How to avoid Holding Costs: Concurrent Closing

Homeowners looking to transition to a new home sometimes forget that it’s not just as simple as moving from your old home into the new home.

This posting is to educate you on how to avoid bridge funding AND all the other holding costs, purchase contingencies and REAL risks associated with buying a new home before you’ve sold your existing home.

What is a Concurrent Closing?

Sometimes wrongly referred to as a Simultaneous Closing, technically speaking, a concurrent closing is purchasing a new home the same exact day (or within a couple days) that you sell your existing home so that the closing occurs at essentially the same time. This is a financial SLAM DUNK because not only do you not need to get bridge funding, but you also don’t need to move all your belongings to storage, move it back out of storage, pay double the mortgage, double the utilities, property taxes, lawn care and other costs required in a transition in which you own the title for two separate homes.

The Residential Buyer, your Cash Buyer

Sell to an ALL CASH BUYER and Avoid a Concurrent Closing

It all happens at the same time so that your moving truck picks up from your old house and delivers straight to your new home. Your mortgage and liability in the old house end the same day that it all kicks on at the new house! We’re talking about thousands and thousands of dollars saved.


How to Perform a Concurrent Closing?

  1. So how can you pull this off?
  2. How does it WORK?

Selling and buying homes concurrently means that money needs to be wired to several accounts in immediate succession. Some of these steps may very well vary depending on the situation, but here’s the most vanilla way it’ll go down:

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Let’s Walk You Through This Storm

1. Your Buyer Pays for your House

So first, you’re going to find someone to buy your old home. At closing, their lender is going to wire money to the closing attorney or escrow company.

If there’s an existing mortgage on your home, then the title company is going to take the money from your buyer’s bank and pay off your mortgage. When that’s paid off, the mortgage company releases their lien on the home

2. The Title Company pays off your Existing Mortgage
3. Transfer the Deed of Ownership

With the home now free of any mortgage or liens, the title company can now convey title to the buyer of your old home. At this moment, they now own your old home.

After the Escrow Company disburses funds for the closing of your old home, you, the Seller, are credited with any Net Proceeds from the sale of your home.  Now you’re ready to put on your Buyer hat.

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4. Remaining funds are transferred to a new Escrow Account.

5. The Escrow Company sends funds for your New house

The Escrow Company that has the net proceeds from your old home now transfers that to the closing of your NEW home.

Now unless your net proceeds from the old home (meaning the amount you receive after your existing mortgage got paid off) is equal to or greater than the price of your new home, then you’re going to need to go get another mortgage for the new home. So after they complete their underwriting on you as a buyer and do their appraisals and inspections, they’ll then wire over the money to the escrow company to purchase the new home.

6. The Escrow Company sends funds for your New house
7. The Title Company pays off the Seller’s existing mortgage

The Title Company then uses those funds to pay off the Seller’s mortgage and allow the Seller to convey a clear title to you.

8. Title Company Records New Deed

With a clear title, the Title Company can now deed the home over to you and record it at the county office.

Now that the deed is transferred and recorded, any remaining funds that weren’t used to pay off the underlying mortgage are given to the seller of your new home.

9. Remaining funds are transferred to a new Escrow Account

So the reason this crazy day of shuffling money, mortgages and liens between about 7 different parties is so awesome is because there is NO OVERLAP OF OWNERSHIP.

And as you probably very well know, that’s what makes changing ownership the most stressful.

  1. Do you move your belongings into storage till the second close happens?
  2. Are you ready to pay both mortgages, HOAs, utilities and insurance policies?

No? Yeah I thought you’d say that; well, this is your ticket out of it.

Can a Concurrent Closing Go Wrong?

Most definitely. The PAINFULLY obvious problem here is that these closings are EXTREMELY difficult to do. There’s so many steps involved in closing an escrow and a concurrent closing only doubles that number.

But let’s talk about how all of this can just blow up in our faces.

What if the buyer of your OLD home ALSO needs to sell their home before buying YOUR home? Well now the steps just TRIPLED.

Now let’s just assume the same thing for the Seller of your NEW home’s future purchase. Now we’re dealing with FOUR DIFFERENT HOMEOWNERS involved in the same closing, each with two sets of lenders. So that’s a total of 16 parties involved in the process for ONE closing.

The Residential Buyer, your Cash Buyer

Sell on Terms to an ALL CASH BUYER and Avoid a Concurrent Closing

This is where the nightmare of your life occurs: any one of these 4 parties and their lenders now require additional appraisals, surveys or documentation to complete the closing process on one of the homes. Well, now all 4 parties’ closings are brought to a halt, blowing up multiple transactions at the same time.

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.

How can I avoid all the hassle of a Concurrent Closing?

Easy answer folks, sell to The Residential Buyer, an all cash buyer.

If you can sell to a high priced cash buyer, like The Residential Buyer, then you can also just entirely avoid the need for bridge funding or pulling off a crazy ploy like a concurrent closing. Reach out to us, or your local realtor, and we can do our best to help you maneuver this process for you.

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