Simultaneous Closing - SIMO

One piece of property. Three players. Two simultaneous transactions. How will it all play out? We’ll tell all on this episode of Simultaneous Closing: SIMO in Action.

Our story begins on a hot summer’s day in Smalltown. Becky, our buyer, is looking to purchase a home. She’s been working with Sully the seller and Irving the investor to iron out the details of the SIMO they’ve got planned. What’s going to happen is this: Sully is going to create a mortgage note to help finance Becky’s purchase of the home. Then Sully is going to instantly turn around and sell the mortgage note to Irving, who will pay for it in cash. Becky gets the property title, Irving gets all of Becky’s mortgage payments, and Sully fades away into the background, no longer a part of this real estate deal.

The creation of the mortgage note and instant selling of it to an investor are the two simultaneous transactions that make up the legs of the “simultaneous closing,” or “SIMO,” concept. While this arrangement can be super beneficial to all three involved parties, there is some trepidation about SIMOs in our post-2008 subprime mortgage crisis world. For example, insurance companies who got burned by predatory lending practices back in the day are a lot more careful about insuring SIMO properties nowadays. Does this mean Becky won’t be able to get insurance? Not necessarily, but it does mean that it might be a little harder and a little more expensive, and the process might take a little longer.