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.
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