Double Close Transactional Funding

[Joe Davis]

Hey BP'ers,

We have always used transactional funding for our "frontside" contracts ensuring we don't need to assign a contract or use the and/or assigns verbiage on the contract. We have always felt that it shows a stronger offer if we do intend to wholesale it instead of keep or flip the property. 

Now as a lender we offer this service to wholesalers - however I find the large majority of you still assign. 

What is the general consensus of states such as Oklahoma, Illinois, New Jersey etc. changing the legislation to make it harder to assign contracts? How have you circumvented this, and what will you plan on doing in the future if assignments are still your chosen method?

Likewise, if you are wholesaling in this states and you are not licensed - how to you intend to continue?

[Joe Davis]

Quote from @David Ramirez:

Hey @Joe Davis, 

When I started my wholesaling business, I thought the 'and/or assigns' verbiage on the contract and the marketing clause might be deal-breakers, but they're not. So far, we haven't had any deals fall through because of this. While one or two clients have expressed their opinions or concerns, these were not difficult to overcome.

As for deciding between assigning or double-closing, we usually opt for assignment unless our fee exceeds 20% of the buyer's purchase price. This is because a high fee could be flagged by a hard money lender on the buyer's side. Sometimes, we don't feel comfortable disclosing the amount of money we are making, as it can lead to pocket watching and greediness.

Double closing, on the other hand, incurs more expenses, making the deal less profitable. However, if a situation arises where we can no longer assign, we are prepared to double close every transaction without any issue

Interesting take on the 20% and guess it makes sense. As a lender, we do not particularly care how much a wholesaler is making as long as the deal works, but a lot of the institutional money does. 

On our double-closings, our title company actually does not make us pay title policy on the purchase, passing it over to the backside buyer which is generally the biggest expense. They also don't charge us an escrow fee, but yes double closing does cost more.

Really i think wholesalers in various states need to have it in their back pocket - as we are seeing states become more bureaucratic with wholesaling and non-licensed parties'. In my opinion double-closings is going to be the future, i cannot see how they can legislate something you technically own.