BiggerPockets

Wells Fargo Kills Transactional Funding Deal

Wednesday, January 13

I am seeing more and more lenders kill short sale deals and wholesale flips.  I guess this is no surprise to most people reading the BiggerPockets site, but thought I'd share the bad news and ask if anyone has found solutions.

Just today, we had a deal right at the finish line that Wells Fargo killed.  We had already funded the Side A-B purchase for the investor, and the end buyer was at the title company ready to sign!  Wow.

I am trying to get more details from the escrow agent to find out exactly how and what reasons were cited.  It was set-up as a simultaneous close, but the lender ahd received all documents and disclosures.  I suspect that the "final" approval of the HUD was reviewed separately from the original approval for closing.

I know Bank of America has been on a rampage lately against double closings, but this is the first time we've been stopped by Wells.  Anyone else have this experience.

Comments

1. 

   James Ward Reply
   over 2 years ago

   I am totally confused, what happened. Would you mind giving more details.

   Thanks.

2. 

   Nick J. Reply
   over 2 years ago

   Ya, could you explain how Wells killed it?

3. 

   Joshua Dorkin Reply
   over 2 years ago

   Fill us in, Paul . . .

4. 

   Ted Akers Reply
   over 2 years ago

   Paul, I do not have exact details yet, but in another investor/funders email they stated that Wells just approved/consented to allowing for a "C" buyer flip transaction. I am trying to find out more details and will post here if I do.

5. 

   Paul Barrow Reply
   over 2 years ago

   Ted, I would be curious about Wells approving a transaction and especially what the "spread" was by the investor. Indeed, on my transaction, the final HUD approval was rejected by a different person who had previously approved the transaction. I think it may depend just on "who you get" on the other line at the time.

6. 

   James Ward Reply
   over 2 years ago

   Paul, would you mind going into a little more detail of what happended on your deal?

   Thanks!

7. 

   Paul Barrow Reply
   over 2 years ago

   James, the details are that we had a double close arranged for a property in Colorado Springs. It was a short sale and the investor had disclosed to the short sale lender that they were "reselling" the property. The end buyer was getting a conventional loan from Wells and the spread by the investor was about $20K. Wells had approved the buyer and the property. I am not sure if they had funded the loan to title or not, but I assume so since the buyer was at the title company ready to sign. Short Funding had already funded the Side A to B transaction and all docs were signed, but with closing instructions to not disburse until final approval from Wells. Somewhere between Side A to B and Side B to C closing, Wells pulled the loan from Side B to C. I *think* that Wells saw a spread from the investor and then rejected the transaction based on final approval of the HUD. This is why I am curious about Ted's successful transaction.

8. 

   Nick J. Reply
   over 2 years ago

   So Wells was the C buyers lender and they're the ones who actually killed the deal by not funding the C buyers at the last second?

   Was Wells the A-B (shorted) lender as well?

9. 

   Paul Barrow Reply
   over 2 years ago

   Yes, Wells was C lender. No, they were not the A-B lender.

10. 

    James Ward Reply
    over 2 years ago

    The problem here was that complete understanding from all parties was not completed before the closing. All investors that are attempting to perform A-B B-C closing, MUST make sure that the title company can correctly convey to all parties what is going on. This is the key!

    This is a great leason, you MUST make sure that your title company is conveying the correct info and working all along the way to ensure the transactions can be completed.

11. 

    Mike Norvell Sr. Reply
    over 2 years ago

    there is a great lesson here....In my travels, this has always been the case and makes the point of having an informed title company that can keep all docs straight.... It may be that lender A is the party that actually killed the deal...

    If in fact the C buyer was not involved with the A lender, then the ABC deal was disclosed as a flip that will always create controversy. When the title work is done, it is VERY clear that there is a spread involved within a SHORT SALE deal. If A is approved for a short sale, and then becomes potentially profitable thru the B-C transaction, it defeats the reasoning behind short sale from Lender A.

    A less profitable way would be to have the deal in place, and create a window of time between A-B and B-C...I know this kills the transactional funding portion of the deal, but eliminates the potential legal ramifications that could cloud this type of transaction long after closing, especially if C were to go into a default.

    A more common and less problematic approach is a short sale close A-B...then carpet & paint, and a then 30 day resale close to C...this handles many of the issues that arise out of a ABC transactional funding deal on a short sale. Could be that a hard money funding source is a better application for a short sale close than transactional funding.... Hope I dont get too many hateful comments for pointing out what to me was obvious...

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