What is transactional funding?

Transactional funding is a short term loan issued to wholesalers to buy and sell an investment property on the same day. This loan term on a transactional funding is only one day and is used to facilitate a wholesale transaction with no money required by the wholesaler. The wholesaler does not need to “assign” the contract, but rather can close on the purchase agreement themself. This is also known as a “double close” and some call it an “AB-BC” transaction. “A” represents the seller of the property, “B” represents the wholesaler, and “C” represents the end buyer, who is often a house flipper or another real estate investor.

Why would you use transactional funding?

Wholesalers will use transactional funding for three primary reasons:
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Keep their assignment fee confidential. Although it is not illegal to assign contracts in many states, some end buyers will kill a deal if they see an assignment fee that they feel is too high. Closing with transactional funding means the wholesaler is closing with cash and takes ownership of the property (very briefly). The profit you are making on the property will not be disclosed to your buyer.
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Credibility as an investor. The wholesaler will show credibility to the seller that they truly are “cash buyers” by closing on the property in their name using transactional funding. This makes it easier to show the property when it is under contract. It also gives the seller more confidence knowing the transaction will close.

The subject property cannot be assigned. Sometimes property being sold by the government cannot be assigned. There are certain end buyers that will also refuse an assigned contract, making a double closing funding program the best option to see the deal through to the finish line.