Three Party Closings In Real Estate



Traditional home sales involve two parties, a buyer and 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. Here is a closer look.

Assume 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. The are also looking to 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.

The specifics of how three party closings occur are highly dependent upon the situation. Regardless of how it is done, the third party purchasing the property from your buyer will often submit the funds for payment of your contract. 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. As the seller, you will only have to deal with your transaction.

There are definite downsides to three party closings. Obviously, the more parties involved, the more chance there is something will go wrong. Three party closings can also make lenders nervous. That being said, there is often a bigger problem.

As a seller, you want to get the top price for your home. In a three party closing, you are confronted with the fact that you did not get the best price. Moreover, you agreed to such a low price that the investor was able to flip the house immediately for a profit. This situation leads to serious seller’s remorse. If you try to pull out of the deal, you can get into litigation and so on.

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