All Forum Posts by: Ted Akers

I think it depends on the deal size.  Buyers of higher priced properties will more easily accept a larger assignment fee, like $20k.  Experienced buyers of lower and mid priced properties may be used to seeing an assignment fee in the $5-7k range, maybe $10k.  I see more wholesalers considering transactional funding in or above the $15k range to avoid disclosing their purchase price when assigning.

Hi @Shannon Webb

The inspection time frame does not relate to transactional funding, but is critical in your purchase contract because it is likely the last out you have under the contract, unless you also choose to have an appraisal contingency, after which your Earnest Money will be at risk if you do not close. The contract will be viewed as stronger without an appraisal contingency. Ask for 15-20 days for inspection, which will likely be longer than they will allow. The longer the better, because that is the time frame you have to find a buyer before the EMD is at risk.

Transactional funds are not transferred to you but are made available to the closing attorney subject to you having an end-buyer with funds at the same closing attorney on the same day. My website provides a substantial explanation of how it works. You can also generate a POF at the website. If you do pay attention to the fact that there are two pages, the second of which is disclosures to you. It is usually better to disclose the fact that you intend to resell, but if I were the probate attorney I would not accept a contract with assignment language or the need to resell the property. That said, I would only go under contract if I were confident I could find a buyer at a higher price within a short time frame.

Hi @Shannon Webb

I have funded many transactional deals in Georgia, and because it is an attorney closing state (rather than title companies as closing agents) it is very difficult to find one that will allow a double, or simultaneous, closing to use your buyers funds to complete your purchase.  Which means they want you to bring separate "wet" funds to the table to close on your purchase.  That is what transactional funding was developed for in the residential market about 7 years ago and is referred to as "back-to-back" closings, where a transactional funder funds your purchase subject to your buyer having his/her funds in escrow with the same closing attorney.  It can be accomplished for under 2 pts. and in this scenario is likely your least expensive option compared to profit sharing or hard money.  Hard money lenders will require you, especially as a new investor, to have "skin in the game" of generally 35% of your purchase price.  A profit split is a good way to "earn while you learn", but if the actual spread is large you may have less expensive options.    Transactional Funding also avoids you having to disclose your purchase price to your end buyer for deals with large spreads that you are wanting to assign.

Assignment can be an attractive option; but because you are dealing with a probate property it is also far less likely that the probate attorney will allow assignment language in your purchase contract. The probate attorney should vet YOUR capacity to purchase and want a bank statement from you, a lenders pre-approval, or a proof of funds from someone such as a transactional funder. Be aware that if the probate attorney digs deep into the requirements of transactional funding he may not like it either; because while you avoid needing assignment language in the contract it does require you to have an end-buyer in place. Make the offer in the name of your LLC and try to get as long of an inspection period as you can, during which time you can go secure a cash contract with an end-buyer.

Peninsula escrow has about a dozen offices in the area.  Nadine Pate is a manager with 20+ years experience and is very familiar with back-to-back closings. 

Her number is 310-541-9664.

@Don Womble 

Please update us as you filter through the suggested title companies.  Texas has historically been more difficult to find title companies that get back-to-back closings.  There seems to be more of them than an any other state that want some "separation" ( maybe 1-3 days) between closings.  There is not good reason for them to require it; but it is generally comforting to them that there is true separation between the deals, so that no one can claim that the end-buyers funds are being used to close on the A-B purchase.  Among national companies Fidelity is usually a good choice, although some local offices of most national title companies still will not like same-day deals.  When speaking to any of them clarify that both transactions will be separately funded, or "wet" funded.  Thanks,

@Sam Williams 

Thank you.  I know it was not the best of news, but knowing hurdles up front can save you many weeks of wasted time.  There are transactional deals that get funded with mortgage buyers involved, but they are more expensive and can be challenging.  Wholesaling is alive and a good way to start in real estate.  There are a lot of cash buyers out there for good deals, so focus on building that list in the market you are working. 

Best Wishes,

Hello @Dean Letfus 

I have funded all types of transactional deals nationwide for about 5 years.  Costs are 1.75 pts. plus $495 for deals over $90K.  Below $90K I go to minimum fee.  You can visit my website for a fair amount of detail.

Thanks,

@Sam Williams 

There are two issues related to mortgage lenders if your end-buyer is using a mortgage. Neither FHA nor conventional lenders will allow their client to purchase via assignment, so you have to take title in order to sale the property to your buyer. The second issue is one of "title seasoning". FHA does not currently have a title seasoning requirement (they used to) but your sale contract has to be dated after you are in title and the appraisal also cannot be ordered before that time, so you will need to go into title for 1-4 weeks (however long it takes that lender to underwrite and close). If your resale price is greater than 20% of your purchase price two appraisals will be required, which typically increases the time line to close. I have funded a same-day FHA deal but that was a few years ago and have not seen one happen since then.

If the buyer is using a conventional mortgage most all lenders have a 90 day title seasoning requirement (some will be longer such as the 6 month time line you heard of).  A portfolio lender that underwrites their own deals may not have title seasoning, but they are somewhat rare after the crash in 2008.  There is one exception you want to be aware of because most loan officers do not know that it is in their underwriting guidelines, but if by chance your buyer is putting 20% down the title seasoning requirement can be waived.  It is possible to close this scenario the same day but it will be a challenge finding a lender that can or will jump through that hoop.

Your greatest chance of success is to fully disclose up front and make sure the lender understands that the property is being purchased and immediately resold.  I suggest not taking the response from a loan officer but insisting that the scenario be presented to an underwriter.

Cash is King if you can find that buyer.  Good luck.

@Russell Salinas 

Transactional funders are going to require that the end buyers funds are in escrow before funding your purchase (for a typical same-day transactional funding).  Your facebook contact is another wholesaler, not a buyer, in this transaction.  The fact that they do not want you to use transactional funding, do not have funds to put into escrow, and want to deal directly with your seller for me would not be a comfortable scenario.  What has she done to prove to you she has buyers for this particular type of property?

This will have to be a very good deal to absorb two wholesale fees and still provide an attractive price to the end buyer.  Your best bet is to convince the seller to go under contract with you, even if the contract period is a fairly short one.  Can you come up with some additional incentive for him to give you a short-term contract?  Under contract prevents the end buyers from going around you, at least for the contract period.  Ask your facebook wholesaler to provide proof of funds from her end-buyer.  Daisy chains like this one with the facebook wholesaler are much less likely to get closed.  You have the deal, although really need it under contract, so you want to be more so dictating the terms to the end-buyer rather than the other way around.  Stay persistent and determined.

Best wishes getting this done.

@Uwe S. 

Thank you much for the health and best of 2015 wishes.  It has been awhile, and is good to hear from you.  I hope you are well and wish you and yours a blessed holiday season and  the best of everything in 2015!