If cash is sitting there to fund the first leg of a double close, is a transactional funder still worth using

Question

A double closer with enough cash to fund the first leg personally, who still uses a transactional funder on almost every deal, illustrates a tradeoff worth laying out rather than dismissing as habit. The case for using personal cash is straightforward. A funder's fee typically runs around one percent of the purchase leg with a minimum in the four figures, and paying that for a few hours of money that wasn't otherwise needed is a real cost. Fewer parties means no escrow instruction letter for the closer to redline, and no third party who can decide late in the day that something in the file needs more review. The case for using a funder anyway holds up too. Personal cash stays free for earnest money and for the next deal that shows up the same week. Some closers strongly prefer a funder's instruction package because it spells out recording order and disbursement priority explicitly, and a closer who has processed that letter many times moves faster than one improvising with a personal wire. There's also an argument that a third party underwriting the end buyer's funds adds a second set of eyes on the only thing that actually repays the deal. The risk if the second leg fails looks similar either way on the surface, ending up owning a house that wasn't meant to be kept. With personal cash, that house is owned free and clear. With a funder, it's owned along with an obligation to them, which is generally the worse position, though exactly how much worse depends entirely on the funder's documentation.

tylerbrooks9 · Answer

The instinct toward using your own cash makes sense: fewer people who can say no on the day. But the point about the closer preferring a package she's seen before is the one that would change a lot of minds, because a closing agent can slow to a crawl over paperwork she's never handled. Write the instructions yourself and there's real risk of getting the wording wrong the first time.

Rena Guide · Answer

Some vocabulary first, since this thread assumes it. A double close is two separate sales on the same day. You buy from the original seller in the A-B closing, then you sell to your end buyer in the B-C closing, and for a short window you are the owner. Transactional funding is money borrowed to cover the A-B purchase, repaid out of the B-C proceeds, often within hours, for a flat fee rather than interest.

What the choice in @monica_tran3's post really turns on is three separate things you can check before you decide. First, whether your closing agent will handle a same-day back-to-back at all, and on what instructions, which varies by state and by title underwriter. Second, whether the end buyer's funds will be on deposit before your first leg funds, because that is the thing that repays either you or the funder. Third, what happens to your cash position for the rest of that week if the money is tied up.

On the risk if the second leg fails, both routes leave you owning the property. Owing a lender on top of that adds a payoff obligation with whatever terms and default remedies their document sets out, so read that document before comparing the two paths.

One thing to confirm rather than assume: the fee, the minimum, and the conditions for funding all vary by funder, so get them in writing before you rely on a number you heard in a thread.

nicole_adeyemi · Answer

The answer usually depends on the end buyer, and that is the only variable that reliably matters. A cash end buyer with funds already in escrow makes using your own money an easy call. A financed one is where having someone else review the file earns its keep. Also worth knowing that in some states the closer will not take outside escrow instructions from anyone, funder or otherwise, which settles the choice on its own. That part differs state to state and even company to company.

If cash is sitting there to fund the first leg of a double close, is a transactional funder still worth using

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