Quick Answer

Transactional funding is a very short-term loan that covers an investor's purchase in a double closing. The lender funds the A to B closing, the investor resells to the end buyer in the B to C closing, and the loan is repaid from those proceeds, often the same day. The investor pays a fee for it.

What Is Transactional Funding?

Transactional funding, sometimes called same-day funding, exists for one purpose: to let an investor complete a double closing without using their own cash. The loan is tied to a specific deal and a confirmed end buyer, and it is usually repaid within hours or days.

Because the end buyer's money is already lined up, the lender's risk is the short window between the two closings. Lenders price that with a flat or percentage fee instead of monthly interest.

How Transactional Funding Works

  1. Two signed contracts: the investor has an A to B purchase contract and a B to C resale contract.
  2. Lender review: the lender checks both contracts, the end buyer's proof of funds or loan approval, and the title commitment.
  3. A to B closing: the lender wires the purchase money to the title company and the investor takes title.
  4. B to C closing: the end buyer funds. The title company repays the lender first, then pays the investor the remaining spread.

Example: The A to B price is $150,000 and the B to C price is $165,000. The lender funds $150,000 and charges a 2% fee, or $3,000. After the loan and fee are repaid, and before closing costs, the investor keeps $12,000. The fee here is for illustration only; terms vary by lender.

What Lenders Usually Require

  • Signed contracts for both sides of the deal.
  • An end buyer with verified funds, often cash.
  • A title company or closing attorney that will handle both closings.
  • Clear title and no unusual contingencies on the B to C contract.

Requirements vary by lender. Read the terms, including fees, minimums, and what happens if the second closing is delayed.

Transactional Funding and State Wholesaling Laws

Rules vary by state, and this is general information, not legal advice. Talk to a real estate attorney before you structure a deal.

Because a double closing puts title in the investor's name, it is generally not treated as an assignment under the Ohio and Tennessee wholesaling statutes. Transactional funding is one way to pay for that first closing.

In South Carolina and Kentucky, the rules focus on marketing a property or contract before you hold title. Owning the property before you market it avoids those restrictions. A same-day double closing where the deal was marketed first may not.

Frequently Asked Questions

What is transactional funding?

Transactional funding is a very short-term loan that pays for the A to B purchase in a double closing. It is repaid from the end buyer's funds at the B to C closing, often the same day.

How much does transactional funding cost?

Lenders usually charge a fee based on a percentage of the loan amount, sometimes with a minimum fee, plus their share of closing costs. Terms vary by lender, so compare quotes before you commit.

Can transactional funding be used for an assignment?

No. Transactional funding is designed for double closings, where the investor takes title. In an assignment, the end buyer funds the only closing, so no investor loan is needed.

What do transactional lenders look at?

Lenders focus mainly on the deal: both signed contracts, the end buyer's verified funds, and clear title. Some also review the investor's experience. Ask each lender for its requirements.

Related Terms & Guides

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