Anyone who has ever closed on real estate knows how much paperwork gets signed at the closing table. Considering how exacting the process can be, it may be surprising to learn that real estate investors create deals that require two closings, often in the same day.
But the “double close” is a time-honored strategy of real estate investors. It enables a savvy investor to take the position of “middleman” in a deal with very little commitment of capital, very little risk … and often an outsized payday compared to the risk involved.
With the right financing, a double close can even require little or no commitment of capital out of the investor’s pocket. Munoz Ghezlan Capital has helped dozens of investors obtain transactional financing to do a double-close,
entitling them to a large check with little or no skin in the game. To understand how this is possible, let’s dive deep into what “double closing” even is, how to do a double close, and the right way to finance one.
Key Takeaways
- Wholesale deals involve the wholesaler getting a property under contract at one price, then agreeing with another buyer to acquire the same property for a higher price. The wholesaler then gets to pocket the difference between the two prices, sometimes without ever taking title or putting money into the transaction.
- A wholesale deal with assignment fees means the wholesaler “assigns” the original contract to a new buyer for a fee. This prevents the wholesaler from ever taking title or putting money into the deal, but it may anger the seller and prevent the seller from going under contract in the first place.
- A double close means that the wholesaler actually closes on the first deal, and then immediately closes with the end buyer on the second deal. This prevents the seller from knowing about the higher price the end buyer is paying, but it requires the wholesaler to come up with the full purchase price and closing costs for the first contract.
- Transactional funding is a type of short-term loan intended for same-day double closes, giving the wholesaler access to the fast capital they need to fund the first close with OPM (“other people’s money”). Transactional lenders underwrite and fund quickly, with approval based on the end buyer’s intent and ability to close.
What Is a Double Close in Real Estate?
Double close in real estate applies to a specific type of creative real estate transaction — a wholesale deal.
Wholesale Deal Structure
The short way to explain wholesale deal structure is that the lead investor, called a “wholesaler,” locates a deal, gets it under contract, and then locates another buyer (sometimes called the “end buyer” or “end investor”) willing to pay more for the property than the price on the contract.
The wholesaler then gets to pocket the difference between the contract price with the seller and the agreed-upon price from the buyer.
To sum up, there are three parties to a wholesale deal:
- The seller
- The wholesaler
- The end buyer
There are two ways to close a wholesale deal:
- Wholesale deal with assignment fees — the deal closes on one contract, the contract the seller signed with the wholesaler. The wholesaler assigns the contract to the end buyer, and the end buyer pays the difference in sale prices to the wholesaler as a fee. Usually does not require transactional funding.
- Double close — the deal closes on two contracts, one closing immediately after the other and sometimes on the same day. The first is the contract between the seller and the wholesaler; the second is the contract between the wholesaler and the end buyer. Usually does require transactional funding, but has several advantages. A company like Munoz Ghezlan Capital helps facilitate transactions like this by brokering transactional funding, a kind of short-term loan meant to fund the closing of the first contract so the wholesaler doesn’t have to close with his/her own money.
To understand this setup better, let’s outline a hypothetical wholesale deal. After that, let’s look at how the deal would be closed under each of the two closing methods to better understand the strengths and weaknesses of each.
Hypothetical Wholesale Deal
We just discussed the three parties to a wholesale deal. For our hypothetical example, let’s give these parties names. For clarity, let’s give them first names with a first letter that indicates what their role is in the deal:
- Sally – the seller
- William – the wholesaler
- Edith — the end buyer
Sally wants to sell her home — fast. Maybe she is:
- A distressed homeowner. She has significant equity in her house, but may have suffered a a job loss, illness, or lawsuit. She has fallen behind on the mortgage, and is in danger of foreclosure if she doesn’t settle soon.
- A “don’t-wanter” — she owns the house free-and-clear, but it has fallen into disrepair. She wants to downsize but doesn’t have the cash or credit she needs to rehab the house.
Either way, it comes down to the same thing — she needs to sell the house quickly, as-is, with no long realtor marketing process, no expensive and time-consuming repairs or rehab.
William, the wholesaler, offers Sally $100,000 for the house as-is, no inspections, closing in one week. Sally knows her house would be worth much more than that if it was fixed up, but she also knows she doesn’t have the time, money, or interest in doing the rehab herself.
Accepting that she won’t get the full market value of the home in its current condition, Sally agrees to William’s terms. William pays a nominal amount for an option fee and earnest money deposit, and they sign a purchase and sale contract.
IMPORTANT NOTE: The house is now “under contract.” William has the exclusive option to buy that property, and Sally can’t easily back out of the deal. If someone comes to Sally with a better offer and she tries to accept it, William can come forward with the earlier contract he and Sally signed and insist that she honor the contract at his price.
However, the contract has a one-week closing period. William has one week to arrange what has to come next, or else the contract is void and Sally is free to field other offers.
With the clock now ticking, William calls Edith. Edith is an experienced real estate investor that William met at a networking event. They have a good relationship and they trust each other. Maybe Edith has even bought deals from William before.
William shows Edith evidence that Sally’s home would be worth $250,000 when fixed up. This is also known as the “after-repair value” (ARV). It needs about $70,000 of renovation work to get it there, which means it would be a good deal for Edith at a purchase price of $120,000.
Edith agrees, and she and William sign a separate agreement to buy the same house for $120,000 one week from now.
William is in a good position — he has a homeowner under contract to sell the property to him at $100,000, and an investor willing to buy the property from him immediately for $120,000, leaving him with a $20,000 profit.
So how could William close the deal? Let’s look at the two methods we outlined above.
Closing This Transaction as a Wholesale Deal with Assignment Fees
If William wants to do a wholesale real estate assignment, he has to put something very specific in the purchase and sale contract.
He can’t just list the buyer on the contract as “William Wholesaler LLC.” This requires him to close the deal and take possession of the property before he can sell it to anyone else.
Including an Assignment Clause in the “Buyer” Field of the Contract
To close in this way, William will need to put something very specific into the “buyer” field of the contract — “William Wholesaler LLC or assigns.”
That “or assigns” phrase gives William the right to “assign” the contract to someone else — in this case, Edith, the end buyer. William’s profit in the deal will come in the form of an assignment fee that Edith will pay William for the privilege of taking over the deal.
Assignment Fee Explained
When William and Edith agree on their own deal, they then prepare a short separate contract called an “assignment agreement.” This agreement stipulates that Edith, not William, is now the assigned buyer on the contract. Edith is now responsible for the $100,000 purchase price and closing costs.
The wholesale real estate assignment agreement also stipulates that Edith owes William $20,000 as an “assignment fee,” bringing her total to close up to $120,000 — the price she and William agreed on. The agreement might even require Edith to refund William some of the expenses he incurred in securing the deal.
Closing the Deal with the Assignment Contract
On closing day, Sally, William, and Edith all show up at the closing table in the escrow office. Edith brings the $120,000 plus closing costs. The escrow officer prepares a closing statement that includes the wholesale real estate assignment agreement between William and Sally in the disbursal-of-funds calculation.
Sally gets her $100,000, William gets his $20,000, and Edith takes title to the property. Done deal.
Advantages of a Wholesale Deal with Assignment Fees
For William, a wholesale deal with assignment fees means that he never has to take title to the property. He doesn’t have to fund the purchase price, either through borrowed funds or his own money. All the funds needed to close escrow come from Edith, the assigned buyer. All William has to do is show up to the closing and collect his $20,000 check.
Disadvantages of a Wholesale Deal with Assignment Fees
In this scenario, Sally, William, and Edith all show up to the closing table. Sally knows who William is and why he is there, but she doesn’t know who Edith is. The closing statement, which Sally has access to as the seller, includes William’s assignment fee. This is probably the first time Sally becomes aware of it.
Angry Seller
William’s assignment fee may have the consequence of angering Sally. She may believe that $20,000 should be hers, since it is her house. William may now look to her like a predatory middleman engaging in arbitrage at Sally’s expense.
The closing table might be too late for Sally to do anything about that. However, this has the potential to create friction, reputational damage, and limitations on future relationships for William.
Dead-on-Arrival Deal
The closing table isn’t the only potential hurdle of a wholesale deal with assignment fees. The inclusion of the “or assigns” phrase in the buyer field of the purchase and sale agreement may prevent the deal from going under contract in the first place. If Sally is a savvy seller, she may understand what “or assigns” means or look it up quickly. She may then refuse to sign the deal with William and hold off for a higher price from an investor who doesn’t intend to wholesale the house.
How to Do a Double Close in this Transaction
If William decides not to take the risk of including “or assigns” on the contract, he may decide to skip the assignment fee and operate this transaction as a double close instead.
William includes no “or assigns” stipulation in the “buyer” field of his contract with Sally. William is the only buyer eligible to close under the contract, and escrow will close under no name but his own (or his LLC).
With Edith, he prepares not a simple assignment agreement but an entire separate purchase and sale contract. According to this contract, Edith will buy the property from William, not Sally. William must first fully close the transaction with Sally and take title to the house, after which he can then sell it to Edith.
The First Closing
At the closing table, Sally and William meet. Edith is not present; Sally may never even know that Edith exists. William brings the $100,000 plus closing costs needed to close escrow. Sally gets her $100,000, William gets the title and the keys, and Sally leaves, her part of the deal concluded.
The Second Closing
But for William, the deal is not done. He walks down the hall of the escrow office to a different closing table, where Edith is waiting with a different stack of paperwork.
Edith has the $120,000 plus closing costs needed to close the second contract — the one between William and Edith. They sign the paperwork, the title that was signed over to William’s name minutes ago is now signed over to Edith.
William gets back the $100,000 he just spent on the house, plus an extra $20,000. Now the deal is fully closed.
In practice, the second closing may take place days or even weeks after the first closing, not minutes or hours. But same-day double closing is common.
Advantages of a Double Close
The most obvious advantage of double closing is avoiding dissatisfaction from Sally, who might try to cancel the deal at closing or never go under contract with William in the first place.
Disadvantages of a Double Close
One downside to a double closing is that William owes an extra set of closing costs for the first transaction. The bigger problem, though, is that William must close on the property himself. He cannot simply sign the title over to Edith without taking title himself — that would be a violation of the terms of the contract. Neither can William close in his name with Edith’s money — legally, the funds to close must come from him.
William therefore has to come up with the $100,000 purchase price plus closing costs himself, either from his own bank account or borrowed funds. Yes, he has a reasonable expectation to get repaid and then some when the second contract closes, but he still has to come up with the funds hiimself.
Considering that a major attraction of wholesaling is that the wholesaler has little or no “skin in the game,” this can be a major stumbling block, especially for beginners with little free capital to work with. This is where obtaining transactional funding with the help of Munoz Ghezlan Capital can help these deals close.
Double Close vs Assignment
Double Close
Pros
- Wholesaler is much more likely to get the deal under contract in the first place.
- Less likelihood of an angry seller challenging the deal at the last minute.
- More transparency of information for the people who need it.
- Less transparency of information for the people who don’t need it.
Cons
- Requires two purchase and sale contracts and two closes.
- More closing costs.
- The wholesaler must briefly take title.
- The wholesaler must come up with the whole purchase price of the first contract.
Assignment
Pros
- Requires only one contract and one set of closing costs.
- The wholesaler never takes title to the property.
- Low down payment investment strategy — the wholesaler usually only needs to come up with a small option fee and earnest money deposit. No need for the wholesaler to come up with the down payment or purchase price.
Cons
- Requires proper wholesale deal structure with the “or assigns” wording it the contract. Buyer may not agree to a contract with the “or assigns” working.
- Buyer has access to information about the end buyer agreement that they don’t necessarily need to know.
- Buyer may be angered by the wholesale agreement and try to cancel the deal.
Transactional Funding — The Secret Weapon for Double Closing
Since the key disadvantage of double closing is that the wholesaler has to come up with the money for the first close — the full purchase price plus closing costs — wholesalers like William would benefit greatly from a reliable source of short-term borrowed funds tailored to their needs. Transactional funding fills that niche — investor financing for wholesale deals.
Transactional funding is a kind of short-term funding specifically designed for same-day double closes. Here’s how it works:
- The wholesaler submits the deal to the lender for approval.
- The lender wires funds to the escrow for the first closing.
- The borrowed funds get repaid to the lender from the escrow of the second closing on the same day.
Essentially, the wholesaler has only borrowed the money for less than a day, sometimes as little as a few hours.
What Is Required to Get Approval for Transactional Funding?
Transactional funding is not based on the credit, income, employment, tax returns, or liquidity of the borrower. It is not even based on the condition of the property.
Instead, it is based on the likelihood of the end buyer (in our example, Edith) closing the second transaction on a same-day double close.
To this end, the lender will require:
- Both signed contracts — 1) seller/wholesaler, 2) wholesaler/end buyer.
- Proof of funds for the end buyer — bank statements, private lender proof of funds, hard money lender commitment statement, etc.
- Confirmation from the title company of the same-day double close.
- Proof of clean title or title commitment.
How Long Does Approval Take for Transactional Funding?
Transactional funding can be approved very quickly. The general expectation is:
- Small Deals ($50k-$500k) — pre-approval same day (1-3 hours), full approval in 24-48 hours.
- Large Deals ($1M+) — 2-4 business days for extra underwriting.
- Rush Approval — if all documents are clean and the end buyer’s funds are easily verifiable, rush approval can sometimes be obtained in as little as 1-2 hours. Rush approval often carries extra fees.
How Soon will the Loan Fund?
Once approved, transactional funding can be wired to escrow on the same day.
How Much Can You Borrow?
Transactional funding is not limited by traditional mortgage stipulations on LTV or LTC — if the lender is confident in the end buyer’s ability and intention to close (and they don’t approve the loan if they aren’t), the lender will lend the entire purchase price and all closing costs for the first closing.
What is the Cost of Borrowing for Transactional Funding?
Because this loan is so short-term, APR or interest rates do not apply. Instead, points on the transaction apply.
Transactional lenders usually collect a fee from the proceeds of the second closing. The amount of the fee is usually 0.5% to 2.5% of the loan amount, with smaller deals requiring more points, larger deals requiring fewer points, and often a minimum fee of $1,000-$2,000 for very small loan balances.
Rush fees may be anywhere from $250-$750 for approval in 24 hours or less, with an extra 0.5-1% if overnight wiring is required to get the cash there in time.
What If the Second Deal Doesn’t Close?
Transactional lenders work hard to make sure they don’t lend if there is a chance that the end buyer won’t close. But if the second contract does not close for any reason, that puts the wholesaler in a tough spot. The wholesaler remains the titled owner of the property but must repay the loan amount in full. If they don’t have the cash to repay the loan, they may face penalty fees and 1-2% daily interest until they pay in full.
Since the penalties for a failed second closing are so steep, many wholesalers only do double closes with end buyers they know, trust, and/or have done deals with in the past.
Bottom Line
Wholesale deals are an incredibly attractive form of real estate entrepreneurship. The present investors with the promise of large payouts in short periods of time with very little risk. Wholesalers act as “middleman” between seller and end buyer, agreeing to one price with the seller and a higher price with the end buyer, with the difference between the two prices as profit for the wholesaler.
The double close fits into the picture as one of the two available closing strategies for a wholesale deal:
- Wholesale deal with assignment fees. The wholesaler assigns the contract to the end buyer for a fee. The wholesaler doesn’t have to take title or put up the purchase price, but risks angering the seller and even losing the deal before the contract is even signed.
- Double close. The deal closes on two separate purchase contracts — one between the seller and the wholesaler, the other between the wholesaler and the end buyer, often on the same day. The wholesaler is more likely to satisfy the seller and keep the deal, but must come up with the full purchase price and closing costs as liquid funds.
Transactional funding acts as a key bridge that makes many double closes possible — a short-term loan that can fund quickly and cover the purchase price of the first closing, without the wholesaler having to have deep pockets.
If you are considering a double close, reach out today to the Munoz Ghezlan Capital expert on transactional funding, for a free strategy session.
We can help you understand how to get approved for investor financing for wholesale deals, how to protect your own interests from the risks of these short-term loans, and realize the fast and lucrative profits of real estate wholesaling for yourself.
