Brian, thanks for taking the time to respond. Would you mind giving me the name of a good lawyer you have used?
The question that I have about your process was when you go to your attorney on Monday to sign closing paper can you explain that? For example, you are supposed to be purchasing the home at that point right? If so, how do you explain to the seller that you will be giving them the money for their home the following day? The seller is OK with that? Ultimately I will need a good attorney. Is there anyway you can help? I have done searches for months, and found no one.
I have read William Bronchicks Double-Closing examples on how to do it without going to the table without any money. When I spoke to my lawyer and explained what I wanted to do he told me I needed to come to the table with the contractual amount I was paying for the house, then I would flip it to the next buyer.
The home is a flip and I would be making $20,000 on it. That money would quickly shrink once I pay a mortgage tax, title insurance and the rest of the bank and closing fees.
Can anyone tell me exactly how to structure such a deal?
Posted by michaela-ATL on September 17, 2003 at 22:57:37:
if the buyer is a cash buyer, would be to have the buyer ‘lend’ you the money for the purchase, which will be immediately paid back.
That way the attorney is ‘off the hook’. They just have to prepare mortgage paperwork and you legitimately buy the property. Then, you immediately pay the loan back and …tata… the seller gets his/her money and you get the spread between buying and selling. Yes, you will have to pay your own closing and title fees, but a deal, that can’t support that is not worth doing, in my opinion.
Posted by Russ Sims on September 17, 2003 at 12:53:15:
Do attorneys close real estate transactions in your area, or is it more the norm for title companies to take care of it? In my area title/escrow companies do the closing most of the time so I turn the transaction over to them and it goes very smoothly.The seller comes in to their office to sign the closing docs, including the deed to me, and is told by the title company that funding may take up to 2 or 3 business days…this seems to be the norm on any transaction, not just double closings. Then I go down and sign the deed to my buyer. My buyer comes in with funding and signs his docs. The title comany wires the appropriate amount to the original seller and they drop a cashier’s check in the mail to me representing the difference between what I bought the home for and what I sold it for, minus my closing costs.
Quick question: what do you mean my mortgage tax and bank fees: if you are doing a double closing you aren’t dealing with a bank so why pay these fees?
Russ
Well, I can certainly say you don’t live in NY. Here, everything goes through an attorney. And they very rarely do assignments/double closings. Here is why. In a Double- Closing, the investor must put a minimum of $5,000.00 down. Then, the sellers attorney will demand all of the funds at closing. There is no 2-3 day waiting period. Then, the bank on the buyers end will do a title search (a few weeks before closing) and they will see that the title is not in the ivestors name…yet. The bank will usually drop the deal there. If not, and the deal goes through, the bank can stop the loan from being processed if title is not held for any less than a year (seasoning clause).
The banks always charge a percentax of what they call mortgage tax. Usually around 1.5%. The title must also be insured, another 2 % and attorney fees $1200.00 per closing.
Posted by B.L.Renfrow on September 17, 2003 at 17:06:44:
Sure it can be done in NY. I’ve done it a number of times in the past. Your attorney doesn’t know what he’s talking about. That’s not unusual. The vast majority of them only know how to do a “conventional” closing. You start throwing unfamiliar scenarios in there like double closings and the like, and they will get all flustered and tell you it can’t be done. You will either need to educate the attorney (which most of the time, is just too much time and effort) or find another one who knows how to handle this. Perhaps if you post your location in NY, others can give you referrals. And $1200 for a closing? You’ve got to be kidding. Mine charges $300.
It’s not really complicated. Say you are buying a property from Sue Seller and “flipping” (and don’t use that word around the attorney or RE agents or lenders) it to Billy Buyer. You go into the attorney’s office on Monday morning, sign all the closing documents which the attorney has prepared, and leave. The attorney puts the file back in his desk. Billy Buyer comes in Tuesday morning. He either is buying with cash, or he is using a lender with no seasoning requirements. He brings a cashier’s check, or his lender has wired the funds to the attorney’s trust account. Billy signs all the buyer’s documents, the seller’s share of the proceeds are either wired to the current lender to pay off the loan, if there is one, or a check to Sue Seller is prepared, and Billy leaves with the keys. The attorney writes you a check for your amount due. That’s all there is to it.
Of course, as you have discovered many lenders now impose title seasoning requirements making the double close less practical for retail buyers. That’s a frequently-discussed topic here; an archive search should bring up multiple discussions of how to deal with this situation. In a nutshell, you either sell to cash buyers, your buyer needs to use a lender with no title seasoning requirement, or you figure out a way to transfer title directly from the seller to the end buyer, without going through you.
Finally, there is no state requirement for any specific amount down. That sounds like more nonsense from someone who is uninformed. I also don’t recall a specific mortgage tax, but it’s been a while since I’ve done a closing and the documents are filed away. Are you talking about the mortgage recording fee? At least in my county, there aren’t any onerous fees. And to the extent you can, those fees should be passed along to your buyer anyway.
Posted by Brent_IL on September 17, 2003 at 16:24:51:
I’m not in New York, but I?ve had some experience in Pennsylvania where much is handled by lawyers.
If the $5,000 is not required by state law, it is an artificial minimum.
What’s your attorney doing for you? A search for a new RE attorney may be fruitful.
The funds are definitely going to be received prior to closing. They just aren’t coming from you. I like the idea of the seller paying you $20,000 to cancel the contract that he has negotiated with you, so he can sell the property to the buyer you’ve found. It?s only a release; the title passes from the seller to your buyer. Your attorney should coordinate this.
Earlier today Frank Chin mentioned http://www.amerilawyer.com They sell real estate documents customized for New York. They might answer your closing questions if you call them up for a quote. Regardless of the location of an attorney?s practice, $1,200 is a lot of money on every deal for only passing papers. Are there expediting or title company services that could help even if they are unpopular?
When you said that the mortgage tax was usually 1.5% and not always 1.5% I?m led to believe that this is not a legitimate tax, but it?s a customary name for a loan fee. I?d get a mortgage broker to check out national lenders licensed in N.Y.
Posted by Kristine-CA on September 17, 2003 at 16:12:56:
Mike: do some reading here in the archives about double closes and simul closes. Others in NY have done it and you may be able to find posts from others in NY. I have investor friends in NY that tell me it can be tricky but it can be done.
Here in CA it’s easy but it costs. There are two escrow fees and two title fees. But the second title fee is a binder that is only 10% of the first policy.
It is possible to have sellers pay costs on the sell escrow and buyers pay costs on the buy escrow so that you do not take on so many costs. I deal with only cash buyers or those with hard money so I have not dealt with the bank and mortgage costs that you mention.
Also, consider posting a question with NY in the subject line so you can get some responses from others in your area.