Double Escrow - Separating Fact From Fiction

Services for Real Estate Pros

It amazes me that so many "experts" who post articles and blogs about the Double Escrow (aka Simultaneous Closing) have absolutely no clue what they are talking about. And it is not just "arm-chair" investors, either. It's Realtors, attorneys - and yes, even a state Supreme Court Justice chiming in on something he does not comprehend.

In the 44 years I have been investing, I have done dozens of double escrows, and I have taught thousands of others how to use it effectively. In fact, I was one of the first to develop investing methods that use the double escrow, way back in 1972. I think that serves to make me somewhat of an expert on it.

First, as to the so-called "definition" of the double escrow according to Nevada State Supreme Court Justice McDaniel (Alley v Nevada Real Estate Division). His warped definition: "The secret use of escrow funds with those of another escrow fund, for the purposes of financial gain by the holder of the escrow funds, and without the knowledge of the owners of the two funds."

While that may have been the case in that specific instance, that is by no means the "definition" of Double Escrow. In an honest double, one person contracts to buy a property at one price, then contracts to sell it at a higher price, with both closings taking place at the same closing (or at least on the same day). There is no "secret use", and all parties are aware of what is transpiring. And it is not the holder of the escrow funds that has financial gain, other than his fee.

And a writer at WiseGeek posted that a double escrow is when a seller writes a note against his own property and sells both the property and the note...blah, blah, blah. I don't know what that person is talking about, and apparently neither does he. A double escrow does not require a seller to generate any kind of note.

And an attorney posted that the double escrow was made illegal by HUD. Far be it from me to play attorney, but I am probably a better one than he is. The double escrow is not illegal, nor can it be made illegal - in America, a person can sell any legal asset at any time - even immediately upon buying. Secondly, HUD cannot make law. Only congress can. What HUD did was to institute a policythat forces banks to insert a seasoning clause into government insured mortgages only, i.e. HUD/FHA/VA. And even then, there are waivers available.

The double escrow is a legitimate method used by savvy investors. It is legal in all 50 states. It is no more complicated than to buy a property, then resell it, provided there is full disclosure to all parties.

And in most states, it is a perfect method for making profits with no down payment at all. That's because the end buyer's funds can be used to pay the original seller. And that is because of the actual wording of the law - that in a simultaneous close, neither transaction is first nor last - both are simultaneous. Hence, the name.

So, don't be afraid of the double escrow. Use it, but don't abuse it - it is a powerful tool.


Comments (5)

David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg


Well it brings up a lot of potential underwriting issues but I guess if you are a cash buyer then it shouldn't matter. However if you are using the funds from the NOT YET closed loan to purchase your closed loan that's not funded I find it hard to believe that's legal. If you buy with cash transact prior to selling that's a whole different story. Its the first scenario that causes problems when someone with no interest or cash in the property thinks they can make money with someone elses money

Jul 22, 2013 02:00 PM

Thank you for your comment, David, but it is perfectly legal - we do it all the time, as evidenced by the docs we have posted online at In fact, as stated in my post that is the essence of the double. The law specifically and clearly states that neither transaction takes place first. That means the end buyer can actually close first, providing the first buyer with the funds to buy from the original seller. That is why it is called SIMULTANEOUS. A lot of people have a problem understanding the concept of "simultaneous" in such a situation. Look at it another way - it is like selling on consignment. Someone brings an iten for you to sell. You do not own the item, but you sell it anyway. You then buy the item from the original seller using the cash you got from the end buyer. Not quite the same, but essentially the same.

Jul 22, 2013 10:57 PM

Soory - those posted docs are at



Jul 22, 2013 10:58 PM

Does buyer 1 have to disclose to seller 1 or to buyer 2, buyer 1's purchase price and buyer 2's purchase price?

Oct 07, 2017 12:19 PM

Hi, Jacob. You are under no obligation to disclose anything to either about the other. The seller is getting what he asked for, and so is your buyer. But if you are concerned about their feelings, just do what I do (as detailed in my course: always start a negotiation by telling the other party that you are an investor, not "Joe Homebuyer". As such, your intention is to make a profit. Since the parties know this, up front, they will have no problem that you are, indeed, making a profit.

Oct 07, 2017 12:25 PM