Another popular property-flipping strategy that is being taught today is concurrent closings, which are better known as simultaneous closings, double closings, and double escrows. Under a typical concurrent closing scenario, Buyer A signs a purchase agreement to buy a property from Seller B; in the meantime, Buyer A turns around and signs a purchase agreement to sell the property to Buyer C at the same time Buyer A buys the property from Seller B. In theory, this sounds as easy as boiling water, but in reality, it is next to impossible to pull off, especially when there are lenders involved in the transaction, because, nowadays, almost all lenders issue closing instructions to title and escrow agents doing concurrent closings, which require:
1. The source of title: The source of title gives the name, date, and recording information of the document that transferred the property's title to the current owner.
2. The source of funds: The source of funds provides information on where the money came from to purchase the property. This is done to prevent the end buyer from funding the seller's purchase of the property from the original owner. In other words, each transaction within the concurrent closing must be funded by each buyer.
3. Full disclosure: All three parties involved in the two separate transactions must be made aware of one another.
4. HUD 1 Settlement Statements: Properly completed HUD 1 Settlement Statements, which accurately document all of the payments made in each transaction and match the actual checks that were disbursed during each closing.
A major flaw in the concurrent closing strategy is that it is illegal to sell any property to which you do not own the title. In legal circles, this is commonly referred to as grand theft. For example, in 2002, the Florida Bar Association disciplined an attorney (Florida Supreme Court Case No. SC01-2321) for acting as legal counsel and the closing agent in a real estate transaction involving selling property the attorney's client did not legally own. The attorney and his client were arrested and charged with grand theft, organized fraud, and obtaining a mortgage or promissory note by false representation. The attorney had participated in a so-called double closing, which he later claimed he did not know was illegal, during which his client closed on a contract to sell a property prior to closing on the contract to purchase the same property. Thus, at the time of the closing on the sales contract, the attorney's client did not own the property because the closing with the original, legitimate seller had not yet taken place. In other words, the attorney knowingly participated in a transaction in which his client sold property to a third party, to which the client did not own the title. However, all of these legal problems could have been avoided if the attorney had advised his client to buy a real estate option instead of the property!
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