Understanding The Difference Between Transactional Funding And Simultaneous Closings (Transactional Funding, Part 4)

Understanding The Difference Between Transactional Funding And Simultaneous Closings (Transactional Funding, Part 4)

Historically, simultaneous closings were a great way for real estate investors, buyers and sellers to all get their â??piece of the pieâ? very quickly in a real estate flip. Simultaneous closings occur when a seller signs a contract selling the property to a real estate investor. This contract is put into the hands of a closing attorney. At the same time, the investor signs a contract selling the property to a third party buyer, contingent on that buyerâ??s ability to fund the transaction. This contract also goes to the closing attorney. At this point, the contracts are in order, and if they were released, the third party would own the property. However, this does not happen until the third party brings their funding to the table with the closing attorney, who takes the money in hand and closes the deal. In a matter of days, in many cases, the seller got their selling price, the real estate investor got their cut for the flip, and the buyer got the deed to the property.
At first, this might not really sound all that much different from the closings that happen today using transactional funding. However, there is one critical difference: in a simultaneous transaction, your name, as the real estate investor, never actually goes on the deed to the property. This can be advantageous for many reasons. It may help you circumvent seasoning requirements â?? if you are not required by the buyerâ??s lender to be on the deed. It can provide tax shelters for some people in some cases. It saves you money that you will otherwise have to spend on getting your own funding â?? however fast and temporary that funding may be. It also just plain speeds the process up.
Generally, real estate investors prefer simultaneous closings to those using transactional funding, if the option is available.  As a real estate investor, it is your responsibility to determine whether or not you need transactional funding or whether a simultaneous closing may be an option. In nearly all cases, if you have the option of doing the latter, it will save you time and money. However, neglect to do your due diligence, and your entire deal could fall through if you are working in an area or with a lender that requires that your name be on that deed before the deal is completed.
As a buyer, this is also an important distinction to understand. Your funding options will likely be limited if the seller is only willing to do a simultaneous closing, and does not offer or have access to transactional funding. You can use this distinction to help you determine up front whether or not you think a deal will work for you.
Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com.

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Tagged with: Between • Closings • Difference • Funding • Part • Simultaneous • Transactional • Understanding

Filed under: Bulk REO Financing

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