Have you heard of a simultaneous close, but aren’t sure what it involves?  You’ll find that it’s a surprisingly simple procedure and a great way to buy property with using your own money.

There are many ways to close a deal in real estate investing.  As a foreclosure investor you’ve probably heard of the famed, simultaneous closing, when purchasing a property from the homeowner.  It’s a great way to make a profit on your time and effort without using your own money to purchase a property.

A simultaneous close is when you buy the property from the homeowner and then immediately turn around and sell that property to an investor.  You very often are only on the title of the property for a few minutes at a time.  Plus, you can often arrange the deal so that you end up buying that house with your investor’s money!

How the Simultaneous Close is Initiated
You initiate a simultaneous close on a property sale by asking your investor to wire their money into the title company that you are using for escrow.  You have already given the title company prepares the two closing documents; one is where you buy the house for $70,000 and the other is where you sell the house to your investor for say $90,000.  That means you get a profit of $20,000 after both closings are complete.

When the title company prepares both of these documents at once, they’ll notice that your buyer has already wired their money into the company’s escrow account.  The title company will see that when you sell this property to your buyer you’ll be getting $90,000 and that the buyer has already transferred his or her money into the title company. 

So, rather than asking you to wire your own money into the title company so they can initiate the first sale (from the homeowner to you) they’ll just use $70,000 of the $90,000 that’s been transferred into the title company by your buyer.  Then, they’ll turn around and complete the second sale (from you to the buyer) and leave you with $20,000 profit without even using your own money!

Basically you’ve just ‘flipped’ a house, which in proper terminology is referred to as ‘Wholesaling’ a house and all without using your own money!  As you can imagine there is a little more to the process of making a simultaneous close, but this is the gist of the procedure.  It’s an excellent way to get involved in real estate investment and get profits with very little starting cash.

The Simultaneous Close sounds like a perfect real estate investment deal.  However, there are a few drawbacks to this foreclosure investor’s dream deal.

It’s part of the dream, the possibility of being able to make thousands of dollars with out using any of your own cash as an initial investment.  Well, it has been done and can still be done with a variety of real estate sale practices.   One of these popular sales in real estate investment is the Simultaneous Closing, which basically involves you purchasing the property with your investor’s money and then selling that property to your investor all in a matter of moments.  It’s legal and requires paying close attention to the numbers on all sides of the deal.

One Minor Drawback with this Real Estate Sale
There is a small problem with using the simultaneous close in order to make a property sale.   A lot of title companies are hesitant to insure the title that’s been sold using this method.  In recent years there have been many problems with mortgage fraud and predatory lending.  Many of those fraud deals have involved a simultaneous close on a property title.  Plus, the business of foreclosure investing and real estate investing has a bad reputation.

So, to try and cut back on the incidents of mortgage fraud and predatory lending title companies have made a blanket rule stating that they just won’t insure a title in simultaneous close. 

This doesn’t sound like a big problem in wholesaling, but it basically means that the title company won’t perform a simultaneous close.  Hence, you can’t buy the property!  This is a bad deal for all the good real estate investors out there who are putting in their time and effort on wholesale deals, but who don’t have the money to invest on their own terms. 

Not all title companies have this rule, but it’s something to keep an eye out for.  This practice has just taken effect in certain areas.  So, it’s to your benefit to see if the title companies you will be working with are still performing simultaneous closings.  You’ll want to do this research before you make an offer on that next big real estate investment. Don’t cast aside the notion of a Simultaneous close entirely because this is still an excellent method for wholesaling property.

It’s not uncommon for you to run into problems in the real estate investment sector, especially when closing a deal.  If you run into problems with a Simultaneous Close on a property, try switching to the ‘Assignment of Contract’ deal to finish that property sale.
Many new real estate investors can run into problems when they attempt a ‘simultaneous close’ on a property they are interested in.  The simultaneous close basically involves you purchasing a property with an investor’s money and immediately selling that property to the investor for your profits.  It’s a nifty little deal that works well, when you pay close attention to the percentage of returns on each sale.  However, many title companies have initiated a blanket policy that prevents these kinds of simultaneous closings.

If you’ve tried a simultaneous close of your own and run into a problem with the title company, there is a way around it through an ‘Assignment of Contract’.  This is simply another kind of property deal where you sell your spot in the contract to purchase the home to your investor. 

How does the ‘Assignment of Contract’ Work Again?
When you approach a homeowner to buy their property you always have them sing the intent to sell contract locking the homeowner in with you as the purchaser.  In an ‘Assignment of Contract’ you would have your homeowner sign that contract as usual, saying that they are going to sell the house to you for $70,000.  Then, you work out a deal with your buyer saying that you are selling the house to him for $90,000. 

You have him cut you a check for $20,000 and you step aside.  Your buyer now fills your place and pays the homeowner you were working with, $70,000 for his or her property.  Basically, instead of buying the house from you, he’s buying a contract from you and still pays his agreed price of $90,000.

Problems with the Bank
You can still run into problems with this kind of real estate investment deal.  The banks often won’t let you do an ‘Assignment of Contract’ on a property sale.  You may find that the bank you submit this kind of contract to for say, a short sale, will often kick the deal back out when you try to turn it in.   When this happens the bank may tell you that they will only put the name of the person on the original property agreement on the new deed, which would be you.

This is in an attempt to cut down on shady or illegal deals that can take place in property investment.  Both homeowners and banks have been duped by property scams.  They can be naturally reticent to allow a sale to go through on a property with a different investor than is originally named on the intent to sell contract.

Don’t turn your back on this type of real estate investment deal.  It’s still a good way to work around a simultaneous close that falls through, especially if you are working with a bank or company that spends a lot of time working with foreclosure investors.