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 property.
“C” is the letter designation for the end buyer of the property or in some cases he may be reselling the property himself in which case there would be another letter designation for the latest end buyer (“D”).
In the last example, the C buyer would then enter a C-D closing!
This is usually referred to as a Daisy Chain series of closings, A-B, B-C, C-D, each one contingent on the previous one to close.
Unfortunately, daisy chain closings often fail because you have at least four to five parties involved and if anything can go wrong, it often does.
When you are purchasing a property from another investor, it’s always imperative for you to make sure the investor has the original contract with the “A” seller, or you could have trouble even before it closes.
Some investors put out other wholesalers’ properties on their list and just see what happens.
That’s ok if this investor has a contract with the investor who has the original contract with the seller, otherwise, you could be getting into an A-B, B-C, C-D, D-E, etc.
Be careful when dealing with sellers and wholesalers so you are not liable for something you are not even aware of!
Search terms – Parties or Legs in Transactional Funding, A to B and B to C what does that mean, Transactional Lending Legs
If you have any additional questions, contact me directly at [email protected].
Be sure to check out BestTransactionalFunding.com for all your same-day double closing needs, including a list of Investor-Friendly Closing Agents in various states.
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