Transactional Funding and Short Sale Hold Requirements

FNMA and Freddie Mac have opted to impose a holding period requirement for short sale purchases, which further inhibits investors from purchasing for quick resale.  The holding period is broken down into two categories:  1) The first allows transfer of the property after thirty (30) days only if profit on the resale is less than 20%, and 2) If profit is greater than 20% the investor must hold the property for ninety (90) days.

The first category restricting resale within thirty (30) days if profit is greater than 20% will especially restrict flips of low value properties.  For example, a $70k purchase could not be sold for more than $84k (120% of 70k) regardless of improvements made to the property.  If an investor put $20k of improvements into that property (for a total investment of $90k) he could still not resale for more than $84k unless he held the property for (90) days.  These types of restrictions add borrowing and holding costs to investors.

Transactional Funding has been an effective tool for short sale investors to accomplish quick purchase and resale transactions.  However, Transactional Funding has typically been available to investors only for short periods of time.  Extended Transactional Funding for holding periods of weeks to now at least (30) days has been available, but in very limited supply.  Funding to (90) days presents noticeably more risks to Transactional Funders because they fund substantially higher percentages of the purchase price - typicaly up to 100% compared to around 65% for hard money lenders.  Thus, transactional funders will focus very much on the liklihood of the end buyer completing their purchase, and specifically on the financial commitment of that end buyer.  Investors seeking Extended Transactional Funding are encouraged to require larger amounts than typical of non-refundable earnest money deposits or liquidated damages to better assure their liklihood of obtaining Extended Transactional Funding.

Ted Akers and Investor Funding Alternatives, LLC provides Extended Transactional Funding and select Joint Venture Funding for rehab projects at www.InvestorFundingSite.com