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One of the ways to make money in real
estate is to move property as quickly as possible. Jumping
from one home to another often leads to a double closing
situation. Three Party Closings In Real Estate
Traditional home sales involve two parties, a buyer and
seller. You may, however, run into a situation where there
are actually three parties involved. This can occur when you
are dealing with a real estate investor. The situation
essentially involves a flip of the home by your investor.
Here is a closer look.
Assume you list your home for a certain price and accept
an offer from a real estate investor. The investor is not
really interested in owning your property. Instead, they are
looking to make a profit as quickly as possible. The are
also looking to move it as soon as possible to free up cash
so they can invest in other properties. If they are
particularly good at their job, they will often find another
party to buy the home from them while they are still in
escrow with you! This is where we get the three party
closing.
The specifics of how three party closings occur are
highly dependent upon the situation. Regardless of how it is
done, the third party purchasing the property from your
buyer will often submit the funds for payment of your
contract. This essentially turns the investor into a
middleman who is collecting a fee and profit for doing
practically nothing. That being said, you will actually do
two separate escrows with two completely separate sets of
documents. As the seller, you will only have to deal with
your transaction.
There are definite downsides to three party closings.
Obviously, the more parties involved, the more chance there
is something will go wrong. Three party closings can also
make lenders nervous. That being said, there is often a
bigger problem.
As a seller, you want to get the top price for your home.
In a three party closing, you are confronted with the fact
that you did not get the best price. Moreover, you agreed to
such a low price that the investor was able to flip the
house immediately for a profit. This situation leads to
serious seller’s remorse. If you try to pull out of the
deal, you can get into litigation and so on.
As a seller, there is not much you can do about a three
party closing. Just try not to get to disillusioned about
the situation.
Raynor James is with the
FSBO
site - FSBOAmerica.org - homes for sale by owner.
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