BiggerPockets

Hi all! So I'm working with a realtor now to find REO's, and I need to get a proof of funds letter to make the offers. The thing is, I have no intention of buying the properties myself, I just want to get them under contract to assign to a cash buyer. So that being said, where would I get a proof of funds letter just for the purpose of submitting it to the banks? I have little cash/credit, and being that I'm a newbie, I don't have a solid reputation yet. And if I found someone to give me a proof of funds letter for this purpose, what's in it for them? Sorry for the long post, I'm just full of questions :lol:

Thanks Mr_Investor! Forgive my newbishness, but what exactly is transactional funding?

Ha! Thanks Scott I'll check it out. I've heard that too. One strategy I've heard works pretty often is buying it through a land contract as the beneficiary, and assigning the benefical interest in the property at the closing. Haven't tried it, just heard it works. Any thoughts on that?

Thanks Will! If the end buyer bought the LLC, would that be something that they would have to maintain/pay yearly fees on etc? I know in at least some states they charge an annual fee to have an LLC open.

Joseph,

Here are a few facts.

1. You can not assign bank REO properties.
2. You will always need a POF letter along with ernest money, usually $1,000.
3. Even if you found someone to give you a POF letter and dont close you will loose your ernest money if you do not close.
4. You will ruin your reputation among the bank REO agents and it will become hard to do business with them.
5. Forming an LLC is pointless. It will not help you lock up the property and easier.
6. In order to sell a bank REO you will have to do a double close if you have an actual cash buyer ready to buy when the bank wants to close but in order to do this you need to be able to lock the property up.

Words of advice: When wanting to wholesale bank reo's you need to actually be legit. You are playing in the big leagues now. The agents know what is going on. Make sure that IF you get a POF that you can close on it if you do not sell it within the given time frame.

My suggestion for you: Stick with trying to sell another wholesale investors property. This way you are out nothing if you do not have a buyer. Find a wholesale investor you can partner on with deals.

5. Forming an LLC is pointless. It will not help you lock up the property and easier.

In reference to forming and LLC. Why would this be pointless? What type of issues would you run into by doing it this way?

I have received a sample POF from a couple of these transactional lenders; it is basically a letter, using the letterhead stock of the transactional lender, stating that there is a pre-approval of funds to a stated amount and under specified conditions, and with phone number and contact person to call to confirm availability of funds. Others have posted on the forums that they have successfully used such letters with their offers to purchase. I wonder if the REO sellers even bother to check any further than the reading of the POF letter.

One of these transactional lenders (Bob Norton) has a website set up to allow users to input transaction details and this letter POF is then produced based on the input from the user. I'm sure others do something similar, but I only right now recall the one where I retrieved the sample that I mentioned above. And I did not have to pay any fees at all to get that letter - that may or may not be surprising depending on how you view things.

Will,

If I were the seller, I certainly agree with what you say - I want to see true liquid cash in the form of an account statement, or at least from a real bank. And even then I want to verify that the funds are really there, and not just wired in on a temp basis, and I would want them escrowed too.

But I was just pointing out that these "play" POF letters are out there, and freely available, and people claim that they are being accepted ... So this might be a workable approach for the OP.

Couple of things.

Curt hit it on the head when he said if you can't close don't mess with REO's. Nothing upsets listing agents more then bailing on a deal. And you will be remembered.

However, setting up an LLC is a way to go. Here is how it goes down. You put an offer on a property "123 Main" and if the offer is accepted you set up an LLC i.e. 123 Main LLC. You then have to go to your buyer and say mr./mrs. buyer I want to sell you a property but I'm not really selling the property but selling my rights in the LLC which has a contractual interest in the property.... Anyway you get the pictrue. If you have not done a deal with this investor before he/she will look at you as if there is an arm growing out of your head!

You could call the lender and ask for your buyers name to be added to the P.A. right before close (this does not work all of the time)

Double close... The bank will always use there title company to pull title, however, you can call their title company once the title is completed and the HUD is set up and tell them you will be closing at your title company. Most of the time this works, however, some times the banks title company will balk and not go along. I've had to sign addendum's to pay all closing cost from the first title company and my title company. no bueno!

Anyway take Curts advise and JV other investors deal. Focus on your buyers list first and locating deals that work for them. Your profit will be smaller, but you can build yourself up and then get into REO's ... Also birddog for more established investors...

Good Luck

Hi Ryan,

I do not set it up until after the offer is accepted. So if I make an offer "123 Main LLC", and that is the buyer. I will not set up the LLC until after the offer is accepted. I already have everything in place through my attorney and it cost me around $150 bucks now. I am making 3 to 5 offer each day and that would not make sense to set up each LLC. You should see an attorney first, have it set up and then start to make offers with LLC's if that is what you want to pursue. When you sell to your buyer you are selling your rights to the LLC which gets around the assignment issue with banks, because the owner "123 Main LLC" does not change only the "manager" or "director" of the LLC. I recommend you speak with an attorney... Good Luck