Wet vs. Dry Funding Real Estate Wholesale Flips

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Title Company Rules Change Procedures for Short Sale and REO Investors

The difference between wet funding and dry funding a double close can mean the difference between success and failure for your wholesale flip profits to be earned.  Dry funding risks the deal, wet funding is safer and more readily accepted by title companies.

  • Wet Funding means that the investor arranges for a short-term loan to fund “Side A” purchase of a property.
  • Dry Funding is when the investor arranges to use another buyer’s money to fund the purchase.
  • In either case the contracts are held in escrow at a single title company.
  • The investor does not need any funds or credit in either case.

Title Companies Prohibit Dry Funding

Dry Funding Close DiagramBefore wide spread rule changes in response to our current mortgage crisis, it was common for investors to arrange to use the purchase money from the end buyer to pass through to his or her purchase and keep a profit margin in the middle.  This was known as dry funding because the investor did not fund the purchase.  Increased legal scrutiny means most title companies will not accept dry funding closings anymore.  Smart real estate investors are adapting to these new rules by using Transactional Funding.

Wet Funding Double Close Diagram

Wet Funding Allowed by Title Companies

Today, investors using short-term loans to bridge the gap and close the Side A to B purchase.  The term for these short term loans is Transactional Funding, Flash Cash, or Short Bridge loans.  The title officer distributes the loan funds to the (previous) owner and then delivers the deed to the investor. Next, the title company closed the B to C Side of the transaction, delivers deed to end buyer from investor, and repays the bridge loan. This is called a Back to Back Closing.  Lastly (but most importantly!) the investor receives the profit proceeds from the title company and a complete set of closing documents from each transaction.

Use Transactional Funding for Flip Profits

{ 9 comments… read them below or add one }

Realnet August 10, 2011 at 8:03 PM

What a great explanation of wet & dry funding. It’s too bad that dry funding is usually out…it was so convenient!

charles McMillian December 8, 2011 at 12:43 PM

We’re seeking 30 day funding to purchase SFH’s through auctions. $250k-$300k in California. We’ll only buy with the end buyer already under contract non-refundable deposit in Escrow end buyers commitment letter and close in 30 days, End buyer would go into escrow the day after we purchase can provide copies of executed purchase agreements with the end buyer prior to bidding with NO contingencies. Buyer’s list is ready; WE could do several of these every month.

jorge March 8, 2012 at 10:24 PM

HI, can you do partial transactional “wet” funding to cover down payments? i believe you may call it “escrow deposit” services,,,what is the cost of it? advise please

Robert Strain March 9, 2012 at 11:38 PM

can i do this in Minnesota

admin April 3, 2012 at 4:43 PM

Yes, we fund nationwide.

admin April 3, 2012 at 4:43 PM

Jorge – We do not fund escrow deposits.

admin April 3, 2012 at 4:48 PM

Please contact us for more information 303.339.8411.

George July 11, 2012 at 11:09 AM

Dear Investor/Wholesaler,

I am a Wholesaler looking for a new title company. Could you refer me to an investor friendly Title Company that understands “Simultaneous Closing and Double Closing” that you have worked with in the Denver area? Also I am willing to work with other Wholesalers on a Joint Venture… where I bring you great deals and you use your End Buyers to purchase the property and we split the profits.

A name and number of a title company that you have worked with if you have one.

Thank You so much,
George

Email: stonegate27@aol.com

admin July 24, 2012 at 8:49 PM

We have a title company referral program available through our investor support programs – http://transactionalfunding.com/membership-levels.

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