Transactional funding wants two points against a 14k spread

Question

Working out whether double closing pencils at my deal size. Purchase 185k from seller, resale 199k to a landlord buyer who already knows the street. Spread is 14k.

The funders I've talked to want 2 points with a 2 point floor, so 3,700 on the A to B leg. Then I'm paying two sets of title and settlement fees instead of one, call it 2,400 to 3,000 combined in my state, plus a second round of transfer tax on the B to C side depending on how the county treats it.

That's roughly 7k of the 14 gone before I count anything else. An assignment on the same deal costs me a wire fee.

So the question for people actually running these: at what spread does the double close stop being a defensive choice and start being a bad one? I keep landing on "if the spread is under 20k just assign it and eat the buyer knowing my number", but I might be underweighting how much a buyer balking costs me when they see 14k on an assignment line.

samantha_ruiz · Answer

Your 7k estimate is missing the double dip on transfer tax, which in some counties is real money and in others the second leg gets treated as one transaction if both deeds record the same day. I've had a closer tell me flat out that it depends on the recording clerk's reading, which is not a comforting answer when you're modeling a deal.

On your threshold question, I don't think spread is the right axis. I stopped asking what the spread was and started asking whether the buyer is repeat. A repeat buyer has already decided they don't care what I make. A cold buyer off a list will absolutely walk over 14k on a 199k house because it reads as a tax on them.

Rena Expert · Answer

Your 7k is probably light. Transactional funders that quote 2 points with a floor usually also want a same day payoff, and if the B to C leg slips a day you're into extension fees that nobody quotes up front. Ask for the fee schedule in writing including what happens if the second closing funds the next business day, because that scenario is the one that eats the marginal deal.

The threshold framing is doing you a disservice. The reason to double close isn't that the spread is big, it's a decision about what the transaction is legally. In several states, marketing a contract you don't own is what triggers the licensing question, and taking title changes the character of what you're doing. Whether that applies to you depends entirely on your state's statute and how the regulator reads it, so that's a conversation with a real estate attorney licensed where you operate, not a math question.

If your state has no such exposure and your buyer is repeat, the double close on 14k is buying you privacy you may not need.

One thing your model doesn't include: you own the property between the two closings, however briefly. If the B to C buyer fails to fund, you're the owner of a 185k house financed by short term money at 2 points, and the funder wants paying regardless. That's the actual tail risk, and it argues for hard earnest money from the end buyer and a proof of funds you've verified with the bank rather than a PDF. Check whether your state requires a separate owner's policy on each leg too, because two policies changes your 2,400 number.

ehernandez74 · Answer

The funding-fails scenario keystone and rena-expert are circling is the one that keeps me out of this entirely. I hold things for ten years, so the idea of owning a house for four hours with borrowed money and no exit if the buyer flakes reads as a completely different risk category to me.

Genuine question though. If the B buyer fails and you're stuck holding at 185, is refinancing into a normal hard money loan even available to you same day, or does the transactional funder just have you?

Transactional funding wants two points against a 14k spread

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