There are options for staying in your home even if you still can’t pay the mortgage.
What is back-to-back escrow?
Back-to-back escrow is a real estate transaction that allows a single entity to finalize the sale of one property and the purchase of another at the same time. By letting the money from the sale enter the escrow account when the sale closes, the buyer can purchase a new home with those funds almost simultaneously.
Also known as concurrent escrow, back-to-back escrow is normally set up in order to allow a party to receive proceeds from the sale of one home in order to finance the purchase of another, usually in the same day. One of the requirements of setting up back-to-back escrow is that funds from the sale of the first property must be sent directly into an escrow account and can only be used to purchase the second property.
The advantage of a back-to-back escrow is that it speeds up the process of both the sale and purchase by cutting through a layer of bank-related legal requirements and giving buyers the convenience of only having to attend one closing.
Back-to-back escrow may also take place when a homeowner is refinancing a home and the new mortgage is carried through a different lender than the original.
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Back-to-back escrow example
Say a homebuyer has made an offer on the house of her dreams. Before she can pay for that house, however, she must receive funds from a home that she is under contract to sell. Without the funds from the sale of her first home, she will not have the money needed to purchase the second.
Rather than ask her to attend closing twice — once for the sale of the first home, and again for the purchase of the new house — a back-to-back escrow is set up. The homebuyer first signs papers as the home seller and receives funds for the purchase of her home. She then fulfills her role as a homebuyer, signing purchase papers and presenting a check for the down payment and closing costs on the new home. The escrow account, having received the funds, closes both sales on the same day.