What is a Concurrent Closing?
A concurrent closing is used for selling and buying homes at the same time. If you need to sell your home in order to buy another home, the fastest way is with a concurrent closing.
Concurrent closing does not mean simultaneous closing. The sale and the purchase can’t happen at exactly the same time. A concurrent closing usually happens within two days. Often, a concurrent closing means that the sale of your current home will be finalized first. Once that happens, the purchase of your next home will be finalized, usually on the following day. Sometimes, the purchase of your next home is finalized within two days.
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How Does a Concurrent Closing Work?
Selling and buying homes concurrently means that money needs to be wired to several accounts. Here’s an example of how a concurrent closing might go.
Step #1: Your Buyer pays for your house.
The Buyer wires funds for down payment and closing costs to the Escrow Company. Then, if the Buyer is taking out a mortgage, the Buyer’s Lender wires loan funds to the Title Company. If you sell your home to a cash buyer, the Buyer wires all the funds to the Escrow Company.
Step #2: The Title Company pays off your existing mortgage.
If you have an outstanding mortgage on the house you’re selling, the Title Company pays off that debt. When that debt is repaid, the Mortgage Company releases the title to the property, giving the you, the Seller, the ability to deed the property to the Buyer.
Step #3: The Title Company orders the Grant Deed recording at the County Assessor’s Office.
The confirmation of recording signals the transfer of ownership, from you, the Seller, to the Buyer.
Step #4: The Title Company transfers any remaining funds to the Escrow Company.
The Escrow Company handling the sale of your home disburses funds for closing costs. You, the Seller, are credited with any Net Proceeds from the sale of your home. Now you become the Buyer.
Step #5: You pay for your new house.
You, the Buyer, wire funds to the Escrow Company handling the purchase of your new home, to cover down payment and closing costs. The Escrow Company handling the sale of your home wires funds to the Title Company that is handling the purchase of your new home. If you are taking out a mortgage to help pay for your new home, your Lender also wires the loan funds to the Title Company.
Step #6: The Title Company pays off the Seller’s existing mortgage.
If the Seller has an outstanding mortgage on the house you’re buying, the Title Company pays off that debt. When that debt is repaid, the Mortgage Company releases the title to the property, giving the Seller to ability to deed to property to you, the Buyer.
Step #7: The Title Company orders the Grant Deed recording at the County Assessor’s Office.
The confirmation of recording signals the transfer of ownership, from the Seller to you, the Buyer.
Step #8: The Title Company transfers any remaining funds to the Escrow Company.
The Escrow Company disburses funds for closing costs, and refunds any remaining balance to you.
When Will I Move?
A common question about concurrent closing is, If I’m selling and buying homes at the same time, when will I move? There is no overlap of ownership. You have to sell your home first before you can buy your next home.
A common solution to this displacement is called a Seller In Possession Addendum, which is signed between you the Seller and the Buyers of your home. You can request that the Buyers allow you to stay in your home for a period of time after escrow closes. In this situation, Sellers often request approximately 5 days for moving and cleaning.
Tips for a Smooth Concurrent Closing
Many people work together for an escrow to close on time. They represent the title company, the escrow company, the lender, and the real estate agents.
There are many steps involved in closing an escrow. A concurrent closing doubles that number. And what if your home’s Buyers need to sell their home in order to pay for your home? If your Buyers also need a concurrent closing to buy your home, the number of steps can triple. So if there is a delay with the sale of your Buyers’ home, there will be a delay with their purchase of your home, and your subsequent purchase of your new home. It can feel like a precarious domino game.
Potential Complications
Other delays can happen. A lender may require additional documentation at the last minute. The County Assessor Office may close early and not allow a title to be recorded that afternoon.
Keep it Simple
Here are two ways to improve your chances of a smooth concurrent closing:
- Use the same Title Company for both selling and buying. If only one Title Company handles both transactions, it can take your seller proceeds and apply them directly toward the purchase of your new home. Reducing the number of wire transfers can speed up the process.
- Use the same Escrow Company for both selling and buying. Using the same Escrow Company also eliminates the number of wire transfers. Now you don’t have to transfer funds from one escrow company to another – the Escrow Officer simply transfers funds between accounts in the same bank.
The ideal arrangement is to use the same Title and Escrow Companies for both transactions. Doing this increases the likelihood that you may be able to close both escrows on the same day, or by the following day.
The Bottom Line
Concurrent closings can be a little more stressful than managing only one transaction, but you can do it. Almost all title and escrow officers have lots of experience with concurrent closings, and will work hard to make it happen for you.
So what’s the first step? It depends on market conditions. You may need to accept an offer on your first home before you can write a strong offer for your next home. This means that the Buyer of your first home agrees that a contingency of the sale of your home is finding, and possibly closing, on replacement property. It also means that the Seller of your next home agrees that a contingency of the purchase is the sale of your existing home.
Are you thinking about selling your home? Here’s how I prepare your home to be listed in the MLS.
You can also read about Seller Closing Costs, Buyer Closing Costs, and Closing Costs for Cash Buyers.
As always, contact me with any questions.
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