Transactional Funding and Short Sale Flips

[Tom Kitas]

Hello everyone I am very new to this forum. I have read a lot of the different threads and find the people on here very knowledgeable and helpful. Now I hope someone can answer a question for me. I have been in real estate for many years and understand the fundamentals. What I am having a hard time with is this new transactional funding short sales. I understand in theory how it works. You find a distressed property in which you make a low offer on. If the offer for the property is accepted then you line up a C buyer that buys it from you for a spread. You arrange for a double closing and I would use transactional money to close my deal and then do a closing with the C buyer as me being the seller. There you would get a check for the difference between transactions minus any fees. All of this has to be transparent and cannot be hidden from anyone involved in all transactions. This is my complete understanding of this theory. My problem is in practical use of this theory.
A year ago banks had no clue what was going on and these short sale transactional funding deals were happening all the time. Now banks have gotten more wise and are on to these deals. My question is how is anyone getting them done? Short sales are a long process in and of itself. Now you are telling the bank that you as the buyer are an investor and have someone else lined up to buy the property after you buy it for a profit. An example would be is you find a house in which you can buy on a short sale for $150,000. The original mortgage from seller A is $250,000. You then find a C buyer that is willing to pay $200,000. How does anyone get the bank to approve this from the prospective of the A seller? Would not A bank who is taking the loss in the short sale just say that if there is a buyer that is willing to pay $200,000 as opposed to $150,000 then the short sale amount they will take would be $200,000 instead of just the $150,000 effectively wiping out your original deal? Also it is my understanding that a lot of banks are putting language in their contracts that state you as the buyer cannot resale the property anywhere from 1 to 6 months. How does anyone get around that. Then there is also the other problem where banks for the C buyer are now looking at the chain of custody on title for the last 12 months. If there are any breaks such as what this would cause, then they are not funding the C transaction and your deal goes down the drain anyway. How would I get around all this legally?