The Pros and Cons of Transactional Funding for Wholesalers and Flippers
Is Transactional Funding Right for Your Deal?
While transactional funding is an incredible tool, it is important to understand when to use it and when a simple assignment of contract makes more sense.
The Pros
1. 100% Privacy
The biggest advantage is keeping your wholesale fee hidden. The seller doesn't see what the end buyer is paying, and the end buyer doesn't see what you paid the seller.
2. No Credit Checks or Appraisals
Because the loan is only for 24 hours, lenders don't care about your credit score, W-2 income, or the condition of the property. Approval is based entirely on the C-buyer's funds being in escrow.
3. Legally Wholesale REOs
Banks explicitly prohibit assigning contracts on foreclosures and REOs. Transactional funding allows you to legally buy and resell these properties.
The Cons
1. Double Closing Costs
When you double close, you are engaging in two separate real estate transactions. This means paying title fees, recording fees, and potentially transfer taxes twice. This eats into your profit margin.
2. Funder Fees
Transactional lenders charge a fee—usually between 1% and 2% of the loan amount, plus processing fees. On a $300,000 deal, the fee could be $3,000 to $6,000.
3. Coordination Complexity
Double closings require a highly competent title company that understands how to coordinate A-B and B-C transactions seamlessly. If the C-buyer's funds are delayed, the entire chain breaks.
The Verdict
If your assignment fee is small (under $10,000), an assignment is usually better. If your fee is large ($20,000+), or if the contract is non-assignable, transactional funding is the clear winner.
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Stefanie Blackburn
Borrower's Deal Strategist at CPI Transactions, LLC
Stefanie helps active real estate investors get their deals funded through smarter deal structures, broader capital relationships, and systems that make the process repeatable. She serves investors nationally across bridge, DSCR, fix & flip, transactional, commercial, and 2nd lien DSCR financing. Based in Denver, Colorado.
