What is Simultaneous Closing – SIMO
Simultaneous Closing embodies a sophisticated real estate financing strategy wherein two transactions unfold concurrently during the property’s closing. Given its intricacies, this process can often be perplexing. Let’s delve deeper into its workings…
How does Simultaneous Closing function?
In a Simultaneous Closing scenario, two distinct closing processes unfold concurrently: one between the investor and the seller, and another between the investor and the buyer. The investor assumes a dual role as both the chain of title holder and the property’s owner. To ensure the seamless transfer of title and forestall any title defects, the investor typically enlists the assistance of a seasoned attorney or reputable title company. Feeling a bit bewildered? Subsequently, the attorney or title company notifies the buyer’s bank of the simultaneous closing, albeit the bank reserves the right to decline the deal. Interestingly, banks may reject a simultaneous closing if they perceive the end buyer as overpaying for the property, which, upon reflection, can be advantageous.
What are the Advantages of Simultaneous Closing?
For those unable to secure a conventional mortgage, fret not, as alternatives abound. Many sellers are open to providing financing directly, effectively assuming the role of the financier for the buyers. Recognizing the occasional challenges individuals face in securing conventional mortgages, lenders often find seller financing an attractive proposition. By offering such financing options, lenders can generate heightened interest in the property, facilitating quicker sales and potentially higher profits.
The Challenges Associated with Simultaneous Closing.
Once widely embraced, Simultaneous Closing is now a rarity due to regulatory shifts within Title Company Internal Regulations. These changes stem from an uptick in mortgage fraud incidents. Consequently, investors find themselves compelled to execute transactions using Back to Back Closing methods. It’s essential to note that, despite this alternative approach, banks may still veto the deal if they perceive the end buyer as overpaying or if the seller lacks a referral.
Understanding Back to Back Closings.
Should Simultaneous Closing prove unattainable, fear not, as Back to Back Closing presents a viable alternative. This transactional method bifurcates into two distinct parts. Firstly, the investor engages in a transaction with the seller, effectively purchasing the property. Subsequently, the investor sells the property to the end buyer in a separate transaction. Throughout this process, the investor serves as both the current owner and the real estate intermediary, with the end buyer furnishing funds for both transactions. Importantly, the presence of two separate closings necessitates the issuance of two HUD-1 statements: one detailing the transaction between the investor and the seller, and the other delineating the transaction between the investor and the end buyer.