What Are Three Party Closings In Real Estate

Moving property as quickly as possible is one of the ways you can make money in real estate. Jumping from one home to another often leads to a double closing situation.

What are Three Party Closings In Real Estate?

The buyer and seller are the two parties involved in traditional home sales. It is possible for you to 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. Try to take a closer look.

What if you list your home for a certain price and accept an offer from a real estate investor? The truth is, the investor is not interested in owning our property. Making a profit as quickly as possible is what they are after instead. Another thing they want to do is 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.

Highly dependent upon the situation are the specifics of how three party closings occur. Since the third party purchasing the property from your buyer will often submit the funds for payment of your contract, it doesn't matter how it is done. 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. 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. Obviously, the more parties involved, the more chance there is something will go wrong. Making lenders nervous is another thing that three party closings can do. Most of the time, there is actually a bigger problem.

Being a seller also means that you want to get the top price for your home. The fact that you did not get the best price is what you are confronted with in a three party closing. Moreover, you agreed 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. If you try to pull out of the deal, you can get into litigation and so on.

Being the seller means that there is not much you can do about a three party closing. Just try not to get to disillusioned about the situation.

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