There are two major risks involved with transactional funding.
- The first risk is when the transactional funder loans the funds for the double closing.
- The second risk is for the investor if anything goes wrong, and he can’t get the funds timely or at all.
- The transactional funder faces five specific types of investor fraud of which the investor may or may not be a part.
- The transactional funder’s primary risk is having to foreclose and get his funds back if the original seller is paid out at closing and the end-buyer doesn’t close.
- While all these possibilities are covered in the instructions to the closing agent, bad things can happen.
- If the lender has to foreclose, he can only hope to get most of his money back despite what some people believe to be an opportunity to make money.
- The other four ways transactional funders are defrauded can cause the entire loss of their funds.
- I’ve never spoken to an investor who doesn’t believe that transactional funding is riskless, that’s because it’s not their money and they don’t fully understand what can go wrong.
- From the investor standpoint the risks are:
- Late payment from another closing agent and not being able to get the funds in time to close,
- End-buyer’s lender not allowing transactional funding to be used for the double closing,
- The transactional lender can’t timely get his funds to the closing so the deal is lost,
- The transactional funder deciding not to come to closing.
- Where I see the transactional funders not coming to closing is usually associated with an amateur funder, a private funder who is unfamiliar with the process, and the double closing being suddenly turned into extended funding because the end-buyer couldn’t close timely.
- If you’re going to use friends or family members for the funds, make sure they understand the process and talk to the closing agent to better understand their risks.
- If you deal with a professional transactional funder, make sure he has adequate funds for your closing, has plenty of five-star Google ratings, and is receptive and responsive to the closing agent.
Keywords – transitional lending risks, transactional funding risks, downside to transactional funding, trnasactional funding warnings
If you have any additional questions, contact me directly at [email protected].
If you need hard money instead of transactional funding, contact me for referrals to private hard money lenders.
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.
We have more five-star Google ratings than all the other transactional funders combined.
Visit DaveDinkel.com for full privacy policy, terms of use, etc. Be sure to contact us through the website at davedinkel.com if you have questions or concerns. Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential. No advice is to be construed as legal, accounting, or professional advice EVER. Please consult related licensed and qualified professionals before taking any action. No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.
