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This is a very common question, and the answer is both “Yes” and “No”.   The assumption we will work on is that the investor is asking this question regarding funding his purchase and sale. I mention this because that’s different from the actual expenses and costs an investor will have to prospect for and find motivated sellers. The first obstacle is the Earnest Money Deposit (EMD) which is too often a career killer for many wannabe investors. Solving this initial obstacle will save you a lot of time and heartache later. You can do this by [...]

A transactional fee means different things to different transactional lenders.   The fees that transactional lenders charge are usually, but are not limited to the following: 1. A funding fee that is a percentage of the actual amount a transactional lender funds for the A-B closing, i.e., $100,000 at 1% = $1,000. 2. A wire fee to cover the expense the transactional lender pays for his wire to the closing agent varies greatly depending on the bank the lender is using. NOTE – you should always check to see what minimum fee the transactional lender charges because [...]

I love this question because it should be an obvious answer but it’s not!   Ironically, most hard money lenders don’t loan funds for same-day double closings. This may sound silly but it’s a fact because they consider same-day transactional funding very risky. What may be surprising is they are correct. Despite what the public thinks about the “safety” of transactional funding, it is fraught with potential issues that only result in one end – the complete loss of the transactional funder’s money! Without disclosing the specifics of what all can go wrong, suffice it to say [...]

  In the previous FAQ about transactional funding, I was asked how to do deals with no EMD. The answer to this question, how can your transactional funder fund an EMD, elaborates on the various answers of doing deals with no EMD. The easiest way, if you are dealing directly with a seller, is to add a clause to your contract stipulating that you will provide the EMD on the day of closing. The most common way this is handled is your transactional funder simply adds in the EMD to the amount he is wiring to the closing [...]

  Not long ago I was called by a couple of lenders asking if I would promote their website for lending Earnest Money Deposits (“EMDs”), and I asked, “What are you thinking and how many times have you done this?” Their answer was interesting, “Haven’t done any yet but we have a plan.” The issue for me was that about 35% to 45%, of all wholesale deals, do not close, and if they loaned these EMDs, they would lose their money! They had no experience but felt that they had the legal aspects covered by a lengthy Agreement [...]

This nomenclature of letter designations for the participants in a real estate closing is important. Parties or Legs in Transactional Funding Letter designations are used for the parties to the purchase and sale as follows: ”A” is the letter designation for the original seller and normally the property owner except where a power of attorney or court order is involved with a different party as the seller. “B” is the letter designation for the investor buyer who may be holding or reselling the property, in which case he is both a buyer and a seller of the [...]

The short answer is “Yes,” but there are a few caveats. Commercial, Multi-Family, and Raw Land with Transactional Funding With commercial, multi-family, and raw land properties, the requirements for closing that must be in place are: The first one is that both “legs” of the closings must occur on the same day and at the same closing agent. Many commercial transactions include “seller financing” which doesn’t matter to the transactional funder as this is less money he needs, but the seller’s loan may not be transferable to the end buyer. In this case, the end buyer must [...]

The words “Pass-through Funding” describe a technique rather than a specific type of closing.   For a better understanding of who the players are in this arena, let’s use the traditional letter designations for each party. “A” is the original seller and property owner. “B” is the investor who first purchases the property and later resells it. “C” is the end-buyer or the party who is purchasing the property for rehabbing, holding as a rental, or wholesaling it to another buyer. The most common type of investor closing is a simple purchase by an investor (“B”) who [...]