Back-to-Back Escrow
Definition and meaning of Back-to-Back Escrow in real estate.
A back-to-back escrow is an arrangement where a property owner coordinates the sale of their current home and the purchase of a new home to close at the same time. This process links the two transactions so the proceeds from the sale can immediately fund the purchase.
In more detail
This strategy is common for buyers who need the equity from their existing home to buy their next property. It requires careful coordination among buyers, sellers, real estate agents, escrow officers, and lenders. If one transaction faces delays, it can create a domino effect that delays or cancels the second transaction. Buyers often use contingencies in their contracts to protect themselves if either transaction fails to close.
Key facts
| Category | Buying & Selling |
|---|---|
| Also known as | Concurrent closing |
| Biggest risk | Delay in one transaction halts both |
| Who manages | Escrow officer or closing attorney |
A family sells their starter home and schedules the closing for the same morning they close on their larger home, using the cash proceeds from the sale to cover the down payment on the purchase.
Frequently asked questions
What happens if the first escrow fails to close?
If the sale of the first home fails, the buyer may not have the funds to complete the purchase of the second home, potentially canceling the second contract unless a contingency is in place.
Is a concurrent closing more expensive?
The closing fees themselves are generally the same, but there may be minor administrative fees for coordinating the wire transfers between escrows.