Dealing with Title Companies That Refuse Double Closings

Navigating real estate transactions, particularly double closings, can be complex. This strategy, where an investor buys and sells a property on the same day, is valuable. However, title companies sometimes refuse to facilitate such deals. Understanding the reasons behind this refusal and how to overcome it is crucial for investors who wish to use double closings as part of their investment strategy.

Why Title Companies Refuse Double Closings

Title companies ensure that a property’s title is clear of any liens or encumbrances before finalizing a sale. However, not all title companies are willing to handle double closings. Here are common reasons why:

1. Perceived Risk of Fraud:
Title companies often worry about fraud. In double closings, an investor buys and immediately sells a property. Some title companies fear that this rapid transaction could be fraudulent, especially if the property’s value seems inflated.

2. Compliance and Regulatory Concerns:
Title companies must adhere to local and federal regulations. Double closings can sometimes raise red flags, particularly if transactions lack transparency. To avoid legal complications, some title companies refuse to participate.

3. Complexity and Liability:
Double closings are more complex than traditional transactions. They require precise timing and attention to detail. Title companies might refuse due to increased liability and the potential for errors, which could lead to disputes or losses.

4. Lack of Experience or Comfort:
Some title companies simply lack the experience or comfort level to handle double closings. These transactions require a deep understanding, and not all companies are equipped or willing to manage them.

Strategies for Overcoming Refusals

While encountering a title company that refuses a double closing is frustrating, there are strategies investors can use to navigate this challenge:

1. Find a Title Company Experienced in Double Closings:
The most straightforward solution is to work with a title company experienced in double closings. These companies understand the process, are comfortable with the risks, and have systems to ensure a smooth transaction. Networking with other investors, like transactional funding lenders, or joining real estate groups can help you find title companies familiar with this practice.

2. Educate the Title Company:
Some title companies may refuse double closings because they don’t fully understand the process. Providing them with detailed information and explaining how the transaction will be conducted transparently can sometimes ease their concerns. An experienced real estate attorney can also vouch for the legality and legitimacy of the transaction.

3. Consider Alternative Closing Methods:
If a title company refuses to handle a double closing, consider alternative methods. For example, you could use an assignment of contract, where you assign your purchase rights to the end buyer for a fee. This method might be less complex and more acceptable to title companies.

4. Use Separate Title Companies:
Another strategy is using different title companies for each leg of the transaction. One company handles the purchase, and a different one manages the sale. This separation can sometimes make title companies more comfortable, as it reduces perceived risks.

5. Be Transparent and Build Trust:
Transparency is key in any real estate transaction, especially in double closings. Ensure all parties—buyers, sellers, and title companies—are fully informed about the deal’s nature. Building trust with your title company through clear communication and a track record of successful transactions can also help gain their cooperation.

Conclusion: Navigating the Challenges

Double closings are a powerful tool for real estate investors, but they come with challenges, particularly when dealing with title companies. Understanding why title companies might refuse these transactions and using strategies to address their concerns can help investors continue using this technique effectively. Whether it’s finding the right title company, educating them about the process, or exploring alternative methods, staying informed and adaptable is key to navigating double closings.

For further guidance on managing real estate transactions, explore Investopedia. For advice on finding title companies open to complex deals, visit BiggerPockets.