First double close on my desk, and the funding fee eats more than I planned

Before you compare fees, get clear on the one thing that makes this loan cheap. The funder's money is out for hours, and it gets repaid from the end buyer's closing. That means the repayment source has to be real and committed before anyone wires anything. So: is the end buyer's hard money lender approved, appraised, and clear to fund on that date, in writing? Do you have their loan approval and their closer's name?

If the answer is "the buyer says he's good," you don't have a same-day exit, you have a hope. The funder will ask for the same paperwork you should be asking for, and that's the actual value in their underwriting.

The line I'd chase first is the end buyer's lender, not the funder.

I had a double close last year where the C side lender got to underwriting, saw that my seller had owned the property for zero days, and refused to fund without a seasoning exception their credit committee never gave. Their rule, not the state's. I found out at 3pm on a Thursday with a funder already committed. I ate a re-lock and a very awkward phone call.

Get the end buyer's lender to say in writing that they will fund on a property their borrower's seller acquired that same day. Some do it constantly. Some won't. You can't tell from the outside.

Slow one for me. Double close means she actually buys it and owns it for a few minutes, and assignment means she sells her contract and never owns it? Is that the whole difference?

@solder that's the difference in one line, yes. She takes title and there are two deeds instead of one contract handed over.

@lantern the sentence I'd hunt for in the funder's paperwork is the one that ends the flat fee. Almost every one of these says something like "repayment by 5pm on the funding date," and then there's a second sentence with a daily rate or an extension fee for what happens after. Also find out whether they record a mortgage in their name and release it, or whether they fund into escrow unsecured on the closer's instructions. That changes recording costs and, in some states, what shows up in the chain. Both are normal. You want to know which one you signed.

Ask the closer the order of operations in plain words. Which deed records first, whether both record the same day, and whether the funder's payoff happens before or after recording. Recording practice is state specific and I've seen two counties in the same state handle a same-day pair differently. Not glamorous, but it's the thing that stalls files.

Genuine question, why not just assign the contract and skip all of this? Assignment fee, no funder, no double transfer tax. 3,640 plus a second set of closing costs is a lot of money to avoid one piece of paper.

@pike because in a growing number of states, marketing and assigning a contract you don't own is exactly what gets called unlicensed brokerage, and the rules differ state by state and keep moving. Taking real title is the way around that objection, which is why double closing keeps gaining ground and why funders like this one exist at all. Whether it applies to her specific facts is a question for a licensed attorney in her state.

Also some end buyers just refuse to look at an assignment. That alone has pushed deals I know of into a double close.

Running it the way I would underwrite it.

Gross spread 25,500. Funder fee 3,640. Buy side closing 1,900. Sell side closing 2,300. Transfer tax 910 plus 1,037. That's 9,787 out, 15,713 left, matching your number.

Missing from your list: two owner's title policies unless the closer will issue the second at a reissue or short-term rate, wire fees on three or four legs, and whatever she spent finding the deal. Marketing cost is real even if it isn't on the settlement statement.

The assumption the whole thing rests on is the 207,500. If the end buyer's appraisal comes in at 198 and the lender sizes off that, the buyer either brings more cash or renegotiates, and your 15,713 becomes 6,000 while the funder's fee doesn't move. What supports the 207,500?

2 percent flat isn't outrageous but it isn't the only quote out there. I've been shown 1 percent to 2.5 percent flat on the funded amount, sometimes with a floor, sometimes with a separate document fee, and it moves with how much repeat volume you send. Get three quotes and ask each one specifically what is excluded from the flat fee.

@sextant is right about the second title policy. Ask directly whether the second one gets a short-term rate. In some states that discount exists on a resale within a set window and it's meaningful money on a 207,500 policy. Whether it applies here depends on the state's rate rules, so ask the closer to quote both legs on one sheet.

Trying to place this in my head with the note stuff I've been reading. Is the funder a lender in the normal sense, with a lien, or is it closer to escrow just parking money for an afternoon? If there's no lien and no time, what are they actually secured by?

@vellum they're secured mostly by the fact that the money to repay them is already sitting on the other side of the table. That's the design. Short window, repayment source lined up before the advance, flat fee for the service.

Which is why I keep looking at this side of the business. 3,640 for a few hours of exposure looks enormous as an annualized number, and annualizing it is meaningless, because the money isn't deployed the other 364 days unless there's constant deal flow. The whole return depends on volume and on the double close staying popular.

Nothing useful to add on the funding, but the double transfer tax line is the one people forget and it varies a lot by state.

Where does the funder's money come from? Is this usually one wealthy person, or a pool of investors, or a warehouse line? I can't tell from the marketing whether I'm reading about a lender or a broker who found someone else's cash.

@sable both exist and the marketing looks identical, which is why I read the funding agreement before I care who they are.

@lantern the two documents that matter here are the funder's agreement and the closer's escrow instructions, and they have to agree with each other. The instruction you want in writing is that the funder's advance goes out only against a fully executed and funded B to C, or that the closer holds and returns it if the second leg doesn't fund. If those two papers disagree, the failure case is decided by whoever's lawyer is louder. Recording sequence and what a same-day pair looks like in the public record are state specific, so ask the closer, not the internet.

One thing to warn your wholesaler about: in a lot of states the 182,000 becomes public record and the end buyer or their agent can see what she paid that morning. Roughly a dozen states don't publish sale prices at all, so it depends entirely on where this is. It doesn't stop the deal, it changes the conversation if the buyer finds out mid-file. Better she decides how she handles that question in advance.

When you say flat fee, does that mean the same 3,640 whether it repays in one hour or six?

@rigging yes, that's what flat means here, and the boundary is the end of the funding day rather than the hour.

I keep pricing this as a business I'd want to be in and I keep landing on the same problem. The risk per deal is genuinely small when the repayment source is committed, and the fee is decent, so the constraint is deal count. It only works if you're the funder three or four wholesalers call every week, and that's a relationship business, not a capital business.

I'd write down the failure case before I chose between the funder and hunting for a different closer. If the B to C doesn't fund at 4pm, who owns a house at 182,000, on what terms, and for how long? Ask the funder that exact question and see whether the answer is a number or a paragraph.

15,700 on a day's work is fine. 15,700 with a hard money lender on the other side who hasn't confirmed they'll fund a same-day resale is a coin toss with extra steps.

Reading this from the other side, since I'm the boring end buyer type. Does the end buyer normally know any of this is happening? I'd want to know if the person on my contract didn't own the house yet, and I'm not sure I'd know where to look.