How Transactional Funding Works
If you have a signed contract and are wholesaling your deal to an end buyer, then if you are short on cash you might need transactional funding. Transactional funding is perfect for bank owned properties and short sales that you are flipping to an end buyer (since banks do not allow assignable contracts).
Double Closing
You are going to need to schedule a double closing with your end buyer. Double closings also known as simultaneous closings allow you to schedule two back to back closings for the same property on the same day. You will need to have a source of funds to pay for the first transaction. This is where transactional funding is needed.
If you have a deal in the State of Florida that needs transactional funding, then we can fund your transaction. However, for us to fund your transaction we need to review it and make sure that it meets the following criteria:
We prefer that you use our preferred Title Company (Independence Title) for both closings. It is much easier to coordinate a double closing if both closing are at the same title company.
But if the bank insists that you must use the seller’s title company for the A to B closing that is fine, as long as you use our approved title company for the second B to C Closing.
Our preferred title company for the State of Florida is:
Independence Title
4700 W Prospect Rd #115,
Fort Lauderdale, FL 33309
Tel: (954) 335-9305
www.titlerate.com
How Does Transactional Funding Work?
If you are looking to flip a bank owned property, then you will have two contracts and two closings. The first contract is between the bank (seller) and you (buyer). The second contract is between you (seller) and your end buyer (buyer). The end buyer is the person that will ultimately be the one that is paying cash and closing on the property. Please note that you are the buyer on the first contract and you are the seller on the second contract.
Example of Transactional Funding
A – Bank
B – You
C – End Buyer
You have a purchase contract with the bank to purchase a bank owned property at $90,000 (first contract). This is known as the A-B transaction.
You market this property to your cash buyer’s (or our cash buyer’s), and you find a buyer at $100,000. You sign another contract with this buyer with you being the seller and them being the buyer (second contract). This is known as the B-C transaction.
Please note there are two different contracts at this point. The first one is the AB contract between you and the bank. The second contract is between you and the end buyer. That is why it is called a double closing because there are two contracts and two separate closings.
The difference between the two contracts $100,000 and $90,000 is your profit, but you have to deduct both closing costs from the first and the second closing, and you have to also deduct the transactional funding fees to establish your net profit. This can result in a lot of your profit being wiped out by fees and closing costs. For this reason, we always recommend to our students that they make offers in land trusts to avoid paying double closing costs.
Double Closing Costs
Since there are two contracts there are two closings. This means you will pay double closing costs. Banks used to allow the funds from the end buyer to pay for the purchase of the A to B transaction (dry closing) but increased regulations specifically related to short sales now require all closings to be funded (wet closing). So that means you have to pay for both closings and those closing costs can really add up.
Fees for Transactional Funding
For the State of Florida, the transactional funding fee is 1%. For all other States, the fee is 2%. There is also a $495 transaction fee. The minimum funding fee is $1,250. For example if you had a deal that required funding in the State of Florida and you were to request us to fund your $90,000 purchase, then your fee would be $900 (which is 1% of the purchase) plus the $495 transaction fee for a total funding fee of $1,295.
Please remember that transactional funding fees are not related to closing costs. Closing costs are what the title company will charge you to close the transaction and are not related to transactional funding fees. Also please note that we are not related to, nor have any ownership interest in the title company and the closing costs that they charge having nothing to do with us.
Both Closings at Our Title Company
We prefer to have both closings at our preferred title company. However, if for some reason the bank insists on using their own title company for the first closing that is fine if the second closing is at our preferred title company. Please note we will not fund your deal if you cannot have the second closing at our preferred title company.
Wholesaling/Flipping the Property
If you want to have us market your deals to our cash buyers then submit your deal to us immediately by using www.submitmydeals.com
You are free to market your deals to your own cash buyers as well or to post bandit signs, Craigslist Ads etc. If you find a buyer then there is no profit split and we will fund your deal. If we find a buyer then we split the deal 50/50.
If you find a cash buyer who is willing to buy the property, then make sure you get a deposit from your end buyer that is at least twice the amount of your initial deposit with the seller. You should make sure that you specify to your end buyer that their deposit is not refundable and that it is an all cash deal (or hard money). You should always only accept cleared funds in the form of a wire directly to our approved title company. Never take personal checks or cashier’s checks. They can be forged or fraudulent.
Submitting Your Deal to The Title Company
You should submit both signed contracts along with a description of the transaction to the title company. It is your responsibility to provide both contracts to our preferred title company, and to clearly communicate with them (do not assume that they know you are a student). Make sure you label all wires for deposits with the property address and your name. It is also your responsibility to communicate with us about the deal well in advance of closing if you want us to fund your deal (at least two weeks prior to closing).
Partnering with Us on Deals
If we market your deal to our cash buyers list and we find a buyer for your deal, then we will fund your deal for free and we will split the profit with you 50/50 net of closing costs. If you get a house under contract and you want us to market it to our buyers then use www.submitmydeals.com to submit your deal to us.
What Are Our Buyers Looking For?
Our buyers are investors are rehabbers that are looking for houses to fix and flip or landlords that are looking for cash flowing rental properties.
Demand from buyers is strongest at the lowest price points of the housing market. Our buyers are looking for cheap houses that have a good profit margin with a substantial difference between the ARV and their purchase price. The higher the price of the property, the less demand from buyers and the less likelihood of you having your deal funded. Stick with the entry level priced homes for your target market city since that is where the buyer demand is.
Which Areas Are in Demand in Florida
We have strong demand for houses anywhere in the State of Florida. The most buyers’ interest is in Miami-Dade County, Broward County, Palm Beach County and St Lucie County. We also have many buyers looking for houses in Central Florida, Tampa, St Petersburg, Jacksonville, and Orlando. Currently anywhere in Florida is in demand.
What If I am In Another State?
The process works the same. The only difference is that the funding fee is increased to 2% and we rely on a transactional funding company to fund the deal. The other difference is the title company will be different. You will still submit your deal to us at www.submitmydeals.com .
We have many students in other States (and out of the country) that work on deals in Florida even though they are in another State. Remember if you are bidding online, it does not matter where you live. All that matters is getting a house under contract and flipping that house to a cash buyer. If you are wholesaling, it does not matter where the house is located or where you live. We have virtual assistants in the Philippines bidding on properties for us.
Do I Have To Be A Student?
Yes, we will not partner with you, nor will we fund your deal unless you are in our Partnership Program. There are real estate laws and regulations that require us to adhere to specific principles in order for us to fund your transaction and to work with you as a partner. We teach this method at our Boot Camps and offer all of our students the opportunity to be deal finders (bird dogs). The parameters of our Partnership Program are also explained in detail at our Boot Camps.
