Simultaneous Transaction and Double Close Explained
What is a Simultaneous Transaction?
A simultaneous transaction is when the property is transferred quickly from the original owner, to the transaction coordinator and then to the new owner. This can take place in quick succession, generally in the space of a few hours. This means that two separate real estate transactions will take place on the day of settlement, often just hours apart. This creates a unique property transaction, called a simultaneous transaction.
In a simultaneous transaction A (the bank) conveys title to B (the facilitator) this is the first side transaction (B has not yet provided funds to A). At the same time of the first side transaction B is conveying title to C (the end buyer). This is the second side transaction. C‘s funds from the second side transaction are then used to fund A in the first side transaction.
How Do I Fund a Simultaneous Transaction?
Obviously, the easiest way to fund a simultaneous transaction is to use your own money to fund the first transaction and let the end buyer use their money to fund the second transaction. While the easiest, it is certainly not the most preferred option by investors.
A second option is to use Transactional Funding. Transaction Funding is used to provide short term financing during the brief transfer period. This is a very short term loan (could be only minutes). The Lender in this scenario will typically charge a fee for the loan that is to be paid along with satisfaction of the second transaction. Of course, your transactional lender is going to want every assurance that the second closing is lined up and ready to go before releasing funds to “fund” the first.
A third option is to use your end buyers funds in the second closing (B to C) to fund the first side transaction (A to B). This method is the most preferred. (See example HUD)
Is It Legal To Use C’s Money To Fund A?
Yes, as long as it's done correctly. The key to doing this correctly is to exercise full disclosure with your end buyer at every step. Southeast Professional Title has taken extreme measures and exercises great care in our simultaneous transactions to be sure the closings are transparent and flow smoothly for all parties.
How Can I Correctly Manage A Simultaneous Close?
Managing a Simultaneous Transaction requires a clear and in depth understanding of the structure of a simultaneous deal. This is why an experienced title company is so valuable to real estate investors trying to close these deals. We have an expert understanding of how to manage both sides so that everything flows seamlessly from A to B and B to C.
What Is The Difference Between A Simultaneous Transaction And A Double Close?
These terms are often used interchangeably and if you really want to get down to "brass tacks" there is not much of a difference. If you just really want to find a way to distinguish between the two it could be this:
In a double close you still have the A to B then B to C structure except in a double close B separately funds the first side transaction with A. Then C separately funds the second side transaction with B.
In a Simultaneous Transaction, part of C’s funds collected in the second side (B to C) transaction are used to fund first side transaction (A to B).
Title Issues For Simultaneous Transactions and Double Closes?
You need to be absolutely certain you receive clear title on the first side transaction in order to successfully complete a Simultaneous Transaction or Double Close. Our tile company has been courtesy closing deals for investors to address this very concern.
Illegal, unnecessary fees on the first side transaction can often occur when working with Bank selected title companies.
Is It Legal To Double Close On A Short Sale?
This is a loaded question we get very frequently and unfortunately there is no black and white answer.
When it comes to selling your short sale property to an end investor the short sale approval letter is KING! Your short sale approval letter will let you know if there are any conditions, restrictions or stipulations placed on your right to transfer the property within certain periods of time.
Southeast Professional Title, LLC
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