Questions for transactional funding lenders

[Sharad M.]

This question is for lenders who make transactional funding. How do you guys make sure that you get paid at the closing? Does your name go on the title? I am a little confused about the process, and I am just trying to gain some more understanding. Thanks!

[Jon Holdman]

Max, I don't do transactional funding, but do do hard money. I've had one deal recently fail. Hopfully it will get resold in early December.

Bottom line: Be sure you're willing to purchase the house for the amount of money you're loaning plus your costs. Do your own due diligence. Believe nothing anyone else involved in the transaction tells you, unless you can independently verify it.

The main thing that can go wrong can be easily summarized. The B-C transaction doesn't happen and you've just loaned money to a borrower who most likely has no ability to pay. So, you've just bought the house. As far as specifics, I can't say, and I suspect most others can't either. The most likely one would seem to me that the wholesaler is selling to a retail buyer and the buyer's lender is unaware of the double close. They find out at the last second and pull funding. I'd say a key step would be to verify directly with the end buyer's funding source that they're aware of the details of the transaction.