Is Transactional Funding Legal?

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on Jul 05 in BestTransactionFunding
Staying on the right side of the law or at least avoiding extra unwanted attention from the authorities can sometimes be a tricky business when flipping houses. Unfortunately many out dated real estate investment courses and programs provide information that either doesn’t work any more or has become illegal. However, this does not include transactional funding.

Dry closings or simultaneous closings where an investors uses a buyer’s money to fund a double closing and pay the seller are definitely frowned upon and can at the very least get you the wrong type of attention. Plus of course it does pose technical issues with recording deeds in time to satisfy the end buyer’s lender’s requirements which can jeopardize your deals.

Flash funding or transactional funding is different. This type of financing provides you as a real estate investor with the funds to close your A to B transaction with the seller, with real money. Then you can have a separate closing for the B to C side which cashes you out with your end buyer via a cash purchase or their bank financing. This is completely legal, though the mechanics may need to work slightly differently depending on where the end buyer is bringing their funds from.

In many cases you can easily close both ends of your deal within three days often even on the same day. However, in circumstances when the end lender wants to see the recorded deed from the first transaction you may need to wait as long as a couple of weeks. Thankfully the best transactional lenders are now rolling out extended financing options that can give you as much as 40 days to re-pay the loan.

So yes, transactional funding is completely legal and above board, though if course as always it helps to use a title company or closing attorney who is comfortable with this type of real estate deal, knows how to facilitate a smooth transaction on both ends and is familiar with how different lenders require things to be done.
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