Double Close Proof of Funds Preparation for Title and Lenders
How to present proof of funds correctly to keep your double-close deals moving fast.
Austin Beverigde
Tennessee
, Goliath Teammate
Preparing for a double close can be daunting, especially when it comes to securing proof of funds. Many real estate investors find themselves in a tight spot, needing to show lenders and title companies that they have the necessary funds to complete transactions. This guide will help you navigate the process smoothly and confidently.
Quick Answer
To prepare for a double close, gather your proof of funds documents, which can include bank statements, private lender letters, or cash reserves. Ensure these documents clearly show your available funds. Communicate with your title company and lenders early to understand their specific requirements, and consider using a transactional funding source if needed.
Understanding Double Closing
A double close involves two transactions: the purchase of a property and its subsequent sale, often on the same day. This process allows investors to buy a property and sell it to another buyer without using their own funds. However, to make this happen, you need to provide proof of funds to both the title company and lenders.
Steps to Prepare Proof of Funds
1. Gather Required Documents
Start by collecting documents that demonstrate your financial capability. Common proof of funds documents include:
Recent bank statements showing available cash.
Letters from private lenders confirming available funds.
Cash reserves documentation, such as investment accounts.
2. Verify Document Authenticity
Ensure that your documents are current and accurately reflect your financial situation. Outdated or inaccurate documents can lead to delays or rejections.
3. Communicate with Your Title Company and Lenders
Contact your title company and lenders to confirm their specific proof of funds requirements. Different entities may have varying standards, and being proactive can save you time.
4. Consider Transactional Funding
If you lack sufficient funds for the double close, consider using transactional funding. This type of short-term loan can cover the purchase price until you sell the property to your end buyer.
Costs Involved in Double Closing
Understanding the costs associated with double closing is crucial. Here are some typical expenses:
Closing costs for both transactions, including title insurance and escrow fees.
Transactional funding fees if you opt for a short-term loan.
Potential realtor commissions if you involve agents in the sale.
Timeline for Double Closing
The timeline for a double close can vary, but typically, you can expect the following:
Initial property acquisition and financing: 1-2 weeks.
Title search and preparation: 1 week.
Closing day: simultaneous closings can occur on the same day.
Checklist for Successful Double Closing
Collect proof of funds documents.
Verify the authenticity of your documents.
Communicate with title companies and lenders.
Consider transactional funding if necessary.
Review closing costs and prepare for expenses.
Common Mistakes to Avoid
Here are some common pitfalls to watch out for:
Submitting outdated documents can lead to delays.
Not verifying lender requirements may result in rejected applications.
Overlooking closing costs can lead to unexpected financial strain.
FAQs
What is proof of funds?
Proof of funds is a document that shows you have the financial ability to complete a transaction. It typically includes bank statements or letters from financial institutions that confirm your available cash.
How long does it take to get proof of funds?
The time it takes to obtain proof of funds can vary. If you have your bank statements ready, it may only take a few hours. However, if you need to request a letter from a lender, it could take a few days.
Can I use a personal loan as proof of funds?
Generally, lenders prefer liquid assets as proof of funds. While a personal loan can provide you with cash, it may not be accepted as proof unless you can show the funds are readily available for the transaction.
What happens if I can’t provide proof of funds?
If you cannot provide proof of funds, you may risk losing the property or facing delays in the closing process. It’s crucial to have this documentation ready to ensure a smooth transaction.
Is transactional funding safe?
Transactional funding is generally safe when used correctly, but it’s essential to work with reputable lenders. Always read the terms and conditions carefully to avoid hidden fees or unfavorable terms.
