Double Closing Risks
We sometimes get asked if we do ‘double closings.’ This refers to the practice of purchasing a
property and then selling it the same day for a profit. This type of transaction poses risks for the
closing attorney as well as the parties involved.
Double closings are not illegal, but they pose many problems. Usually, the first closing is for a
lower purchase price than the second. The difference in price is the profit for the first buyer.
Each transaction must stand on its own. The funds from the second transaction may not be
used for the first purchase.
The difference in price on the same day is pretty good evidence that someone either sold for
much less than what the property was worth, or purchased the property for more than what it
was worth or what it would appraise for.
Because the seller is selling for a lower price in the first transaction, they may feel like they were
the victim of a scam. The second buyer may also feel they were tricked in the transaction. All
parties need to know about both transactions. Without this transparency, the risk of a
lawsuit after closing increases.
Another consideration is that most lenders will not approve a loan to purchase property pursuant
to a double closing.
Also, FHA requires the seller to be on the title for 90 days prior to closing. For a double closing
to work, both transactions would need to be cash without any traditional loans.
Often, a proposed purchaser is simply getting a property under contract to market to other potential buyers. In this scenario, the first buyer is acting as a “Broker” per OCGA 43-40-30 (a) without a license.
When called by new real estate investors, our standard answer is that we do not do double
closings for these reasons.
There are limited circumstances where we could do a double closing, but not very often.
John C. Bennett is a real estate closing attorney and owner of Origin Title and Escrow, Inc..
Since 2003, Origin Title has handled real estate transactions – purchases, refinances, reverse
mortgages – quickly and professionally. There will be no surprises, nothing misunderstood. Title
searches are thorough and well-reasoned, to avoid unpleasant surprises later down the road.
Calculate your closing costs in Georgia or Florida using our calculator or contact Origin Title using the form provided.