If you're selling a property and buying one around the same time, you may be able to opt for what's called a concurrent closing. In its simplest form, this just means two closings done back to back -- or at least in very quick succession.
These closings are a way of streamlining the typically difficult task of buying a new property and selling your previous one simultaneously. They can also help ensure you have the funds to buy your new property (as long as the property you're selling closes first).
How a concurrent closing works
Concurrent closings usually go like this: You'll attend your closing appointment for Transaction A -- ideally the home you're selling. You and the buyer will both sign your documents, and the funds will be transferred and the sale completed.
Once this is done, you'll turn around (at the same title company) and do the closing on the property you're buying -- Transaction B. Both closings may occur on the same day or it may be a few days apart, depending on how long funding takes.
Concurrent closing versus double closing
Concurrent closings shouldn't be confused with double closings. Double closings are a strategy used in wholesaling real estate, and they're a lot harder to come by. In these situations, the investor essentially uses the funds from their end buyer to fund the purchase of the property.
It works like this:
- The end buyer's money goes into an escrow account or to the attorney handling the transaction.
- The investor uses that money to fund the purchase of the property and pay the seller.
- The investor, now the owner of the property, then sells it to the end buyer, getting the difference between the two prices in cash.
It's essentially a way for a wholesaler to flip a property without putting down any of his or her own money.
Pros of concurrent closings
The biggest advantage of a concurrent closing is that it ensures you have the money necessary to fund your new purchase. Because you'll close on your old property first, you'll have the proceeds from that sale to use toward your down payment and closing costs. You will also have paid off that old mortgage loan, which will likely help you in qualifying for new financing, too.
These closings also remove a lot of the hassle from the transaction. You don't have to go to two different title companies, and in many cases, you can complete both the sale and the purchase all in one day. It's a nice way to streamline a typically complicated process for everyone involved.
Finally, if you're physically moving from one property to the next, a concurrent closing can keep you from being displaced or needing to rent storage space. You can move out from one home and into the other almost simultaneously.