Transactional Funding Process???

[Darvin Ezell]

I am new to doing REO's and hearing about Transactional funding and I am unclear about the process. I read that you have to have the end buyers funds already in escrow in order to use transactional funding. I am working on an REO deal and need to know how this process works. Can someone give a step by step process. These are the steps i have in my head.

1. Find a good deal, analyze the deal, and make offer to seller.

2.I sign the sellers purchase agreement and then have my end buyer sign my purchase agreement with my price.

I am confused as to when and how do i get the buyers funds into escrow, especially if the sellers title company is in a complete other state. And how does the AB BC close thing work? Can someone explain this process?

[Shari Peterson]

Listen to @Phil Z. -- using Transactional Funding can be tricky to use with REOs, because usually they've already selected the title company/closing agent (TC/CA). This is because they've had to have the title work done at the time they have taken back the property. They've spent money on this and likely have a long-standing relationship with that particular TC/CA handling all of their closings.

That being said, it IS possible to use Transactional Funding for a double close, although it is a bit tricky. 

With Transactional Funding, the requirement is that both the A-B and the B-C closings be conducted by the same party, particularly with regard to the TC/CA that is holding escrow and recording deeds. That is because this title company/closing agent is contractually bound to not disburse the payoff to the A Seller until 100% of the C Buyer's funds are in escrow and will be closing immediately after the A-B transaction. They also are the party responsible for recording the transfer of title from A-B and B-C in the proper order.

You may be able to successfully close if one of the following happens:

1. If you can get the Seller's title company/closing agent to either switch to your title company (perhaps in exchange for a fee equal to the costs incurred by the REO asset manager)

2. Ask them if they'll handle to double close (which is tricky, because maybe the REO manager won't allow this or didn't know this)

3. Get them to agree to allow your chosen TC/CA to handle the B side of the A-B and record the transfer of title and disbursement to the A Seller. If they ask why you can just say you that this is your preferred TC/CA and you feel more comfortable working with them.