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Transactional funders typically cover 100% of what is “Due from Borrower” as shown on the settlement statement.   This should mean the investor would not have to bring any money at all to the closing. However, as always there are exceptions to this industry standard for what transactional funding covers. I have heard that certain transactional lenders will not fund any of the closing costs associated with the A-B closing. These costs include all settlement fees and expenses listed on the second page of the settlement statements. It is important that your contract with the seller and [...]

This “extended closing” is the second most common reason for deal failure behind hard money lenders not funding timely or at all on the B-C closing.   I have asked closing attorneys in most states if there is an actual statute (law) that specifically requires the closing agent to do the A-B and B-C closings on different days, The answer has always been, “absolutely not!”, yet this extended closing requirement happens in about 20% of all closings in a certain group of states. These states are the ones where well-meaning but uninformed politicians or the State BAR [...]

There should never be any upfront costs for transactional funding, but…   Some transactional lenders charge an Application Fee for them to decide whether they will or will not fund your deal. It is critical for any investor who needs transactional funding to “interview” an actual representative of the funding company and ask certain questions, such as: What states do you NOT fund in? Do you have any upfront fees? What happens if the deal doesn’t close, am I charged anything? What is your minimum? How much is your funding fee? Is there a wire or transaction [...]

Both terms can be misleading so check carefully what the transactional lender actually means.   The terms “flash” and “instant” obviously infer the very quick funding of a loan by a transactional lender. A “flash” of light takes a millisecond while “instant” implies it’s over and you didn’t even know it! In the real world, in both cases, a transactional lender must take time to make sure he isn’t throwing his money away, so there are no “instant or flash” loans. However, the advertising really draws in unsuspecting investor-borrowers and often to their detriment. In transactional lending, [...]

The cost of transactional funding can vary greatly and you should know ahead of time your total costs before engaging a transactional lender.   The fees a transactional lender can charge include but are not limited to: The Funding Fee for borrowing the funds for the actual double closing which can range from 1% to 2%+ for closings that require $1,000,000 or more which are usually negotiated. A Wire Fee to cover the lender’s cost of wiring his funds, A Minimum Fee that covers “smaller” amounts loaned to investors which can range from $350 to $1,495+, An [...]

There are two ways of looking at transactional funding in terms of being a loan or not.   First, many closing agents are emphatic that transactional funding is a loan and they actually require a lender’s title policy in addition to the regular owner’s title policy. The cost of this additional policy is usually $25 depending on the price of the property’s buyer’s policy. If a conventional or hard money lender was funding a purchase, they always require a lender’s policy which additionally insures the amount loaned for about 10% over the actual amount loaned. But to [...]

Double Close and a Simultaneous Close - The short and correct answer is they are not the same!   There is more than semantics when you talk about double closings and simultaneous closings. As an investor for over 47 years, there has been a definite change in what words and phrases mean in real estate investing. Some of the changes have come about by necessity, some because of Investor invention, and others were taken out of context by investors. As an example of investor invention, many years ago I needed a description of what seemed like continuous [...]

Transactional funding and hard money differ greatly.   Interestingly, most hard money lenders will not do transactional funding because they consider it too risky, and in some cases, they are correct. Let's compare the main aspects of both types of lending: What we have is a comparative analysis of the items a hard money versus the transactional funding. First of all credit score - for hard money there is a minimum required by every hard money lender; for transactional funding, none. Bankruptcy - hard money likely not okay; transactional funding, it's okay. Funds how much - hard [...]