BiggerPockets

Hi,

I've heard a lot about simultaneous closings to be illegal nowadays, is it true?? How about in NJ? Simultaneous closing, I mean, using C's money to fund AB transactions. Transactions are done ALL CASH. Would there be a problem?

This is pertaining to REOs only, not short sales.

Thanks in advance!

I've never believed simultaneous closings to be illegal (at least no one has ever shown me the statutes that make it illegal), but it's certainly not something that most title companies or closing attorneys will do. In fact, I haven't heard of anyone being able to do a simultaneous close in several years.

If you're looking to wholesale REOs, your best bet is to do a double close or to purchase in an LLC or trust and then sell your interest in the entity.

I agree with JScott. Illegal is a strong and overly used word. I've heard some companies do them with cash, so you may have ask around for a company or do the double close with flash funding.

Hi Thomas. Where in NJ are you? I'm in northern NJ and my investor group uses Metropolitan Title & Abstract in Rutherford. Real estate attorney we use are Christopher Goodson in Montclair and Peter Caplan in Verona. Google these names for their contact info. Good luck!

Hi FinanceExaminer,

I don't quite understand when you said "no, it's not illegal. It's a title concern, ALTA is the main culprit in connection with conventional lending requirements (in notices required by the settlement agent) that a buyer must be able to close the A on their on merit before selling in the B transaction. That is the settlement agent's view in a cash transaction, as explained by American Title."

Does this pertain to wholesaling REOs using ALL CASH? No lender will ever be involved. What does ALTA stand for?

Sorry for the questions, I just want to understand.

Thanks!

Thank you Jimmy!

Just thinking out loud, if simultaneous closings are still being done, then how come other title companies won't do it? Should we ask if their underwriters permit the title company to do it? Is there any legal documents that are passed by congress that prohibits this?

Thanks!

JThomas,

On REO property once you do obtain the property from the bank via your cash offer you can either vest title to an LLC then sell shares in the LLC or sell the the LLC outright. IMO a better way is to setup a land trust and sell your % of beneficial interest to your buyer when he comes in with his monies at close of escrow and that echoes what JScott mentioned and I agree wholeheartedly.

You would however as stated verify your title/escrow company is LT friendly and basically that is a corporate trustee or whichever trustee you use is selling the property to a designated beneficiary ( buyer) via directions from the trust's beneficiaries that simple and the escrow agent would follow that direction as well.

I believe each transaction is different depending on what your escrow/tile company will allow so I would "pre-flight" the transaction to see what objections that may have.
Just make sure you have an arm's length transaction.

Mr Finance Examiner: Excellent reply on your posting on this.

Good luck. . :roll:

The bank is not going to accept a note at closing. But I think you know that, so it must have just been a loaded question.

I dont know why some title companies will and some wont. I always assumed they have different title insurance companies that they write through.

Even if you have trouble finding a title company to allow the simul close, you can just use transactional funding and make your closing on the A to B go through with a wire from your one day loan. It really doesent cost much, and pretty much anyone should be able to handle both closings for you.

Just as if you were doing a simul close, you will want to request a courtesy closing on the A to B at your title company.

Good Luck!

First off, I would guess that ALTA's influence is different in different parts of the country, but in my part of the country, nobody cares about ALTA. ALTA is a trade organization that most title companies are not a part of.

Secondly, as far as I could find, ALTA does not specify that you can not do a double/simultaneous closing.

In their Uniform General Closing Instructions, they do reference a simultaneous closing situation in Paragraphs J.1.a.i and K.4.a.i as a "double escrow, double closing, flip sale, pass through, or equity skimming" transaction, and they only stipulate that you can not move forward without full disclosure of the situation to and authorization from the buyer's lender.

In a wholesaling situation that would most likely be a hard money lender or a commercial lender, and neither one of them will care. And it would seem to not apply to a cash transaction.

It also states that an exception to this rule of disclosure is in transactions with single family residences where the seller is a federal government organization, which would mean HUD and Fannie Mae REO's.

Now Paragraph G.7 reads:

Before or at closing, Settlement Agent must receive from Borrower cash or other good funds (as defined by Applicable Law) sufficient to pay all amounts shown on the Settlement Statement as payable by Borrower. Types of trade equity (real estate swaps, tax exchanges) or any other sources of noncash funds to Close must be authorized in writing by Lender before Signing.

You could interpret the initial part of that paragraph to apply to a simultaneous closing, but I think you could strongly argue that a simultaneous closing could be a type of "trade equity" as specified in the latter part of that paragraph, and then Lender authorization would be the only requirement.

There is really no reason the title agent should care if the buyer's lender is fully aware of the situation and okay with it.

Here is the link to ALTA's guidelines if you would like to read it yourself:

http://www.alta.org/images/PDF/09-05-15_UniformGeneralClosing.pdf

Bill, if your title agent referenced ALTA as why they wouldn't do a simultaneous closing for you, I think you should find another agent.

Wait a minute. I think I remember having a very similar conversation with you way back. If I remember correctly I think we finally came to the conclusion that you had never wholesaled a property, so it was probably best for you to not be telling people what they should or shouldn't be doing in an area that you have no experience with.

Or maybe that was just my conclusion. :D

Title insurance is not normally issued until the title company can verify that all deeds and mortgage documents were properly filed. Usually they verify this by filing the documents themselves. Yes, this type of transaction is atypical for many title companies, but it does not inherently pose any increased risk to the title company. They still control all the components (the deeds) that would pose any risk to their title insurance.

This seems to me to be an issue of fear and not fact. Just as many realtors will quickly tell you that wholesaling is illegal. Just as some title agents will still tell me that I can't do double or simultaneous closings, even after I've done 100 of them. Its fear, not facts.

Focus on finding an investor friendly title agent and you shouldn't have any problems. That's really the bottom line.

ThomasK,

I am a transactional funder from NJ and can give you several attorneys/title companies with whom we've worked. Please email our contact info below.

Best,
Duane.