How does a two way fee split come out when transactional funding sits behind a double close?

Question

Look at this from the money side rather than the contract side. A common micro network structure has one member sourcing and another bringing the end buyer, with the spread split 60/40. Say the A-B leg is $215k and the B-C is $232k, about $17k gross before costs, closed the same day with borrowed funds for a few hours. The first question a transactional lender has to answer is who is actually being lent to. The entity on the A-B contract is the sourcing member's LLC. The member with the buyer is on none of the paper, so how does his 40 percent come out? An invoice against the B-C proceeds? A line on the settlement statement? And if the closing agent will not put it on the statement, that money moves outside of closing, which is the part that should make any lender nervous. Second issue. These groups often circulate one proof of funds letter across the whole membership. If a lender's name ends up on that letter and a member the lender has never spoken to uses it on an offer he never closes, what has the lender signed up for?

Rena Expert · Accepted Answer

You lend to the entity on the A-B contract, full stop. That LLC is the buyer on leg one and the seller on leg two, so it's the only party with a position your funds are securing. The second member has no contractual claim on your borrower's proceeds unless there's a written agreement between the two of them, which is usually a JV agreement signed before the offer goes out and not a handshake in a group chat.

How the 40% moves is where deals get ugly. Cleanest is a line on the B-C settlement statement paid to the second member's entity, disclosed to everyone on both legs. Plenty of closing agents will do that. Plenty won't, and in some states paying a person for producing a buyer looks like compensation for brokerage activity depending on how the state's licensing statute reads, which is a question for a licensed attorney in that state before anyone wires anything. If the answer is that the split has to happen outside closing, I'd treat that as information about the deal rather than a paperwork inconvenience.

On your $17k: second-leg closing costs plus a point or two on $215k for a few hours plus a funder minimum will take a real bite, and I'd want to see their actual net on the last few before believing the 60/40 is on $17k rather than on $10k.

The thing that would kill your loan isn't the split. It's the C buyer's financing. If that buyer uses a lender with a seasoning or resale restriction, the B-C leg doesn't fund and your money is out with no exit that day. Get the C buyer's lender terms in writing before you commit, every time, not once for the group.

On the shared proof of funds letter, I'd decline. Your name on an offer you didn't underwrite, to a seller you've never seen, is your reputation with agents in that market, and you can't police who forwards the PDF.

nicole_adeyemi · Answer

One thing on comping the B-C leg. In roughly a dozen states sale prices aren't public record at all, so if you're in one of those you're verifying that $232k off whatever the members hand you (broker sheets, an appraisal if you're lucky). Ask for the C buyer's executed contract. A screenshot of a text verifies nothing.

How does a two way fee split come out when transactional funding sits behind a double close?

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