Closing Services for Transactional Funding and Hard Money Loans
Learn what these alternative lending options entail and how our real estate attorneys can help.
Transactional FundingThis is a short-term loan that is used to finance *back-to-back* or *double closings,* where a property is bought and then quickly resold to a third party, usually within a 24-hour period. Thus, it is an ideal choice for purchasing foreclosures, short sales, and other distressed properties that are already contracted to be resold shortly after their initial purchase. This means that to qualify for this type of loan, you must already have a buyer lined up to buy the property within a short time after you purchase it.
Transactional funding offers a myriad of benefits: it does not require borrowers to disclose their creditworthiness or income, and it will usually cover all the costs of the initial purchase. There is also the option of Extended Transactional Funding, which works the same way except you get a relatively longer window within which to resell the property (typically up to 180 days, rather than 24 hours, after you first acquire the property). However, it is comparatively less common than regular transactional funding and there are very few funders that provide this service.
The biggest caveat to transactional funding is the inherent difficulty of timing the resale just right to meet requirements. That is why it is best to work with Jurado & Farshchian real estate attorneys who are experts in both securing this sort of funding and ensuring that these tricky double closings can be accomplished.
Hard Money LoansAlso known as a private mortgage, hard money loans are usually provided by an individual or private entity as opposed to a financial institution. Thus they generally lack the stringent requirements of conventional funding sources, making them ideal for risky transactions or other circumstances (such as when the borrower needs a longer term loan or is purchasing a property that need a lot rehabilitation).
Note that the amount you can borrow with a hard money loan will often be contingent on how much equity and/or rehab potential the subject property has. The fees and interest rates also tend to be higher than conventional loans, making it imperative that you have qualified real estate attorneys by your side to help you understand the loan terms.