t let them do that to you. You can’t let them walk all over you. Try to get them on a shorter time frame.
If they got the cash, then why can’t they close it in a week?”
Do you have other questions or comments about doing wholesale flips? Please Leave them in the comment box below.