Back to Back Closes - The Mystery Explained

A back to back close occurs when you buy and sell a house at or near the same time.

The two closings are always done sequentially,one after the other,never simultaneously. This is a way for both the title company and government to get paid each time the title of a property changes hands.

Back-to-back closes are also called "double close", "simultaneous" or "sequential close".

Title companies have done back-to-back closes for years. It's one of the reasons they are in the business. I mean, whatever business you are in, wouldn't you always prefer to sell two instead of one of whatever it is you sell?

Recently title companies have changed the way they do business and the majority of them see a big red flag on your head when you mention back-to-back closes. What is somewhat surprising is that many title companies have no idea what you are talking about if you ask them if they do simultaneous closes? Go figure?

Two aspects of the business have changed. One, most title companies no longer publicly acknowledge that they do back-to-back closes, anymore. And two, those that do no longer allow you to start a transaction without having the money for the first close.

See, in the old days, like two or three years ago, when you did a back-to-back close the transaction flowed as follows: If a seller had a house to sell and an end-buyer had the cash to buy it, an investor could simply stand in the middle--like the banks--and get paid on the spread.

The seller would sell the house to the investor and the title company would deal with the paperwork in a so-called dry closing(no cash). Later that day the title would be passed to the end-buyer in a wet closing (or cash closing) and all accounts would be balanced in cash.Now both legs must have cash! So why all the fuss?

Title companies hate back to back closes because they got burned a number of times in the past recent years.

In the previous red hot real estate market an investor might buy a house at one price and immediately flip or sell it for an inflated price above market value.

Somewhere along the line from the start to the end of the deal a whole lot of folks through commission and omission would lie--often validated by documents attesting to the truth.

In short, somebody or a whole group of folks working together would commit Fraud! And in the final analysis the title company would often be left holding the bag, so to speak. That gave flipping houses a bad name. Title companies reacted. And people started saying flipping was bad. Some started saying flipping was illegal.

Flipping houses is not illegal! But fraud is. But we all know that, right? Many people have apparently gotten the two confused in the housing fiasco. But one thing is clear, generally speaking title companies unanimously hate back to back closes.

When it rains it pours. Related and added to the double closing woes of investors are seasoning requirements for an FHA and other lender loans. FHA requires that when you purchase real estate you must hold title in your name for at least 90 days before the title can change hands again. There are a few exceptions.

What this essentially means is that if you buy a house with the intentions of flipping or selling it immediately that you must first own the house for at least 90 days. Bummer!

Not all lenders abide by these rules, some have equivalent requirements and still others have even longer seasoning requirements. Some have none! The only way to know what's going on in your deal is to speak to your end buyer's lender to find out their business practices.

Now to tie it all together the point is, finding a title company to do a back-to-back close can be a real challenge. And even when you do find one, they no longer do dry closings. Plus you are now required to deal with seasoning issues. Which for FHA means that you must own a property for at least 90 days before transferring title. You can do everything else right, but if your deal is not in compliance with your title companies rules--your deal does not close. So we must learn to adapt or die.

For more information about back-to-back closes go to my website: http://www.doubleclosehelp.com or call me at 800-627-3692 or email me at: help@homehelpnow.us.

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