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What is a Double Closing in Real Estate?

Jerry Norton

Jan 24, 2024

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Investing in real estate is full of complex terms and unique strategies, both of which may be new to you, regardless if you’re a beginner or experienced investor. 

Did you know that you can purchase a property from a seller and sell the property to a buyer … all at the same time? 

It’s true. 

This is a double closing. It's a real estate investing strategy that can be used if you don't have a ton of cash for your real estate deal.

But a double closing can be a complex real estate investing strategy. That’s why, in this article, we’ll break down everything you need to know about it. 

Let’s get started!

What is a Double Closing?

Also known as double escrow or simultaneous closing, a double closing is a legal real estate transaction that involves two separate closings.

In simple terms, it involves the simultaneous purchase and sale of a property. 

Here’s how it works: the buyer purchases the property from the seller, and then immediately sells it to another buyer.

This process usually happens within a short timeframe — often on the same day.

For buyers, it allows them to acquire a property without utilizing their own funds by selling it to a subsequent buyer at a higher price. This can be particularly useful in situations where the buyer does not have enough capital to purchase the property outright. 

By engaging in a double closing, a real estate investor can secure the property and make a profit — without having to invest a significant amount of their own money.

Advantages of a Double Closing in Real Estate

One of the main benefits of double closing is the potential for a significant profit. 

By purchasing a property at a lower price and selling it immediately at a higher price, buyers can make a substantial return on their investment. 

Additionally, double closings allow buyers to acquire properties without using their own funds, making it an attractive option for those with limited capital.

Disadvantages of a Double Closing in Real Estate

While double closing can be lucrative, it is not without risks. Finding a subsequent buyer who is willing to purchase the property at a higher price within a short timeframe can be the most challenging aspect of the process. 

How a Double Closing Works

Let's take a look at the double closing process step by step. 

Find a Motivated Seller and Buyer

The double closing process starts with a real estate investor finding a motivated seller as well as a buyer looking for a good investment opportunity, typically a distressed property. 

Negotiate with the Buyer

Once the real estate investor signs the purchase and sale contract to buy the first home, he or she will starts searching for a subsequent buyer who is willing to purchase the property at a higher price. Ideally, the real estate investor has a large network to pull from, so the search is quick and easy — or as simple as contacting someone who would be interested in this type of deal. 

You as the real estate investor must also ensure that the subsequent buyer is aware of the double closing arrangement and is willing to participate in the transaction. 

Why?

Clear communication and transparency are essential to avoid any misunderstandings or legal complications.

Funding

Financing plays a critical role in double closings. Keep in mind that most buyers who engage in this type of transaction do not use their own funds for the purchase. Instead, they rely on financing from a lender, whether that is traditional, or a hard or private money loan.

One advantage for you as a real estate investor is that a distressed property for sale will likely be discounted, making the loan process easier.

Close the Deal

After you've locked in funding for the original property, and the buyer is ready to purchase it, the last step is to close the deal. This includes coordinating with the title companies, lenders, and attorneys to ensure the smooth transfer of ownership.

The second closing occurs almost simultaneously, with the subsequent buyer purchasing the property from the real estate investor.

And that's the double closing real estate strategy!

Double Closing vs Wholesale Real Estate Contracting

While a double closing may have similarities to wholesale real estate contracting, it’s important to note there are key differences.

Whereas a double closing involves two separate transactions — a investor buys the property from the seller and then immediately sells it to an end buyer — wholesale real estate contracting involves a contractual agreement between an investor and seller where the investor secures the right to purchase the property at a discounted price.

Then, the property is marketed to an end buyer, and the contract is assigned to the end buyer for a profit.

While the real estate investor owns a property briefly with a double closing, the investor does not own the property with wholesale real estate contracting. 

The Bottom Line: Double Closing

A double closing can be a lucrative real estate investing strategy, especially if you’re looking to invest without using your own money. But it can be full of challenges. 

If you pursue a double closing, ensure that you use this guide to be aware of each step of the process, as well as its advantages and disadvantages, to ensure a smooth and profitable deal.