Any wholesalers out there ever used some sort of bridge loan in order to not disclose your profit? I personally haven't hit a home run deal yet but in my area they've made double closes virtually illegal.
How are they illegal?
I've been told, by I think pretty good sources, that "they" are not allowing double closes because something about the original seller not getting full value.
I guess I should add to my original post that if anyone knows a title co doing them in North Bay let me know.
What's a good rate for transactional funding?
I am from N CA and we do Transactional Funding. I don't see how Santa Rosa would be any different. Chicago Title in Pleasanton does double closings, and I am sure there are others. The rates are usually about 2% for larger loans and up to 3% for smaller loans. I hope this is helpful.
I own a title company in Chicago. Re double closings .. It's not so much that they are illegal, but it has to do with how each portion is funded. For example, the original purchase "A" must be closed and funded before you can move on. Purchase "C" (to the end buyer) cannot fund "A". ("B", of course, is the middleman in the deal). So, yes, the rates are a bit higher, because you are actually performing two different closings I think that transactional funding is a good idea. . Hope this helps!
Anyone telling you that double closing are "illegal" is either uninformed, or works for a title company that does not like back-to-back closings. Some title companies have taken the position that they want a day or two or three separation between the A-B-C transactions, but that is a CYA position of the title company so they can clearly show that the end buyers funds were not used for your purchase. As to the "full value to the seller" that is more applicable to short sales, in which case you DO need to disclose in your purchase contract that you are an investor and you retain the right to sell the property for a profit. The bank can either choose to accept your contract or not.
It appears that @Michelle White
gets it. I know some title companies in Chicago do want to see the separation by 2-3 days, but again that is a situation where they are not competent or comfortable enough that they can document that there were two distinct transactions which were separately funded, the first by you with transactional funding and the second with other funds from your end buyer.
Ted Akers, Transactional Funder
Thanks for responses, I was under the assumption that "double close" implied that the B to C funded the A to B transaction. Transactional funding seems easy enough once both agreements are on paper its just I had never heard of wholesalers closing on a property.
As a title closer I was explained that back to back closing are ok as long as each transaction is independent, each transaction starts and closes before moving to the next transaction. Also, the major problem I have seen is when there is an end lender involved that will hold the title company responsible for two year chain of title. Most major lenders look at chain of title for flips, so on a back to back closing this history is hidden so the lender may consider the second transaction a defrauding the lender.
Thanks Edwin, why would the lender care?
@Russell Ponce , what you described in DRY CLOSING - not double closing. In a double close, both transactions are FUNDED. Dry closing is not allowed by many title companies in many states. Double close or do assignment of contracts.
Bank (all major banks) knows our in and outs regarding back to back and flips; therefore, their guidelines are set up to detect and kill any deal with any mark-up (as they see it: inflated value), especially for VA loans. Banks look at current value current as a cushion of their exit strategy (foreclosure). Therefore, banks guidelines are setup to maximize their value at the time of foreclosure, so a flips (and back to back closing) are view as an inflated value. That is why bank required TWO appraisals on all flips. I will like to cut and paste some underwriters' verbiage BUT I'm prohibited from doing so. One more thing, banks monitoring time is normally one year.
Transactional funding normal run about 1% regards of the amount.
1% not too bad. I imagine a lender wants to see both agreements signed before they commit?
Yes I was using double close and simultaneous close interchangebly. I see now there is a distinction.
1% is a fair price to charge to help investors.
Wendell, sorry if I was not clear, I was a closer for 11 years (Chicago Title and First American Title) and the definition varies but generally speaking a dry closing is when all the paper work is done but the fund did not arrived. Some lender will not allow dry closing (mostly none escrows – wet states) this because the borrower is paying interest from the closing date (paper work done) although the borrower never took position of the property. Each deal is handed on a case-by-case bias. I just have to add one word “BANKS!” few understand the true nature real estate (non- commercial).
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