In real estate, one of the ways that you can make money is to move property as quickly as possible. Often, jumping from one home to another will lead to a double closing situation.

Understanding Three Party Closings In Real Estate

In traditional home sales, the two parties involved is a buyer and a 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. How about taking a closer look?

What if 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. Another thing they want to do is move it as soon as possible to free up cash so they can invest in other properties. Being particularly good at their job would mean that most of the time, they will 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.

When it comes to the specifics of how three party closings occur, they are highly dependent on the situation. It doesn’t matter how it is done because the third party purchasing the property from your buyer will often submit the funds for payment of your contract. This will then turn 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. If you are the seller, then your transaction is the only thing you would have to deal with.

There are definite downsides to three party closings. It’s obvious that the more parties involved, the more chance there is something will go wrong. Three party closings can also make lenders nervous. With that being said, there is a bigger problem most of the time.

Wanting to get the top price for your home is what it also means to be a seller. In a three party closing, you are confronted with the fact that you did not get the best price. You also need to agree to such a low price that the investor was able to flip the house immediately for a profit. In this situation, the result could be a serious seller’s remorse. Trying to pull out of the deal would mean that you can get into litigation and so on.

There is not much you can do about a three party closing if you are the seller. At the very least, you should try not to get to disillusioned about the situation.

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