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Simultaneous Closings

Three Clocks Showing The Same Time

What Is A Simultaneous Closing?

For the purposes of this service, a simultaneous closing is the sale of residential or commercial property using seller financing, which includes the sale of the seller financed note at the same closing, or within a month thereafter.

There are other definitions of simultaneous closings, and depending on how you learned what you know about this, you might be convinced that it's the "right way." But there really are various usages of the term "simultaneous closings."

More people are probably familiar with a simultaneous closing being the sale of a property that you are selling, and a property that you are buying, on the same day. Often it applies to someone moving from one house to another. If you look up "simultaneous closing" on the internet much imformation you find will be about this usage. Other terms that are used the same way are double closing, back to back closing, double escrow closing, concurrent closing and contingent sale.

Another use of the term simultaneous closing applies to real estate investors buying and selling the same property at one closing or later the same day. Some of the gurus have taught about using the funds from this sale to pay for the purchase itself.

Whatever your thoughts on any of these possibilities, you might be able to make use of the first option above, that is selling the seller held note quickly, in a variety of your real estate dealings.

As financial regulations have changed, note buyers require one payment be made by the property buyer, before they will buy the note. The good news is that by following the process described below, you can get assistance structuring a note and mortgage ahead of time. This will include a quote contingent on those terms, to purchase the note after one payment is received.

Steps To Complete A Simultaneous Closing

  1. If you are not clear on how the Dodd-Frank and SAFE Acts will affect your transaction, please read this section.

  2. Market your property using ads that say something like

  3. Owner Will Finance
    No Points
    Easy Qualifying

  4. Set the sales price equal to the appraised value, and strive to keep it there. Think ahead about what owner financed terms you will consider.

  5. As you receive calls from prospective buyers, screen them as you normally would. Also ask about their total gross monthly income. To prepare for this question, first estimate the monthly cost to pay you for the mortgage you will hold.

  6. (Using the calculator below, click on "calculate," and the results are shown under the heading Mortgage Repayment Summary. All costs you input are included in the monthly payment. Set an input to zero to remove it from the calculation. You will have more options once you click "calculate.")


  7. When prospective buyers arrive to see your property develop some rapport. Let them wander around to get comfortable. Point out all the best features of your property. This is also a good time to start talking about the owner financing being offered.

  8. Review the Simultaneous Closing Worksheet ahead of time. I will need this information to provide a quote to purchase your note and mortgage. Beginning with the "Proposed Note Information" section, you will need input from your proposed buyer to answer some of the questions. As soon as a buyer indicates a willingness to purchase, sit down with them and start to structure a deal. You can tell your buyer, "We'll just put the numbers down and see if we can work it out." Everyone needs to keep in mind that these are preliminary numbers. The deal needs to work for all parties including the note investor.

  9. As mentioned in the section on Dodd-Frank, you as the creditor will need to use reasonably reliable third-party records to verify the underwriting information about your buyers. Prospective note investors will also need to review this information.

    In addition to you completing the Simultaneous Closing Worksheet, your buyers will need to complete an Authorization To Obtain Credit.

    By also completing a FNMA1003 or equivalent credit application, Verification Of Employment and a Verification Of Rent, I will have access to more prospective note buyers. The Fannie Mae 1003 is the standard loan application used by most lenders. To return these forms you may click or tap here to upload using encrypted security. If you prefer email these forms to bob@notesolutions.us or fax them to 855-975-2875.

  10. A note investor may help you structure the Mortgage and Note to minimize the discount. Depending on the terms of your note, the property characteristics and the property buyer's credit history, you may be required to hold a second mortgage. The percentage will vary, but a 10% second mortgage is common. If our offer to purchase your note is acceptable to you, we will sign a letter confirming what we have agreed to, and what contingencies need to be met. The main contingencies are marketable title insurance to the property, and an appraisal acceptable to the note investor, which supports the sales price of the property.

  11. Property seller and buyer sign a real estate purchase contract and a deposit is put in escrow. For all document preparation you should work with a closing agent of your choice, such as an attorney or title company.

  12. Your property is sold to the property buyer. After one note payment is made by the property buyer, your note is sold to the note buyer. The property buyer will make remaining payments according to the terms of the note. Those payments are made directly to the note buyer. Payments may also be made to the property seller, if for example, a second mortgage is held by the seller.



Possible Scenarios

  1. You may create a note that's acceptable to you and your property buyer, but no one will be willing to purchase that note as part of a simultaneous closing. You must realize of course, that this is true for any note, new or seasoned. The difference is that if you plan to do a simultaneous closing, you have a greater sense of urgency to sell your note. This depends on the extent you need cash at closing, and what other sources of funds you have or can acquire.

  2. The note created in scenario 1. above, may become more desirable to a note buyer with the passage of time. As the note becomes seasoned, that is, a number of payments have been made, a note buyer may offer to purchase this note. But if the other characteristics of the note are undesirable, then even as the note becomes seasoned, you may find no note buyers. However, based on the advantages of owner financing, you may still be satisfied with your deal.


  3. If you create a more desirable note yourself or with the assistance of a note broker/buyer, then the following possibilities may arise:

  4. Once again, all notes of this nature are sold at a discount. A note buyer may offer to purchase the entire note you are about to create after one payment is made. You may like this deal, but the discount may be greater for a newly created note, and for a full note purchase, than a partial purchase.

  5. A note buyer may offer to purchase only part of your note at the closing table. You may be offered more than one way to do this. One or more of the options may apeal to you. And the discount percent applied will probably be less than the discount if you are offered a full purchase.

  6. You may also plan on a partial sale of your note on your own, in advance of making plans on how to sell your property. The distinction here is that you are targeting a partial sale of your note, rather than a note buyer only offering a partial and not a full purchase.

  7. While these ideas pertain to the note and mortgage, the contract of sale for your property is closely related. By doing a simultaneous closing, the assumption is that the property seller needs to receive some cash soon after closing. To protect yourself from a simultaneous closing that doesn't work out as planned, you could use a contingent contract.

    For example, you could add a clause that states "This sale is contingent upon the owner financed note being sold within _________ days after the closing date, to generate cash proceeds acceptable to the Seller. Otherwise the contract of sale shall be considered null and void." Then you would need a quote in advance of closing, to sell your note within the time frame acceptable to you.


Is A Simultaneous Closing A Good Idea For You?

For starters you have to be willing to offer seller financing. If you plan to attempt a simultaneous closing, it doesn't mean that you can create a junky note because you are going to sell it quickly. No one will buy it, and that's just a bad way to do business. So learn what's necessary to create a quality note. That said, if you are a motivated property seller, your circumstances may limit the quality of your promissory note. So do the best you can.

What is the minimum amount of cash that you need at closing? Knowing this is essential to plan accordingly. Are you able to wait until one payment is made by the note payor before receiving your cash? What alternative sources of funds might be available to you temporarily? Even if you don't need any funds at closing, might you have a good use of some funds shortly thereafter?

Would you consider collecting some monthly payments now or in the future? If so, this would give you the chance to collect reliable fixed income, in addition to collecting a lump sum of cash. The idea here is to do a partial sale of the note payments for upfront cash, while still receiving part of each monthly payment. Based on the varied approaches different funding sources take, the additional flexibility of this approach could provide your best deal overall.

Below is a chart to help you decide what to do next. This is just meant to give you some additional thinking input. (Note that the usage of "Buying" in the chart, refers to buying another property at the same time you are selling one. "Equity" refers to the equity in the property that you are selling.)

Is A Simultaneous Closing A Good Idea For You?
Equity Buying And Need Cash At Closing Buying And Don't Need Cash At Closing Not Buying And Need Cash At Closing Not Buying And Don't Need Cash At Closing Investor/Rehabber Need Cash At Closing Investor/Rehabber Don't Need Cash At Closing
0-20% No No Maybe No Maybe No
21-80% Maybe No Maybe No Maybe Maybe
81-100% Yes Maybe Yes No Yes Yes/Maybe
Caveat:   Availability of other funds and your plans could change these answers.

While this chart comes at the end of the page, it's really a starting point to help you think about your situation. But keep in mind that you do need the background above, for an understanding of simultaneous closings.

As soon as you're ready to get started please complete a Simultaneous Closing Worksheet.

PLEASE NOTE THAT WE ARE NOT LENDERS AND DO NOT PROVIDE LOANS

REFERRALS = CASH FOR YOU OR YOUR CHARITY

To Expedite Your Results Please Complete A Worksheet

For your security all worksheets are encrypted. This gives you the most effective protection for your data, and protects your privacy.


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