Double Close and Transactional Funding

When doing a double close on a HUD or REO, I am confused what protects the hard money lender (who provides the transactional) funding from getting screwed if the investor backs out. Because the hard money lender to double close will be buying the house in cash.

  1. You get the house under an option period
  2. Find Investor
  3. Investor deposits earnest money in escrow
  4. Lets say the close date is 5/15
  5. Investor backs out the day of on the 15
  6. Investor forfeits earnest money, but hard money lender has now closed on the property and has no investor to transfer title to?

If someone could help straighten this timeline out I would really appreciate it . It just seems like to me if your investor backs out in a double close and the hard money guy has already bought the house, then they are screwed.


A private money, hard money and transactional funding loan are all different, although some companies may make all three types of loans.

A transactional lender generally loans the temporary funds between seller A, investor B and end buyer C. The A-B / B-C Transactions!

There must be a sale / purchase contract between seller A and investor B, and there must be a sale / purchase contract between investor B and end buyer C.
A-B contract is entered into escrow and escrow opened, investor B sells property to buyer C with an approved loan and funds and the second escrow is opened at the same title company, just prior to closing seller A signs all documents for sale along with investor B, then investor B and buyer C sign all documents and closing papers for the second escrow, once all documents are signed and verified by the title company the Transactional Lender will deposit funds for the A-B purchase to escrow one, which normally closes in the afternoon, and the following morning (Different Date) the transaction between B-C closes and the Transactional Lender get’s repaid the loan plus normally 1% and the spread between both transactions is paid to investor B.

At no time can the transaction fail as Transactional Funding Funds are never wired to escrow until both escrows documents are signed, the end buyer C’s lender has wired end purchase funds and everything is set to close!