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 holds the property and where the funds come from the buyer or a lender.
The second most common type is an “Assignment of Contract” where the investor (“B”) literally “assigns” his contract with the original seller (“A”) to the investor end- buyer (“C”) who comes to the closing and purchases the property.
The original investor (“B”) can also “sell” his contract to another investor (“C”) who then steps into the “investor’s shoes” (“B”) and closes directly with the original seller (“A”).
In either of the above situations where the investor (“B”) does not need money to close his purchase with the original seller (“A”) and uses the end buyer’s (“C”) funds, the transaction is referred to as an A – C closing.
The term pass-through funding has been associated with any type of A – C closing.
The investor runs the risk if the original seller (“A”) or end-buyer (“C”) finds out how much the profit was and does not close.
Some closing agents have been very creative in generating closing statements, so the original seller and the end buyer aren’t aware of the profit the investor is making.
Recently two more of these attorney/closing agents have lost their licenses for “Deceptive Business Practices,” and the deeds for the closings were rescinded.
Be careful out there because focusing on saving a few dollars can be very expensive.
If you have any additional questions, contact me directly at DaveDinkelQuestions@gmail.com.
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.
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