How can I perform a double closing, despite the potential risks?
In my last post, we uncovered three potential problems with double closings. Generally speaking, they are a overcomplicated, difficult, and occasionally dangerous technique. You can almost always use a different strategy to flip the property, such as an assignable contract or a simple purchase. Both strategies are far easier, especially for beginners.
But sometimes you have no choice. You might have an assignable contract but a buyer that’s short on cash and needs to finance your fee. Or, you might run across an unbelievable deal that you can’t afford to close, but you know an investor that would buy from you immediately. Whatever the case, you can still perform a double closing. Just follow these best practices:
Find the Right Attorney
Attorneys are a dime a dozen, so with enough time, you can undoubtedly find one that will perform a double closing for you. Only, do you want to trust just any old attorney with overseeing such a complicated transaction? If you scrape the bottom of the barrel, you’re going to get substandard results. With a double closing, that can be disastrous.
The best approach is to work with an attorney that:
Has recommendations from several other investors
Has actually performed a double closing at least once
Is responsive, quickly returning your phone calls and finishing work on time
You need someone that you can trust to make sure all of the paperwork is in order and everyone understands what’s going on. It takes a special breed of attorney to accomplish that, so if possible, give yourself a week or two to interview attorneys and find the right one.
Negotiate a Flexible Contract
Even if you do everything perfectly, your double closing might fall apart. Your seller might have a flat tire, your investor’s lender may request additional documentation, or you’re carefully chosen closing attorney might lose the paperwork. In any of these cases, you’ll probably have to reschedule… but can you?
The key to double closings is negotiating a flexible contract, where you can extend a few weeks (or months), if necessary. Do your best to slip in the right to extend a month without any extra payments. If that doesn’t work, try offering an additional binder payment in the event of an extension, so the money is applied to the principal.
This way, you can relax at closing time because you have a little extra room for delays and problems.
Flip to an Investor You Know
If you’re going to set up a deal with a double closing, I highly recommend using an investor that you’ve known for more than a few weeks. There are two reasons:
Because double closings are so much trouble, only your friends may cooperate
Because you’ll know their work habits and whether they’ll close without problems
The second reason is the most important. If you try to perform a double closing with a complete stranger, you have no idea whether they are capable of closing or whether they’re organized enough to carry it off.
By working with someone you know, on the other hand, you should have a better idea of their financial situation and organization. If you can, find someone that can close with cash and is highly responsive. It’ll dramatically increase your success rate with double closings.