✅ Double Closing a Short Sale — Legal but Very Restricted

Yes, it is technically legal to double close a short sale under certain conditions, but it is highly regulated and must be done properly to avoid violating federal laws or committing mortgage fraud.

⚖️ The Key Legal Rule: Full Disclosure to the Lender

The crucial factor is disclosure.

The short sale lender (the bank that’s taking the loss) must know and approve the transaction terms.

If you hide the resale price, use undisclosed transactional funding, or misrepresent the final buyer, that can be considered fraudulent.

In other words:
You cannot tell the bank you’re buying for $190,000 while secretly already reselling it for $220,000 the same day — unless the bank explicitly allows or is aware of that arrangement.

🚫 What Makes It Illegal

It becomes illegal if:

• The short sale lender is misled or not fully informed of the resale.
• There is any misrepresentation on the HUD-1/CD closing statement.
• Funds or resale documents are withheld from the bank to influence their approval.
• The investor uses a straw buyer or manipulates title flow.

Violations can fall under federal wire fraud, bank fraud, or mail fraud statutes, even if you intended to close both deals cleanly.

💡 When It’s Legal

A double closing on a short sale is legal when:

• Both closings are fully disclosed to all parties (especially the short sale lender).
• The end buyer’s funds are not used to fund the first closing.
• The HUD-1/CD statements for both closings accurately reflect all transactions.
• The title company and lender are aware of the same-day resale.

If done correctly and transparently, this is just a normal back-to-back closing — not fraud.

🧾 Deed Restriction Watch-Out

Most modern short sale approval letters include a “deed restriction” clause that says something like:

“Buyer shall not resell the property for 30, 60, or 90 days following the date of closing.”

If that language is in the approval letter, you cannot legally resell the property until the restriction period expires.

So — even if the title company is willing, you can’t flip the deal until that window passes.