Occasionally I am asked if two transactions can be closed on the same day … where each transaction is being handled by different Escrow Agents.
The short answer is “no,” and here’s why. It all has to do with the sequence of events that occurs on the morning of closing.
Signing of all documents, including loan documents by the Buyer/Borrower, will have occurred (hopefully), a few days prior to closing (for both transactions). On the morning of closing, the new lender calls the Escrow Officer to confirm it is ready to close, i.e., new lender will send a wire of loan proceeds to the Escrow Agent, and the Escrow Agent is authorized to have the documents recorded at the County courthouse.
Typically, the new lender has a cutoff by which it will give this authorization and wire it’s funds. Often it is prior to Noon or 1pm.
This same process must also occur for the new lender on the second transaction.
Unfortunately, no one knows how long it will take for the documents on the first transaction to be recorded at the courthouse. And until the documents for the first transaction are actually recorded, the first Escrow Agent cannot release the seller’s proceeds to the second Escrow Agent.
The second Escrow Agent, of course, cannot release the documents to the courthouse until the Buyer’s funds have been received (the “Buyer” here being the “Seller” on the first transaction).
Furthermore, there is a distinct possibility that the first transaction will not be recorded until mid to later afternoon. By that time, the Federal Reserve will be closed for the day, so the Seller’s proceeds cannot be wired to the second Escrow Agent until the next morning. Not to mention the the new lender on the second transaction probably needed a definite answer by Noon or 1pm as to whether or not its transaction could close that same day.
This, of course, will prevent the second transaction from closing simultaneously on the same day as the first transaction.
What to do?!
There are two ways to handle this successfully … and predictably.
1. The parties can appoint the same Escrow Agent to handle both transactions. This way, when the first lender has authorized closing and recording, and the second lender does so also, the Escrow Agent can send both transactions to the courthouse at the same time. Since the Seller’s funds from the first transaction do not have to be wired out … but rather simply applied to the second transaction in the same escrow office … there is no delay in closing the second transaction.
2. If the parties cannot agree to appoint the same Escrow Agent on both transactions, it is essential that the two closing dates be at least one day apart. This will allow time on the first closing day for the recording and wiring to be completed, so that the second transaction can proceed the next morning.
Of course, option #2 works best if possession is at least one or more days after closing. If possession is “on closing,” the Seller on the first transaction would have to vacate the property before they were closed on their new purchase, thus having to stay overnight elsewhere for at least a day or two.
Always consult with the Escrow Agent(s) when negotiating two back-to-back closings, so all of the possible issues are addressed well before the closing date.