Can You Use EMD Funding and Transactional Funding on the Same Deal?

Why would one deal need both?

A wholesale deal needs money twice. The first time is when you sign the purchase contract and the seller wants earnest money in escrow. The second time is at the A-B closing, when you must pay the seller before your end buyer's money can close the B-C side.

EMD funding covers the first moment. Transactional funding covers the second. If you plan to assign the contract, you only need the first. If you plan to double close, you may need both.

How do the two loans fit together?

Think of the deal as a timeline.

The two loans do not overlap in purpose. The EMD loan is about the deposit. The transactional loan is about the purchase. At Axelrad they are separate files, and each has its own paperwork.

What does title do with the funded deposit at closing?

The deposit is already in escrow, so title credits it against the purchase price on the A-B settlement statement. That credit is money that came from your EMD lender, so the EMD lender must be repaid out of the closing.

Give title one clear set of written instructions that covers:

1. The funded deposit and who it is repaid to.
2. The transactional funds that arrive for the A-B closing and who they are repaid to.
3. The order of the wires on closing day.

If two funders send title two different sets of instructions, title will stop and ask. That costs you time on the day you can least afford it.

What do you need to do first?

On an EMD deal, the first step is to confirm the seller will cooperate. The seller signs a short EMD amendment that protects the deposit, and the title company or escrow agent must accept that language too. Deals stall here more than anywhere else, so raise it early, before you spend time on anything else.

For the double close, the work depends on how many title companies are involved:

• One title company handles both closings. You introduce us to that title company. There is nothing for you to sign and no underwriting on the transactional side.
• Two title companies. We need a signed deed of trust, a signed loan agreement and a desktop appraisal of the property.

What if the deal dies before closing?

If the deal cancels inside its contingencies, the deposit comes back from escrow and repays the EMD lender. No transactional funding is ever sent, because there is no A-B closing. Read the deposit terms in your purchase contract carefully. The refund depends on those terms, not on who funded the deposit.

How do you apply for both?

Use one application and tell us at the start that you need both. The application asks for the title or escrow company and the escrow officer, because the funds go directly to title. Tell us:

• The contract price and the deposit the seller wants.
• The end of the inspection period.
• Whether you plan to assign or double close.
• Whether one title company or two will handle the closings.

Not sure the deal is ready to fund? Take the deal-readiness quiz. This guide answers a question our desk hears every week at Axelrad Capital, founded by Bryce Axelrad.