Simultaneous Close... Advise needed.

[MarkOnaba]

A couple of weeks ago, we (and 6 others) put an offer on a property that is owned by the bank (foreclosure). The bank chose our offer over the rest of them and we proceeded to get financing, complete the inspection and other due diligence.



The property is worth well over what I purchased it for, though a little dated.



About a day after we removed conditions, I get a call from one of the bidders, and he'd like to purchase the property for more than I paid for it. After some negotiation, we've arrived at a price we are both comfortable with, now comes the hard part.



How do I accomplish a simultaneous close, when it wasn't my intent at the beginning (so no "and/or nominee" in the offer)?



The closing date is fast approaching and I'm looking for advise from the REIN network. I'll be contacting Barry McQuire shortly for his take on the situation, but I thought I would put it out to the REIN network, for some tips, ideas and strategies...

 

[JimWhitelaw]

The simplest way is not to do a simultaneous close, but to assign your purchase contract to your buyer. You'll need two documents:



1) Assignment agreement - This outlines the agreement to assign your contract to your buyer, your assignment fee, etc. Best to get this acknowledged and signed by the seller too. If your lawyer doesn't supply you with a template for this, I can send you a sample.



2) Amendment to the purchase and sale agreement. This will be a standard amendment, changing the name of the buyer from yourself to your buyer. Your realtor should have a template for this. Again, you'll need to get the seller to accept this amendment.



The seller shouldn't have any issue with this as their contract will close as agreed upon, but banks are funny and don't always see things logically. Simultaneous close is actually two transactions and so the lack of "and/or nominee" is not a problem.

 

[Thomas Beyer]

Does it say 'name and/or Nominee" .. or just Name ?



You need an assigment contract signed by you, the buyer, and the ultimate buyer, AND you need permission from seller (i.e. a contract amendment)



The seller MAY NOT give you that permission/amendment since they would rightly assume you sold it for more money.



Thus, the best is to buy it, and once you own it, resell it.

 

[RedlineBrett]

Contact a hard money lender and show them both contracts.



They'll charge you a few thousand dollars to borrow a few hundred thousand for a few hours while you wait for the buyer to buy it from you. Will probably be cheaper than the 3 months interest you would pay to break a conventional loan and you won't have to free up your down payment cash as they usually do 100% financing.



It will also cost you a little more in legal fees as this will definitely be more work for your lawyer (buy plus a sell and in the same day). You'll likely need title insurance too.



That... or get a shadier lawyer than Barry who is willing to skirt trust protocol and pay the bank with the funds from the guy buying it from you.



Also most foreclosures in Alberta do not provide an RPR and the buyer usually has to pay for this in order to register conventional financing. Make sure the guy you are selling to is on the hook for this, not you.

 

[neill]

You could also talk with your lawyer to see if they will do what is called an intervening transfer. It is similar to what happens when a new home builder gives possession of a new house to the owner - they typically do not take title from the developper and title transfers directly.



It is possible in this scenario that you would not require your own funds and poss simpler than contract assignment.



@Brett - in some cases can you used title insurance in lieu of rpr?



(and Congrats!)

 

[lanedry77]

Hi Mark,



I just completed a simultaneous closing this week here in Calgary, so I'll chime in also.



There are a lot of variables in this situation;



- I would presume the bank you are buying the property from will have an issue with anyone else closing on the house other than you. They shouldn't, but banks are funny like Jim says.



- You mentioned that you were getting financing for the property, but didn't clarify if the person that wants to buy it from you was buying with cash or getting financing. *IF* they are getting new financing, there's really only two options; (1) assign the contract as Jim suggests [noting that the selling bank may/likely will have issue with that], or (2) buy it, wait a couple weeks for the title to settle, then sell it as Thomas suggests. for option #2, a mortgage would be a bad choice, and you should use shorter-term money like Brett suggests.



- *IF* the buyer will pay cash, you have more options. If you designate the seller to receive title on your purchase [and Barry may correct my terminology there], then your lawyer can flow the buyers money through to you so that you buy it and put the buyers name on title directly. The downside here is that your buyer will know exactly what you paid for the house *before* they close. [They'll always be able to find out what you paid after closing, but if the spread is too large and they're small-minded, they may choose to not close at the time of signing.] This is the 'intervening transfer', or sometimes called 'skip transfer' that Neill mentioned - the title 'skips' over you, or in other words, your buyer 'intervenes' in the transfer ot title from the seller to the you.



It's important in this situation that your sale contract to your buyer has a condition on it that your purchase must go through first.



in this way, you don't need to borrow money. This could save you $3k or much more in loan fees



- If your buyer is buying with cash, but your lawyer doesn't know how to do this, that leaves you with two main options;

(1) Follow Brett's suggestion and find a hard money lender to lend you the money for a few hours. Brett knows some - call him if you need money.

(2) find a better lawyer.





Best of luck Mark - and great job!





Thanks,



David.

 

[MarkOnaba]

A Huge Thank You to everyone for the advice!

The potential buyer did have the cash to close (no financing needed), so it would have been really easy to complete the transaction. Unfortunately, the buyer had second thoughts and decided to back out of the deal and build a new house instead.

So back to Plan A! The "long-long term flip"