Clarity On "Open Title Close"
Hi Everyone,
I've read on this forum about an open title close. I've not heard this type of closing before, but an essence it's still a double-closing; simultaneous.
Ok, I've read the way it works is the title company leaves the title open and have my buyer comes in 1st to close then would I close with my seller.
My question is, how does this solve the title seasoning requirement, and I'm not referring to the length of time on title but rather seller being on title period. I'm a mortgage broker and I have several lenders that I deal with that doesn't require title seasoning but they do require seller to be on title.
So, if I'm selling an REO property how can I do a double-close(open title close) when I'm not on title? For my buyer's lender will want to see the seller whose selling to their borrower be on title.
Any responses would greatly be appreciated... I'm trying to learn as much possible. This open title close would solve a whole lot of my problems when comes to wholesaling REO'S.
Thanks,
flosale
The short answer is this: the 'open title close' as referenced by JohnMichael is very hard to execute. Not that it's a difficult concept, but finding title companies or lawyers willing to do it are scarce, at least from my perspective.
When I first saw the technique on these boards, I spoke to six title companies (including two national ones) and no one had ever done it, or even heard of it.
That's not to say it doesn't exisit. Perhaps in your state, it does, and is used often. But back east, I can't find anyone who does them.
In fact, simultaneous closings are sometimes difficult because, as you suggest, seasoning issues scare the bejeezus out of the banks.
I've found success by building relationships with local bankers who understand RE investing. You probably won't find this with big mortgage companies.
I will disagree with writergig
You can either purchase the property outright and do a 2nd closing later or set it up as a open title closing and transfer the title twice at closing.
It's just simply on how you approach a title company.
I simply tell them what I want, I only deal with large title companies as they have the bonding that I want when I purchase title insurance to cover any errors or omissions.
The last transaction that I dealt with was with one of the nations top title companies and it went like this.
I told them I have a property under contract for purchase and before I could close on the deal I have a buyer who has placed it under contract and I would like to have all this taken care of! Can you handle this? I never get a no on this!
This is how it worked, the Title Company closed with my buyer first and one hour later they closed with my seller second.
This type of transaction occurs each and every day and it is not just my state related as I have done this in California, Colorado, Nevada, Texas, Missouri, Illinois, Florida, Virginia, Ohio, Indiana, West Virginia, Tennessee and Arkansas.
Why writergig has had no success in this, I simply have no ideal.
Title closing has nothing to do with Title seasoning it is lender related!
If you are having problems with seasoning and can not find any lenders out their who will fund the deal for your customer you can do a seller financed deal and sell the note and you can even do this with an underlying mortgage.
Seasoning has never been an issue for me as an investor; I simply provide supportive documents that prove why the subject property is worth my asking price vs my purchase price. Now if you think carpet and paint will show a value increase of 75k good luck to you.
All lenders are looking for is that the deal is fair and you are not trying to sell for more than it is truly worth.
Look at it this way we have a population in this big old world of around 6 billion people and only around 587 billionaires so why try to be a billionaire because the odds are against you.
This same philosophy stops most investors from becoming successful because of a belief I have not money so I can't do real estate, I can't find a deal, I can't, I can't, I can't!
So tell me how many no's does it take to get to a yes?
[addsig]
Sorry JohnMichael, I'll disgaree with you here.
Not that your information wrong, but how you interpreted my post.
I approached three of the biggest title companies in the country. Household names, everyone on here would recognize them.
NOT ONE had ever heard of an 'open title close'. Simultaneous close, yes. Double Closing, yes. 'Open Title'? No. Maybe that's a term you use in MO, I don't know. But back here in NY and VA, where I own a number of properties, they have never heard that term.
So maybe it's just a matter of verbage.
Anyway, the process of doing two closings within an hour, where the buyer settles first and the seller settles second, well of course that's possible. According to the title people and attorneys here, it's simple called a Double Closing.
One thing to rember about these boards is that people participate from all over the world. Terms may be different in your area, not to mention laws. So to say I am wrong for passing on what I'm told by known, reputable professionals who close hundreds of properties per month, is remiss.
I want to say thank you to both JohnMichael and writergig for your responses. It's obvious both of you guys have had different experiences in dealing with this issue. I will have to investigate it more for myself and see what kind of responses I get back.
But, John..., I'm still am curious about how you were able to pull this type of closing off without ever being on title. Because how can you sell a property without providing proof of vested interest. If you doing this routinely then all power to you. If there's anything else you could shed some more light on please let me know it would greatly be appreciated.
Thanks,
flosale
I want to clarify that JohnMichael is a very smart and dedicated contributor to this board; I respect his opinions.
I believe the answer to your question, flosale, about never taking title, lies in the sales contract. If you have an "or assigns" clause, you never have to take title during a double (simultaneous) close. You just show up at closing and assign the property to the 'new' buyer.
Anyone else care to chime in on this?
If John is actually buying the property with his OWN money then a double close shouldn’t be a problem with any title company. BUT when I think of WHOLESALING I assume the wholesaler is not using any of his own money to make this transaction happen. This is where the double close or open close method has never worked for me because where is the money coming from between the 1st closing and the 2nd closing. Of course I know my buyer is funding the deal but the seller has to be paid 1st.
I keep it simple with assignments, maybe I’m missing something here but the double or open close method has never worked for me UNLESS I wanted to put up my own money on the 1st closing which is not TRUE WHOLESALING in my opinion.
Just my 2 cents
205JUNKERS:
Thanks for the reply.
I don't believe there is a 'true wholesaling' method. I believe there are many versions and any one can be correct or 'true' if it works. The basic concept is buy low (or option low) and assign high. As long as you make it work legally and profitably, to me, it's fine.
Having said that, JohnMichael's method is precisely what you say doesn't work for you. Perhaps he has a relationship with a title company that allows his method to work. Or, maybe you've just been unlucky with your title companies. There are many variables to consider.
But it's good that we discuss these different procedures so that new ideas are formed.
This is how it worked, the Title Company closed with my buyer first
(The money to pay off the seller came from the buyer)
and one hour later they closed with my seller second.
(Seller paid, title company paid, I was paid)
I did not assign the contract! Therefore, I took title to the property!
The title company simply recorded the deed to me first than to my buyer.
Look folks this is not a hard transaction as you are making it. The Title Company that I used is the 3rd largest in the nation, so you can debate all you want about it!
The fact is I do this all the time and so do other investors! It's not rocket science!
205JUNKERScom I never used my own money; I used my buyers money! This is true wholesaling! True wholesaling is simply selling below market value but the strategies in wholesaling vary!
Writergig thank you for your last comment. The and or assigns has to do with selling one's contract rights to a 3rd party. In my transaction I did not do the and or assigns process. This is why I took title.
I am not discrediting any post on this issue. I am just telling you this process works and has worked for other investors and me for years.
It's all about how you approach things in real estate investing! Many have told me over the years that creative transactions do not work and that may be true for them! Just because something does not work for one does not mean it will not work for another!
Take it for what it is worth! We can agree or disagree and that's ok! All that I can say is I make good money at this and so do many other as well! If it works for you great if it doesn't than find a new strategy that will work for you!
[addsig]
JM:
Thanks for clarifying.
I think a big part of the confusion here lies in information that newbies get from some, not all, title companies.
I understand perfectly how the various processes work, with and without 'and or assigns' clauses. The clsoing process, as explained on this boards, is indeed simple.
BUT...if you happen to contact a title company that has a 23-yr old rookie clerk working that day, who knows NOTHING about deal making or creative investing, it's like talking to a house cat. (You get nowhere, and annoy the cat.)
The more we kick these ideas around (within reason) the more ammunition we have against the housecat.
Thanks for participating!
I guess when I say TRUE WHOLESALING I meant the wholesalers money wasn’t being used to close. Of course I understand there are different methods of wholesaling.
I’ve never had to double close because an assignment is a one step process and you don’t have to explain that process, it is what it is.
The one thing I guess I don’t understand is what if your buyer backs out on a double close and the title company has already paid the seller. (For newbies this could be a disaster.)
I’m not sure how long you all have been investing but I’ve had a buyer or 2 to back out on the closing date.
Also, why not use an assignment over a double close?
I’ve always wonder why!
writergig
You are so correct!
Many times folks take a statement from one and make it gospel.
I have never taken ones word for anything until I investigate the subject.
We as investors must be vary careful with information we receive.
Let me give you an example:
My partner at the time who has been a real estate investor for years said their was no way I could do a deal like this cause he has tried and has not been able to do it!
This is the deal - A commercial property that was in REO status held by Bank of America who had a total investment in the property of 130k and the property value only 150k and had the property on the market for over a year in Howell county Missouri. So I made a real low ball offer of 20k (no bull) to my amazement they accepted the offer. I just about $^&&@# my shorts! After I got over my shock I asked them if they would consider allowing me to pay them over 5 years on a no doc loan, I really mean a no doc loan, no income verification, no credit check, just my signature on the loan doc's.
I have made all kinds of strange deals just by simply asking!
Have a great day writergig!
[addsig]
I commend JohnMichael on double closings, he is correct. I know because I am doing it exactly as he described and it works. Also further I agree, just ASK about doing a deal no matter what. Thanks,
so johnmichael correct me if i am wrong. There is a property for sale (seller a), you are the buyer (buyer a), you get it under contract to purchase. Now you have a contract to sell to somebody else (buyer b). You are (seller b) in this transaction, this contract is subject to certain transactions taking place in order for title to pass,
in the 1st closing seller "b", completes transaction with buyer "b". the deal is fully funded in escrow until the seller "a "conveys title to buyer "a", that s you.. the title company has both deeds they record buyer "a "deed first then buyer "b "deed second, to get the correct chain. the excess thats in escrow from the 1st closing and the second closing goes to you. is this process that you are describing ?
The way this can be done (closing with the Buyer first) is because both Deeds are held in escrow until the transactions are completed. If the Buyer brings enough funds to closing, both Deeds get recorded. If not, the closings are squelched.
[addsig]
i suspect that 99% of all title companies would not do this type of closing...johnmichael do you mind sharing the title closer name and company he works for..i am sure there are many investors on this board who would like to give their business, to this title company...
johnmichael since this is a learning forum, please explain what your closing consists of. this is what i gather from the info that you have given, if i am wrong please correct me so every one can learn.
There is a property for sale (seller a), you are the buyer (buyer a), you get it under contract to purchase. Now you have a contract to sell to somebody else (buyer b). You are (seller b) in this transaction, this contract is subject to certain transactions taking place in order for title to pass,
in the 1st closing seller "b", completes transaction with buyer "b". the deal is fully funded in escrow until the seller "a "conveys title to buyer "a", that s you.. the title company has both deeds they record buyer "a "deed first then buyer "b "deed second, to get the correct chain. the excess thats in escrow from the 1st closing and the second closing goes to you. is this process that you are describing ?
i