Double closing

A double closing is the simultaneous purchase and sale of a real estate property involving three parties: the original seller, an investor (middleman), and the final buyer.

The underlying reasons for having a double closing vary. The most pressing and usual reason is to allow the middleman to use the purchasers funds to acquire the property from the original seller. Another common reason for a double closing is to conceal the identity of the purchaser or seller.

Typically, a real estate investor first enters into a contract to purchase a property and then subsequently (before closing the purchase) enters into a contract to sell the property (hopefully for a higher price). The investor then utilizes a double closing to close both transactions at approximately the same time.

The Mechanics

The mechanics of a double closing vary, depending on who the buyer and seller are, who is providing the financing, and who is conducting the closing. In the simplest form of double closing, the purchaser would pay the purchase monies to the middleman and they would complete a settlement statement (HUD-1) for their transaction. The purchaser would have to wait while the middleman uses most of the purchase monies to purchase the property from the seller. The seller and middleman would also complete a separate settlement statement for their transaction. The middleman would then instruct the seller to deed the property directly to the purchaser.

There are potential drawbacks to the use of a double closing. In a state that collects a transfer tax, the county clerk or auditor may object to the fact that the original seller's name is not on the purchaser's settlement statement. The purchaser's lender may conduct their own closings, and may object to being involved in the transaction between the seller and middleman. The purchaser or seller may disapprove of the profit made by the middleman, or they may dislike each other. The closing agent may object to being paid for only one closing while having to do extra work. Real estate agents may resent that they did not get the highest possible price for their seller. These and other hindrances may require a middleman to be creative when conducting a double closing.

To keep the purchaser and seller separate, or to pacify a leery lender, the closing may be conducted in two different rooms or at two different times or locations. Success is more likely if the closing agent is friendly and accommodating.

To simplify the transaction, the middleman may make one settlement statement directly between the purchaser and seller and take his profit as a line item on the settlement statement. This line item is usually on the purchaser's side of the statement as an assignment fee. This may create a problem for the middleman, as assignment fees may be taxed at a different rate than short-term capital gains.

Legal Standpoint

From a legal standpoint, most sale contracts stipulate that the seller may pay encumbrances out of the proceeds of the sale. The fact that the original seller still owns the property is definitely an encumbrance. Also, most contracts are assignable, thus the middleman always has the right to assign his purchase contract to the purchaser for a fee.

 

 

 

About Three Palms Real Estate – Your Professional Guides to Paradise
With so many choices it’s hard to navigate the volume of information available to you. Three Palms Professional Realtors will do the work for you. From beachfront Gulf Shores Condos to secluded family homes in Orange Beach, we know the best properties and we know the market. It’s important to us to educate our clients about the activities and amenities available in the area, as well as the types of properties we have to offer and financing options to help you make an informed decision that is right for you. Our mission is to determine your specific needs, desires and goals and to find the property and investment that is right for you.

Whether your dream is living on the water or just minutes from it, our Professional Guides to Paradise can get you here!

Call us at 1.866.980.PALM (7256) or Email Us to discuss the possibilities. Check out our favorite picks, or perform a custom search for Gulf Shores real estate or Orange Beach Real Estate.

Licensed in Alabama and Florida.

Gulf Shores and Orange Beach Area Info

Climate
The Gulf Coast Area has a mild climate with an average annual temperature of 67.4 degrees. The average temperature in January is 51.4 degrees. The average temperature in July is 81.8 degrees. The average annual precipitation is 67 inches, and the growing season is 292 days.

Education
Education is a fundamental block in building a bright future. The Gulf Coast Area opened a brand new high school during 1999 in Gulf Shores (ph. 251.968.4747). The area has two elementary schools; they are Gulf Shores Elementary (ph. 251.968.7375) and Orange Beach Elementary (ph. 251.981.5662). Gulf Shores Middle School (ph. 251.968.8719) offers an excellent curriculum in preparation for high school. All public schools are part of the Baldwin County school system. If you are interested in private education, you also have the option of Bayside Academy (ph. 251.955.5211), which includes age 3yrs – Grade 4.

Healthcare
The nearest hospital is South Baldwin Regional Medical Center (ph. 800.580.3627) located in Foley. South Baldwin Medical Center offers 24-hour emergency services (ph. 251.952.3400). Numerous medical professionals practice in the area providing both family practice and specialized care.

Airports
Corporate and Private air service is available in Gulf Shores from the Jack Edwards Municipal Airport, with a full Instrument Landing System and the longest paved runway being 7000 feet. The closest commercial air service is available in Pensacola, roughly 30 miles away, at the Pensacola Regional Airport (ph. 850.435.1746). Major carriers serving the airport are Continental, US Airways, Delta, Northwest, and American. Other commercial airports are located in Mobile (ph. 251.633.0313) and Gulf Port, Mississippi (ph. 228.863.5951).

Shopping
The area offers many shops ranging from casual apparel and beachwear to upscale fashion and specialty boutiques. If you are a bargain hunter, you can find 120 factory outlet stores in Foley.

Parks and Recreation
The nearest state park is the Gulf State Park (ph. 251.948.7275). The 6,000-acre park area offers campsites, picnic areas, 18-hole golf course, 825 foot fishing pier, 144 room hotel and convention center. Other parks in the area include Bon Secour Wildlife Refuge (ph. 251.540.7720), Meyer Park (ph. 251.968.4420), Johnnie Sims Park and Kids Park (ph. 251.968.4420), and Wade Ward Nature Park (ph. 251.968.4420).

State/Local Income Tax
For detailed information about Alabama income tax, contact the Alabama Department of Revenue, Individual and Corporate Tax Division (ph. 251.242.1000). In most instances, local governments in Alabama do not levy city, town, or county income taxes.

Property Taxes
Property (Ad Valorem) taxes are taxes on real business and/or personal property. “Ad Valorem” means “according to value”. For details, call the Revenue Commissioner’s office (ph. 251.943.5061, ext. 2840).