What Does It Mean When a Real Estate Transaction Is Funded?

What Does It Mean When a Real Estate Transaction Is Funded?

You know how you can close on a property and still be waiting for your money to be paid? That’s because closing and funding aren’t the same thing. And if you’re wholesaling or flipping houses, this difference actually matters.

Funding occurs when the buyer’s cash or their lender’s money is transferred to the title company’s account, allowing everyone to receive payment. However, depending on your state, that might not happen until a day or two after you’ve already signed everything.

Here’s a detailed guide on when funding happens so you can avoid those awkward moments where you thought you’d have cash in hand, but you’re still waiting.

What Does It Mean When a Real Estate Transaction Is Funded?

Funded means the money is physically sitting in the title company’s account, ready to be distributed. The buyer’s lender sent their wire, or the cash buyer moved their funds over, and now the title company can start paying everyone out, including you.

In other words, all the documents get signed during closing, but funding is when the actual cash arrives. Once funding is secured, the title company pays off any existing mortgages and covers the associated fees. This is also when they cut your check or wire your money. The county records the deed, so ownership officially transfers.

Some states use wet funding, where all this happens on the same day. Meanwhile, others do dry funding, where you might sign today, but the money doesn’t move until tomorrow. If you’re wholesaling and doing a double close, this timing can make or break your deal.

When and How Do Funds Change Hands in Real Estate

The money doesn’t go straight from the buyer to you because the title company needs to ensure that everyone gets their share first. They’re the middleman who hold funds and distribute them.

The Role of Funds in Real Estate Deals

These funds cover way more than just your profit. They’re also paying off mortgages, covering agent commissions if applicable, handling title insurance, recording fees, transfer taxes, and any other costs listed on the settlement statement.

The title company divides everything up based on what was agreed upon, so your final number is whatever’s left after everyone else has been paid.

If you’re doing transactional funding or a double close, you need to know exactly when these funds arrive. That’s when you can pay back your lender and move on to the next deal.

Where the Money Comes From

Most buyers obtain a mortgage, so their lender wires the loan amount to the title company on the day of funding. Cash buyers wire directly from their bank, which speeds up the process since there are no underwriters or loan conditions to deal with.

The title company simply waits for the wire to appear in their account and verifies that the amount is correct. Once it’s there, the funding is official.

If you’re the cash buyer using your own capital or transactional funding, this is when your money is disbursed and begins to work.

The Actual Transfer of Funds at Closing

Once the wire comes through, the title company’s system separates everything. Existing mortgages are paid off immediately, then commissions and fees are handled, and finally, you receive whatever’s left.

You probably already told them whether you want a wire or a check. Most investors opt for wire transfers because the money arrives in your account the same day or the next business day.

Checks take longer, and no one actually wants to wait when you could be putting that cash into the next real estate property. The entire distribution occurs within hours of funding confirmation, but your actual access to the money depends on how quickly your bank processes incoming wires.

Wet Funding vs. Dry Funding

Wet funding is when everything happens the same day. You sign the papers, the money arrives, and then the deed records.

Meanwhile, dry funding means you sign everything, but then nothing actually happens until the next day or even a few days later. This is because the money takes its time showing up, and the county isn’t recording anything until it does.

Most states do dry funding, which sucks when you’re trying to do back-to-back closings or you just want your money already. But if you’re working in California, Alaska, Arizona, Hawaii, Idaho, Nevada, New Mexico, Oregon, or Washington, then you’re in luck because those are wet funding states.

Everything wraps up the same day, and you can actually move on with your life. Many wholesalers we know specifically hunt for deals in wet funding states because it makes double closings so much cleaner.

You don’t have to stress about whether your second closing is gonna happen before your transactional funding is due.

Different Ways Real Estate Transactions Get Funded

Buyers can fund deals in like a million different ways. Some methods are extremely fast, while others take an extremely long time.

Traditional Mortgage Funding

This is your everyday buyer who’s getting a loan from a bank. They’ve been working on this for weeks and submitted all their documents. They also got pre-approved. Then, on the closing day, the bank wires the loan amount.

The issue is that these deals are slow and somewhat unpredictable because banks are selective in their lending practices. The buyer could tank their credit right before closing, or the bank could find some random issue, and suddenly the whole thing falls apart.

It happens way more than people realize. You need to understand that if you’re selling to someone with traditional financing, there’s always a small risk hanging over your head until the wire actually clears.

Cash Purchases

Cash deals are so much better. The buyer just wires money straight from their account, and you’re done. There’s no bank in the middle, nitpicking everything and no underwriter who might kill the deal at the last second.

Cash buyers can close quickly (sometimes in as little as a week), and once everyone signs, the money is available right away. If you’re wholesaling to other investors, they’re almost always paying cash, which makes everything smooth.

The wire comes through, and you get your assignment fee or your spread. Then, you’re onto the next one.

Alternative Funding Methods

There are several other ways people fund deals that you may encounter. Here are some of them:

Hard Money Loans

These are private lenders who are primarily concerned with the value of the real estate property, rather than the buyer’s credit score or income. They close much faster than banks, and you often see them with flippers who need to move quickly.

Private Money Loans

This is essentially someone who has cash available and wants to earn interest on it. It could be a family member, a friend, another investor, or whoever. The terms are whatever you guys work out between yourselves.

Home Equity Lines of Credit (HELOCs)

The buyer is extracting equity from another real estate property they own. It’s like cash because the money’s already approved and ready to go; they just transfer it over.

Bridge Loans

These are short-term loans for individuals who need to purchase a new real estate property before selling their existing one. You see these with investors who are moving fast between deals and need to overlap for a bit.

Transactional Funding

This is specifically for us wholesalers doing double closes. You borrow the money for literally hours or maybe a couple of days just to close your A-to-B transaction, then you pay it back immediately when your B-to-C closes.

This is a short-term option that allows you to complete deals without using your own cash. Contact us today to learn more.

FHA Loans

These are government loans that allow people to put down only 3.5%, which sounds great for buyers, but for the seller, it’s somewhat of a pain. These take forever to close, and the property has to meet all these requirements. Not ideal if you’re trying to move fast.

VA Loans

These are zero-down loans for veterans. They’re also slow to close, but at least the buyer doesn’t need a large amount of money up front. Still not great if you’re in a hurry.

USDA Loans

These are for rural properties, and they’re even slower than FHA. Plus, they only work in specific areas, so you can’t even use them everywhere.

Common Delays That Can Hold Up Funding

Funding delays are the worst because you think everything’s done, and then you’re just sitting there waiting. Here are some of the things that can keep your money stuck.

Last-Minute Buyer Financing Issues

This is the number one deal killer. The buyer goes out and buys a car two days before the closing process or opens a new credit card for furniture and tanks their credit score. Banks perform a soft credit check right before releasing funds, and if anything has changed, they can cancel the entire loan on the spot.

We’ve seen deals die hours before closing because someone couldn’t wait to go shopping, and it’s the most frustrating thing ever.

Title Problems

Property title issues pop up all the time, and they’ll stop your deal dead. It could be a random lien nobody knew about, an old judgment, unusual property boundaries that require a survey, or even just the seller’s name being spelled differently on different documents.

Sometimes it’s quick to fix, and sometimes you’re waiting weeks for estate issues to be cleared up before anyone can proceed with funding.

Appraisal Complications

If the buyer’s getting a mortgage, the bank orders an appraisal, and sometimes it comes back lower than the purchase price. Now the lender won’t fund the full amount unless the buyer brings more cash or you drop your price.

With investment properties, this happens less frequently since most buyers use cash or hard money; however, when it does occur, it’s a significant inconvenience.

Missing Documentation

Someone always forgets to sign something, or the notary screws up, or the lender suddenly needs one more form they didn’t mention until closing day.

The title company can’t fund until every single document is perfect. That means that even one missing signature delays everything, and you’re just sitting there waiting for someone to track down the right paperwork.

Wire Transfer Delays

Wire problems are super common. Someone types in the wrong routing number, the wire gets flagged for fraud review, or it’s Friday afternoon, and the bank already processed their last wire, so now you’re stuck until Monday.

Banks are particularly concerned about wire fraud, so they may hold transfers to verify everything. This can take hours or days, depending on the level of care they provide.

Lender Underwriting Delays

There are also instances when the lender is simply slow because they’re backed up with other loans, or they continue to find minor details to double-check.

Every day the funding process gets delayed, it costs you money, especially if you’re paying interest on transactional funding. This is also an issue if you have another deal pending that requires this cash to proceed.

8 Things Sellers Need to Know About When Their Estate Transaction Is Funded

Here’s what you need to keep in mind about funding and getting your money when you’re selling:

1. Don’t count on the money until it actually hits

Don’t schedule your next closing, book movers, or commit to anything based on when you think funding will occur. Wait until the title company confirms that the wire has come through before making any plans that depend on having that cash.

2. Your payout will probably be less than you calculated

The title company will identify random items that need to be paid, which you may have forgotten about or were unaware of. Things like old utility bills, HOA assessments, property taxes that weren’t prorated right, whatever. They deduct all fees from your proceeds before paying you, so please be aware that the amount may differ.

3. Review your settlement statement before closing

This shows you exactly what’s getting deducted and what you’re walking away with. Go through it line by line so there are no surprises when the money arrives in your account.

4. Pick wire transfers over checks

Wires get you paid the same day or next business day, while checks take like a week to clear. Most investors go with wires because who wants to sit around waiting when you could be putting that money into the next deal?

5. Keep your final settlement statement forever

You will need this for tax purposes and in case you need to reference something later. It shows every dollar that came in and went out.

6. Track multiple deals carefully

If you have multiple closings scheduled around the same time, ensure you know which funding is allocated to which property. It’s easy to lose track when money is being transferred between different deals.

7. Confirm your wire info is correct

Provide the title company with the correct routing and account numbers, and double-check everything. One wrong digit and your money goes to the wrong place or gets held up while they figure out what happened.

8. Know your state’s funding timeline

Wet funding states pay you the same day, while dry funding states require you to wait until the next business day or later. You need to plan accordingly so you’re not expecting money that isn’t coming yet.

Frequently Asked Questions:

How long does it take for a real estate transaction to be funded?

It depends on your state, but funding typically occurs either on the same day as closing or the next business day.

Wet funding states like California and Arizona fund on the closing day, so the money shows up within hours of signing. Meanwhile, dry funding states make you wait until the next business day or longer if there are complications.

Can a deal fall through after closing but before the funding is finalized?

Yes, it can, and it’s one of the scariest things that can happen. You’ve already signed everything, but if the buyer’s real estate financing falls through before the lender sends the wire, the deal will die.

This occurs when the buyer takes a foolish action after closing, such as opening a new credit line, or when the lender discovers a problem during their final review. It’s rare, but it happens enough that you shouldn’t count on anything until funding is actually confirmed.

What’s the difference between the closing date and the funding date?

Closing is when everyone sits down and signs all the documents. Funding occurs when the money is actually transferred from the lender or buyer into the title company’s account.

In wet funding states, both happen on the same day. In dry funding states, you might close on Tuesday, but funding doesn’t happen until Wednesday or Thursday. The deed is not recorded, and you don’t receive payment until funding is secured.

Key Takeaways: What Does It Mean When a Real Estate Transaction Is Funded

As we’ve shared in this guide, funding occurs when the buyer’s money is actually deposited into the title company’s account, allowing all parties to receive payment. It’s not the same as closing. You may sign papers today, but funding could be finalized tomorrow, depending on your state’s requirements. Wet funding states handle everything the same day, which is perfect for double closes, but most states do dry funding, where you wait until the next business day.

If you’re wholesaling and need transactional funding to close your deals fast, call KP Close at (843) 823-1148. We fund 15+ deals monthly, and we’ve been doing this since 2016, so we know exactly what you need. Send us your A-B and B-C contracts, and we’ll wire the funds for your double close without the usual lender headaches!