I've seen this statement come up a lot in these forums and rather answer it everytime I thought it would be best just to post it.
"My broker, realtor, agent, etc. told me that DOUBLE CLOSINGS are illegal."
Let me address this:
1st, real estate agents are not the experts on closings, financing, or investing. They are experts in marketing and showing properties.
2nd, the term DOUBLE closings and SIMULTANEOUS closings are often used interchangeably by those who don't know the difference.
SIMULTANEOUS closings are the old way of using 'no money down' to close on a property. The process involves A to B (the seller & you) and B to C (you & your buyer). All parties are present at the closing office at the same time, seller and buyer in separate rooms. You, the investor would actually sign the paperwork with your buyer before you sign with the seller, hence you don't actually own the property yet. Which is why this is a gray area as to it's legality. Once you complete this paperwork, you then sign with the seller. The title company must be onboard and working with you, the investor, because they need to submit everything correctly, order wise, because they need the funds from the buyer to you (B to C) in order to pay the closing from seller to you (A to B). The difference in the price on the two closings is your profit and the title company cuts you a check. Almost no title companies do this anymore because of legal concerns.
DOUBLE closings are completely legal because you are actually purchasing the property with your own funds. This is usually done with a transactional lender. Once you purchase, you own free and clear and can re-sell immediately for a profit. Completely legal!
TRANSACTIONAL FUNDING are funds given to investors to purchase properties that are going to be resold right away or within a few hours for a profit. The transactions must be completed on the same day with the same title company. These loans are based solely on the fact that there is enough profit in the transaction to make the flip work - NOT your credit or income. The lender normally charges between 2-3% of the re-sale price to do this. It is all performed with the title company via wire transfer which guarantees the lender will be protected and make their money back. You only get charged if the transaction takes place.
Now you know! Go inform a RE agent or two!
"Learn and Earn!"