It sounds to me like the "transactional funding" you describe is a "cute" way around the simultaneous closing problem.  As one of my law professors used to say "it's too cute by half."  If B cannot fund his purchase from A with money from the sale to C, why would it be okay for B to use your money for one day and pay it off with the proceeds from the sale to C?  In substance, it still looks like a land flip to me.

Lenders (such as C's) have been burned by land flips, which is why many of them do not permit back to back closings anymore. The fact that B uses your money for one day and then pays it off with the proceeds of the sale to C does not do anything to protect C or his lender from the dangers of land flips.

As you stated, "has become pretty mainstream in the past several months."  It is a pretty recent development, so I don't take much comfort in the fact that nobody has gone to jail over this yet.  In my mind, the same problems that ended up in federal investigations from simultaneous closings could happen with the "transactional funding" model you describe.  Many of those involved in simultaneous closings didn't see a problem with them initially, either. 

Because in substance, the transaction is the same, I would not close anything that resembled this type of deal.  Too risky from my perspective.  I'll stick to more traditional closings.

Best,
Robert A. Franco
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