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Example Of A Simultaneous Closing

Background Information

Joe Seller has a new job in another city and needs to sell his home which has an appraised value of  $120,000.  The balance on his current mortgage is $80, 000. 


Scenario 1 (Ideal)


Joe Seller lists the property for $125,000 with his real estate agent and gets an offer for the full asking price from a well qualified buyer who has secured financing from a traditional lender.

Here is what the numbers look like:

   $ 125,000   Selling Price

    -    7,500   Commissions for agent (6%)

    -    3,000   Closing (seller’s closing costs)

    -  80,000    Balance on current mortgage

= $  34,500    Due to Joe Seller at closing (to be used as down payment on his new home)


If only all real estate deals went down this simple!


Scenario 2 (real life)


Joe Seller lists the property for $125,000 with his real estate agent.  One month later Joe Seller has reported to his new job and starts renting an apartment for $1,000/month.  His is still paying his mortgage because he has not sold his house.  After another two months Joe Seller, (at the urging of his agent), has reduced the asking price to $120,000.    Another month goes by and Joe gets an offer of $115,000.  Joe is desperate now and takes the offer.

Here is what the numbers look like:

    $115,000   Selling Price

    -   6,900    Commission for agent (6%)

    -   3,000    Closing (seller’s closing costs)

    -   3,000    Rent on apartment

    -   3,200    Mortgage (4 months at $800 – its probably a lot higher)

    - 78,000    Balance on current mortgage (also probably higher)

= $  20,900    Due to Joe Seller at closing (to be used as down payment on his new home)


A considerable loss from the ideal situation!


Scenario 3 (Owner Financing with Simultaneous Closing)


Joe Seller lists the property for $135,000 with his real estate agent.  He opts for asking more than appraised value because he is now offering possible owner financing with 20% down.  This means that Joe Seller is willing to back a balance of $108,000 on the note.  Joe has done his homework and is working with ACI to set up a simultaneous closing before he starts taking offers.  He structures his note like this:


 Interest is to be 10.0% for 30 years with 20% down and a balloon payment in 5 years equal to $104,300.06.  At the end of the initial 5 year period the buyer will have to refinance probably at a much lower rate (since he now has built up equity, the value of the home has increased and he probably has a higher credit score then when he first started since he has been paying on time for 5 years.) ACI has been helpful in locating potential investors who will be ready to buy his note on closing day.  Joe seller finds a buyer that meets his criteria and ACI has located a buyer for Joe Seller’s note and their offer is $ 93,000 at closing time.


Yes, there is a discount after all the investor is now taking on all the risks that Joe Seller did not want in the first place.  Risks and problems like collecting monthly payments, assessing late fees when necessary, accounting, reporting income to the IRS, checking to make sure owner does not get behind on taxes and homeowners insurance,  the list could go on and on.  But, that’s OK – ACI and the investors can handle little problems as well as big problems (think foreclosure).  Don’t let the discount blind you to the potential gains.  Bottom line Joe Seller accepts the offer of $93,000 for his note.  Read on and see why this is still a good deal.


Within a week Joe Seller begins getting offers from potential buyers.  He fills out a mortgage application and asks for a credit report from each since he is going to finance part of the mortgage and he has the right to know this information (not to mention the investors who are going to buy the note are going to ask anyway).  He finds a potential buyer who has “average to poor” credit BUT he has good steady employment with a good company and really can afford the note payments but cannot secure traditional financing for obvious reasons.  Joe Seller accepts Billy Buyer’s offer of 135,000 with $27,000 (20%) down payment.  Remember, Joe has secured a buyer for that $108,000 note already with the help of ACI


Let’s look to see what the numbers look like now.

    Sell price                                 $135,000  (remember the home  is appraised at $120,000),

    Down payment                         -  27,000  (20% of selling price)

    Owner Financed Note              $108,000   (30 years at 10.0% and a 5yr balloon payment) To be sold for $ 93,000 cash!


At closing, this is what Joe Seller can expect.


     Price for his note                    $ 93,000 (remember why there is a discount?)

     Down payment                    +$ 27,000  (from down payment)

     Balance on Mortgage            - $ 80,000  (“due on sale”)

     Agent’s Commissions           - $   8,100  (6% of sale price)

     Closing Costs (Taxes?)          - $   2,000 


Grand Total Due to Joe at closing =>   $29,900. 


Not as good as in the “Ideal World”, but compared to what could happen without owner finance and simultaneous closing it’s a definite plus (about $9,000).   



Please contact us and we will do our best to help with simultaneous closings.


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