Also commonly referred to as a simultaneous closing. Double escrows are misunderstood when they are really a very simple closing consisting of two separate transactions:
- Buy Side – This is the purchase and sale agreement you have with the seller stating the terms and conditions of the sale. For this example the purchase price is $100,000 cash.
- Sell Side – The purchase and sale agreement you have with the new buyer stating the terms and conditions of the sale. In this contract you are the seller. For this agreement the purchase price is $110,000.
When you open escrow with the title company inform them that you would like to complete a simultaneous closing and insist that there are two separate escrows and HUD 1 Settlement Statements for the property. One for the buy side and one for the sell side. As long as they are treated as separate escrows there are no problems, because the title company can only talk to principles of the transaction on each file.
In other words, the title company cannot tell your seller and your buyer about simultaneous closing, terms or other arrangements. Unfortunately some title companies do not understand their fiduciary obligations and will not participate in a double closing. Ask early and if they are unwilling take your business elsewhere.
When it is time to close the transaction insist that the buyer signs before the seller. (You always want the person with the funds to bring the money and sign before the person who owns the property signs; this ensures a smooth, hassle-free closing.)
Note: Not all title companies will do double escrows. Make sure you ask before opening up the escrow!
Tip: If your buyer pays all of the closing costs, the only expense you have to pay with some title companies is the title insurance. To reduce this expense further, request a “hold open” title policy and your cost will only be a fraction of a normal title policy.