How is the investment (transaction) risk is contractually eliminated?
Prior to purchase, at a known cost effected contractually, there must a buyer in place for a profitable resale. This buyer must have demonstrated proof of funds. If all these conditions are not met there is no transaction and hence, no loss is possible. Since the original purchase and resale are contractual, most executions are simultaneous, like a double escrow involving real estate. At all times, the commitment is either (1) 100% in cash. or (2) pre-sold instruments. Hardly any risk in either situation. Concurrent with the closing (instantaneous in most instances), any debt incurred to finance the purchase is paid off; the loans is on a non-recourse basis with the lender relying solely on the instruments held as collateral for security; a process called FORFAITlNG.
