Commercial Earnest Money Deposit Option Funding
Hello,
My name is Tod Snodgrass, with Creative Transaction Funding. We offer Commercial Earnest Money Deposit Option Funding (CEMDOF). CEMD financing is available on a nationwide basis.
Are you working on any deals in need of CEMD? We are happy to pay for referrals!
CEMD is for Commercial Property Wholesalers (CPWs).
NOTE: We have a separate CEMD program for commercial real estate buyers (not wholesalers).
Please feel free to send a request for the “Buyers” CMED program.
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Are you an experienced CPW?
Do you have a potential, high quality double close deal that is ready to go, however you lack the cash needed for the CEMD?
We may be able to help. For deals that meet our standard criteria, we can fund the CEMD via a Joint Venture (JV)–a form of equity.
Executive CEMD summary:
1. Designed for commercial properties purchases.
2. CEMD is different from residential EMD because:
a. The (CMED) amounts are usually a lot higher;
b. Escrow time frames are usually longer, i.e. to allow extra time needed for due diligence;
c. They include an option period.
Case Study: Commercial Earnest Money Deposit Option Funding Program
A wholesaler (CPW) was seeking to flip a commercial property via a double close. He was buying the property for $10,000,000 and selling it to another party for $11,000,000.
The CPW (“B”) had the seller (“A”) under contract that included a 30-day option period. The CPW had the buyer (“C”) under contract and had already lined up the $10,000,000 purchase money he needed from a Transactional Funding Money Source (TFMS). FYI: With a double close, there are two separate escrows: A to B and B to C.
The CPW was required to come up with two different funding amounts to kick start the process: Option money and the CEMD funding. The Option fee (for 30 days) was $20 per day = $600, paid out-of-pocket by the wholesaler (CPW).
The CEMD was 0.01% (one percent) x $10,000,000 = $100,000. Since all the CPW’s cash was tied up in other deals, they came to our firm (CTF) for the CEMD. Once CTF confirmed that the wholesaler’s deal met our standard criteria, we agreed to fund the $100,000 CMED funding amount.
Two escrows were opened, A to B: seller to CPW for $10,000,000 and B to C: CPW to buyer for $11,000,000. Next, the CPW wrote a check to the seller for $600 to cover the option. CTF then wired $100,000 into escrow for the CEMD funding.
After a few days, the option was exercised, and the deal went forward. The buyer was instructed to wire $11,000,000 into the BC (second) escrow. Once the Escrow officer confirmed that the BC funds ($11,000,000) had been received, then the Escrow officer wired $100,000 to CTF since the CEMD funding was no longer needed in the deal. CEMD funds are always fully refundable because, by mutual agreement of all parties, they can never be allowed to become part of the purchase price (go hard).
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Next the TFMS wired $10,000,000 into the AB (first) escrow. The AB escrow closed, and the deed was recorded; then the BC escrow closed, and documents were recorded. Last, the Escrow officer distributed funds and documents to the different parties as follows: the buyer received a recorded deed to the property; the seller received $10,000,000; CTF received $50,000 as their 50% markup for the $100,000 they had previously provided; the CPW received $950,000 ($10,000,000-$50,000), less closing costs for both transactions, etc.
Tod Snodgrass
Creative Transaction Funding LLC
[email protected]
