Transactional Funding

Overview: Transactional Funding

Transactional funding is short-term financing utilized by investors to fund the acquisition of distressed real estate, with the intent to resell the property at a profit shortly after acquisition. Aegis provides transactional funding for short sale acquisitions, as well as REOs, and will allow up to 60 days for repayment.

IMPORTANT: Aegis RE Partners is a provider of equity capital, and is not a lender or licensed mortgage banker. Aegis will not provide transactional funding for short sale transactions where full disclosure has not been made to the seller's lender regarding the nature of the transaction (i.e., property flip), nor will we fund any transactions where we suspect fraud, misrepresentation or BPO/appraisal manipulation.

The following are frequently asked questions (FAQ) regarding our transactional funding program:

Q: What sets Aegis apart from other transactional funders?
       
A: There are two key differences between the Aegis program and what is most commonly offered by transactional funders:
 
1.    Aegis makes a preferred equity investment in the property as opposed to a loan. As such, Aegis does not require a personal guarantee (other than for fraud and misrepresentation), nor do we require a promissory note to be executed.
2.  Most transactional funders provide loans only for back to back transactions, whereas our general investment parameters allow for planned holding periods up to 60 days, with our “sweet spot” being hold periods of 10-35 days.

Q: What percentage of the profit is allocated to Aegis?
 
A: As a provider of preferred equity, Aegis is entitled to a preferred return on the capital invested in each transaction. To achieve our targeted IRR for this investment strategy, we have established the following profit allocation schedule:

To the extent the total profit allocated to Aegis on any individual transaction is less than $2,000 based upon the schedule above, Aegis will be entitled to a minimum preferred profit allocation of $2,000. More details regarding our profit allocation can be found in the Aegis Agreement for Acquisition and Resale of Property

Q: In addition to the profit allocation, are there any other costs associated with each transaction?
 
A: Since we fund transactions based upon the merits of each deal, it is imperative that we perform the necessary due diligence on each transaction (e.g., valuation, market analysis, title history, etc.). To cover the costs associated with this due diligence, the Client pays Aegis $400 for the first transaction, and $250 for each subsequent transaction. This amount is paid to Aegis concurrent with the submission of each new transaction package.

Q: Does Aegis perform a credit check?
 
A: No. However, as part of our standard due diligence, we will run a full background check - including criminal - on each principal of the company. Aegis is not a lender and, therefore, does not qualify the transaction based upon the Client’s ability to repay the invested capital.

Q: What information does Aegis require in order to begin underwriting a new transaction?
 
A: In order for us to begin the underwriting process, we must have all of the following information:
 
1. Aegis Application Form
2. Aegis Short Sale Transaction Worksheet
3. Copy of Drivers License
4. Articles of Incorporation/Organization
5. Bylaws/Operating Agreement
6. Evidence that Corporation is in Good Standing (as of transaction date)
7. Resumes of all Principals and/or Authorized Signers
8. Brief Narrative Describing Business Plan
9. Fully Executed A-B Contract (with all Addendums if applicable)
10. Signed Approval Letter from A-Seller’s Lender
11. If Short Sale, Affidavit of Understanding: Signed by A Seller and Notarized
12. All Investor Disclosures (e.g., Intent to Sell at Profit, etc.)
13. Fully Executed B-C Contract (with all Addendums and Disclosures)
14. Evidence that C-Buyer’s Deposit is being held in Escrow (Min. Deposit of 3%)
15. Approval Letter from C-Buyer’s Lender (must be from lender, not broker)
16. All Disclosures (e.g., Intent to Sell at Profit, etc.) must be present in contract
17. A-B and B-C Preliminary HUD-1 Closing Statements
18. Aegis Valuation and Analysis Fee

Q: How long does Aegis take to underwrite, approve and fund a transaction?
 
A: Typically, our underwriting process can be completed within 7-10 business days from the time we receive all of the information listed above. Given the nature of this business, we are frequently asked to underwrite and fund transactions in 2-3 days. In order for us to properly underwrite the risk inherent in each transaction, we must have at least 7-10 business days. Please keep this timing in mind when structuring your transactions, as we will very rarely make exceptions to this policy.

Q: What issues would preclude Aegis from funding a transaction?
 
A: Although we are in the business of investing capital, our primary objective is to generate superior risk-adjusted returns, while preserving our investors’ capital. In order for us to achieve this objective, we must fully vet each transaction before making an investment. As such, we will not fund transactions where the following characteristics are present:
 
Full disclosure has not been made to the seller, seller’s lender, buyer, and buyer’s lender with respect to the nature of the transaction (i.e., property flip)
Buyer’s loan is not fully credit approved, with the only remaining conditions being appraisal and clear title
Title history shows multiple foreclosures, flips and/or deed transfers over the past 5 years
Subject market is still in a state of decline with respect to property values, or has an oversupply of foreclosed homes and/or short sales
The spread between the A-B and B-C price is not sufficient to cover the costs of the transaction and provide an adequate equity “cushion” in the event the B-C transaction fails to close
The markup between the A-B and B-C is excessive or unrealistic, or where the B-C price is greater than the mortgage(s) being paid off (i.e., equity stripping)
A-B contract is in an individual’s name (i.e., we will only provide capital to companies, not consumers)
 
In addition to the aforementioned issues, we will not fund transactions where we feel any facts have been misrepresented to any of the parties involved (seller, seller’s lender, buyer, buyer’s lender, title/escrow company, and us).

Q: Can I choose the title and escrow company for the transaction?
 
A: No. Given the unique nature of these short sale transactions and how we structure our capital contribution, Aegis has approved a number of title/escrow companies and attorneys around the country with whom we will work. A list of these service providers can be found on the Aegis Partners page of this site.

Q: How does Aegis protect its investment?
 
A: As noted above, we are providing equity, not debt. Accordingly, all of our invested capital is at risk without recourse back to our Clients (except for instances where fraud and/or misrepresentation has occurred). However, lack of personal guarantee and promissory note notwithstanding, we are able to mitigate risk and protect our investment through: (i) extensive transaction-level due diligence; (ii) execution of a Deed between Aegis, as Grantee, and our Client, as Grantor, which is held in escrow; (iii) filing of a Memorandum of Understanding, Mortgage, and/or Performance Deed of Trust; (iv) title insurance policy and closing protection letter provided by title insurance company; and (v) working only with trusted third party providers (e.g., title/escrow companies, mortgage lenders, appraisers, etc.).

Q: Will Aegis provide a Proof of Funds Letter?
 
A: We will provide a Proof of Funds letter upon our completing a cursory review of the contemplated transaction, which includes a quick analysis of the subject property, as well as the A-B and B-C contract prices. For members of Fix-A-Flip Funding, Aegis will not charge a fee for POF letters. POF letters will be issued at a cost of $25 each for non-members. We will not issue POF letters for those transactions that fail to meet our standard underwriting criteria.

Q: What if my C-buyer is getting an FHA loan and, therefore, cannot get an approval letter prior to the A-B Closing?
 
A: We require that, at a minimum, the C-buyer provide a pre-approval letter from their lender (letters from brokers are not acceptable) stating that the loan has been credit approved, and that all supporting documentation has been collected, verified and approved. Although lenders cannot officially approve a file prior to A-B closing, the loan officer can do most, if not all of the underwriting beforehand. Additionally, we may request that the C-buyer sign letter authorizing Aegis to speak directly with, and obtain information from their lender.

Q: How do I get started with Aegis?
 
A: To be added to our “prospect” database, which we encourage you to do prior to having a deal to submit, please complete the Investor Information Package and return, via email, to application@aegisrepartners.com. This will help in expediting the process once you have a transaction in need of funding. Please note, we don’t “pre-approve” Clients, as our decision to invest is based primarily on the transaction. However, if you have any liens, judgments, or pending lawsuits against you or the company in which you be taking title to the property, we will most likely decline your request.