Transactional funding + B-C...

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Transactional funding + B-C...

Herm M.Pro Member
Real Estate Investor · NorCal, CA · Member since 2009 · 273 posts · 43 votes

How do you make sure everything goes smoothly in this part of a flip? Since these bridge lenders usually only lend for 48 hours, how do we line things up?

Let's say that today I have a contract/approval from the short sale lender and have 30 days to close. So on the 30th day, that's when I'm going to have the transactional lender send the hard money. So on the 31st day, I need C buyer's side to bring their money to the table.

What's the best way to do this? Here's my big question:

- The title report is going to show A as the homeowner, until B records on title on the 30th day (or 31st).

- The C buyer has shown their lender a B-C purchase contract, showing that they're buying from B.

- Obviously, C's lender will not fund until B is on title.

Do we need to inform C's lender that we want "B buyer's name on title to be the LAST condition for this transaction. Clear all the other conditions during the first 30 days (appraisal, etc.), and we want you to be ready to fund as soon as B goes on title on day 30/31."

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James Ward
Real Estate Investor · Ocala, FL · Member since 2008 · 742 posts · 463 votes
16y

You sure did pack some great questions into this post. So, I will try to answer all of them as best I can.

1) How to make things go smoothly? It is a juggling act. Make sure to keep in constant contact with everyone involed, especially the Title company. They (Title) can help you more than you will ever know. So keep them VERY happy.
2) How to line things up? Schedule everything with the Title company and make sure everyone is on the same page. Be prepared to be able to answer any questions or be prepared to solve problems. Or at least know how to find a person that can.
3) Why are you waiting for the last day to do anything? That is just asking for problems. Get them closed ASAP. This way, when something comes up, you have time.
4) How to show what is going to happen? This is really where you, Title, and everyone else involved MUST be on the same page. To get the End Buyers Lender to understand, they must be told exactly what is happening and when. Talk to your Title company and set something up with them about how they convey what all is happening.

So, to boil everything down. Have a GREAT team of professionals that you work with. Make sure everyone is on the same page and everyone can convey what is going to happen. If everyone understands what is happening, this will make things move easier. (This does not guarantee that things will always close, but it will assist in your success!)

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  • James Ward
    Real Estate Investor · Ocala, FL · Member since 2008 · 742 posts · 463 votes
    16y

    You sure did pack some great questions into this post. So, I will try to answer all of them as best I can.

    1) How to make things go smoothly? It is a juggling act. Make sure to keep in constant contact with everyone involed, especially the Title company. They (Title) can help you more than you will ever know. So keep them VERY happy.
    2) How to line things up? Schedule everything with the Title company and make sure everyone is on the same page. Be prepared to be able to answer any questions or be prepared to solve problems. Or at least know how to find a person that can.
    3) Why are you waiting for the last day to do anything? That is just asking for problems. Get them closed ASAP. This way, when something comes up, you have time.
    4) How to show what is going to happen? This is really where you, Title, and everyone else involved MUST be on the same page. To get the End Buyers Lender to understand, they must be told exactly what is happening and when. Talk to your Title company and set something up with them about how they convey what all is happening.

    So, to boil everything down. Have a GREAT team of professionals that you work with. Make sure everyone is on the same page and everyone can convey what is going to happen. If everyone understands what is happening, this will make things move easier. (This does not guarantee that things will always close, but it will assist in your success!)

    6Reply
  • Justin S.
    Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
    16y

    Great response James. I would only add to ensure that you have back up lenders available. For our shorts, if the homeowner requires financing, we make them go through our lenders because they understand what we are doing. We control everything! And we disclose everything!

    Its all part of the team you build.

    5Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Then make sure you have a good transactional lender who has the capital and the knowledge of how to get it done in a timely manner. One who offers options, etc. Most TF's will not fund unless the end buyers funds are in escrow. In CA, that is almost impossible because most counties do not allow you to record and fund on the same day.

    Use a funder who has 48 and even 72 hour options.

    Podcast Guest on Show #130
    0Reply
  • Marcus Mccray
    Real Estate Consultant · Monrovia, CA · Member since 2009 · 73 posts · 20 votes
    16y

    Will, you do transactional funding right? Can you send me a fee schedule (if you do) along with any other short term loans type programs you have?

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Marcus,

    I don't want to take away from the topic of this thread, so please just refer to my fudning website belwo in my signature (not teh Nationwide site)

    Will

    Podcast Guest on Show #130
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  • Marcus Mccray
    Real Estate Consultant · Monrovia, CA · Member since 2009 · 73 posts · 20 votes
    16y

    "Will" do!

    0Reply
  • Scott Hubbard
    Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
    16y

    I cannot add any more to what was already discussed above by James and Justin, however, I would like to emphasize number three of James' answer becuase I find that no matter how prepared you are, there is usually a hiccup.

    Do yourself a favor... Schedule closing at least 5 days prior to the expiration.

    2Reply
  • James Ward
    Real Estate Investor · Ocala, FL · Member since 2008 · 742 posts · 463 votes
    16y
    Originally posted by Scott Hubbard:
    I would like to emphasize number three of James' answer becuase I find that no matter how prepared you are, there is usually a hiccup.

    Do yourself a favor... Schedule closing at least 5 days prior to the expiration.

    Here is where I am at this point. If nothing gets messed up or no problems arise, I kind of get dissapointed. Solving the problems and issues are one of my favorite part.

    But, putting yourself againts a deadline is really bad!

    0Reply
  • Herm M.Pro Member
    OP
    Real Estate Investor · NorCal, CA · Member since 2009 · 273 posts · 43 votes
    16y

    Thanks for the advice everyone. I'm sooooo anxious to close my first deal.

    I did REAL good with the BPO woman. I listed the property at 310k, and have a buyer at 340k who is willing to pay the difference in cash if their lender's appraisal comes up short.

    So I spit my game at the BPO agent, and it worked wonders. She said "I can't disclose the exact BPO amount, but I will tell you that it's under your list price."

    So let's assume the BPO is 305k. 250k is 82% of BPO...I'll be thrilled if I can get the property at 250k.

    0Reply
  • Rob Huxman
    Real Estate Consultant · Lakewood, CO · Member since 2009 · 69 posts · 23 votes
    16y

    H Mann,

    $250 should be no problem at all. As far as the Transaction funding there are a ton of options f\I have seen it as low as 1.75. I can give you that guys name and number really a great guy and easy to work with. And he don't have all the junk fee's. I don't get a commission from him just trust him alot and know he gets things done. As far as BOA goes they are really not that bad to deal with after you get to through the BPO stage. Let me know if you have any questions I have been doing Short Sales sense Short Sales were not cool..

    0Reply
  • Herm M.Pro Member
    OP
    Real Estate Investor · NorCal, CA · Member since 2009 · 273 posts · 43 votes
    16y

    Thanks for the input Rob.

    Not sure where BOA came from, but this short sale is with WaMu/Chase.

    Also, can I get some more opinions on whether or not 250k should be do-able on a BPO under 310k...?

    0Reply
  • Clifton Jones
    Investor · Melbourne, FL · Member since 2008 · 90 posts · 39 votes
    16y

    The best way to find this out is to find what REO's are selling for in this area. If they are selling for more than $250K, then the likelihood of getting the short sale approved for that price is very low. If they are selling for $200K, then you have a high likelihood.

    The lender will try to get the most they can from the property, so if they can get more by foreclosing and selling as an REO, then they will. The best answer to your question is to find out what the REO's are selling for.

    0Reply
  • Scott Hubbard
    Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
    16y

    In California, in most markets that I have been dealing with, REO's are selling for far more then 82% of market value.

    If you received a BPO at $300K, then they will counter you at $300K. Actually they might even counter a little higher.

    What are you going to counter them with and how are you going to justify this price?

    They are not just going to give it to you... You need to provide support to justify $250K.

    1Reply
  • Brian Haskins
    Real Estate Investor · St. Louis, MO · Member since 2008 · 443 posts · 91 votes
    16y

    You need to find a title company that you really trust that know these types of transactions. They will set it up for you so its all done properly.

    Brian Haskins

    0Reply
  • Herm M.Pro Member
    OP
    Real Estate Investor · NorCal, CA · Member since 2009 · 273 posts · 43 votes
    16y
    Originally posted by Scott Hubbard:
    In California, in most markets that I have been dealing with, REO's are selling for far more then 82% of market value.

    If you received a BPO at $300K, then they will counter you at $300K. Actually they might even counter a little higher.

    What are you going to counter them with and how are you going to justify this price?

    They are not just going to give it to you... You need to provide support to justify $250K.



    What are some of the things I can do? Sexual predator map?

    I understand that REO's sell for more than 82%...but don't we have to factor in foreclosure costs too? Let's say this property could fetch 300k as an REO...what about the 25k or so that it's going to cost to foreclose the home? That brings the net down to 275k or so.

    Anyway, what are some of the strategies I could use to get this for 250-260k?

    0Reply
  • Herm M.Pro Member
    OP
    Real Estate Investor · NorCal, CA · Member since 2009 · 273 posts · 43 votes
    16y

    Also, I'm assuming that the BPO on this is 305k. I'm okay to buy this at even 90%, which is 275k. That's my worst-case scenario, I hope.

    0Reply
  • Herm M.Pro Member
    OP
    Real Estate Investor · NorCal, CA · Member since 2009 · 273 posts · 43 votes
    16y
    Originally posted by Scott Hubbard:
    In California, in most markets that I have been dealing with, REO's are selling for far more then 82% of market value.

    If you received a BPO at $300K, then they will counter you at $300K. Actually they might even counter a little higher.

    What are you going to counter them with and how are you going to justify this price?

    They are not just going to give it to you... You need to provide support to justify $250K.



    Scott, would you say that it's going to be a difficult task to get this around 250k, based on what you've seen with CA properties?
    0Reply
  • Scott Hubbard
    Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
    16y
    Originally posted by H Mann:


    Scott, would you say that it's going to be a difficult task to get this around 250k, based on what you've seen with CA properties?


    I cannot say for sure what the lender will do. I stopped trying to guess a long time ago.

    I tell other investors: Do not expect to get any discount. You need to be prepared to give them some support for the discount.

    1. Repair Estimates
    2. Photos of the neighbor with a junked car on his lawn
    3. Comps that support your price
    4. Crime stats

    If they counter at the BPO, what are you going to hand them that supports your offer?

    Lender are not giving up discounts without a fight. If you are buying a turnkey house that is in really good condition, you are going to have a hard time refuting the BPO.

    Foreclosure costs are not good enough of a reason to give up discounts. If your seller has not made a payment in 12 months, then I doubt the lender will give you any discount as all.

    To answer your question:

    I believe you can get 20% if;

    1. Your not including commissions on the A to B
    2. Seller is less than 6 months delinquent
    3. The comparables support lower sales

    1Reply
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