Transactional Funding Advice

[Milton Peggs]

Hello Everyone,

I am seeking information on transactional funding can anyone help

[Jeff S.]

For a typical AB-BC transactional loan, @Milton Peggs , you (called B) find a home seller (called A) and a buyer (called C). You also find a transactional lender, which means someone willing to loan you money to purchase the house for a very short period of time. Your buyer, C, has their financing lined up by a bank ready to fund.

Once C's bank has provided their funds (that's the key), your transactional lender funds your purchase of the property from A. This is the AB side of the deal and you now own the house. Within a few minutes to a few hours, the funds from C's bank are used to pay you and you sell the property to your buyer C. This is the BC side and is considered a "simultaneous" transaction since both your purchase and sale occurred on the same day. The money you received from C is used to pay your lender back plus their fee. You keep any difference.

Transactional loans like this are considered almost risk-free to your lender since there would be instructions stating that you cannot buy the property until your buyer's lender has funded their side of the purchase, and presumably won't pull out within that few minute to few hour interim.

Taking any longer than a day for you to sell your purchase to C is no longer risk-free since there is time for C's lender to pull out. Banks cancel loans all the time. Call it what you want, but this is not a transactional loan in any traditional sense and certainly not risk-free. If it took "at least 20 days," and C's lender bailed out in the interim, you would get stuck with a property you might not want and a loan you might not be able to pay back. Shame on any lender who allows you to get into that.

Though maybe short term, you're looking for a normal (probably private) loan, Milton, for which I bet you'll have to qualify. The risks for you and your lender here are great.