any tips on how to weed out covertly contingency-type offers from serious direct buyers?
obviously not all investors resort to wholesaling tactics once they get ur attention by flaunting 'all-cash' offers and ' proof of funds' in the excess of millions, but with the advent of MLM in this broke hyperinflative economy, less people/businesses qualify for funding, yet more are inspired by multimedia advertising/marketing/networking to want to 'invest' anyways evenmoreso. or in other words, increasingly individuals/business want to spend more money while they have less available to them. even via credit or 'creative' funding.
at least as of Jan 2014 lenders are bound by the 'New Qualified (QM) Rule' at a nationwide level by the Consumer Financial Protection Bureau, which mandates that even 'PRIVATE' loans require the borrower's total documented debt to income (DTI) including the loan payment isn't over 43%.
so seems more and more than ever resort to creating the facade that they do in order to be taken seriously and appear to be busy actively 'investing' yet more and more properties are in/out/in/out of contract like musical chairs these days until they 'finally' close after much wasted time.
the plethora of sites out there offering 'proof of funds' letters - some like the above offering proof of 'unlimited' funds for a low monthly 'subscription' really take the cake in what 'proof of funds' is apparently being belittled to.
investing in the business arena used to mean expending money for future profit; i'm not sure of the scope of what it means nowadays anymore though.
Simple get the buyer to put up substantial NON-REFUNDABLE earnest money that you the seller hold.
If they are full of crap they lose thousands to tens of thousands.
The POF has to be from their bank account. You can also request before executing a contract that their bank provide a statement of funds letter.
Have them remove the loan and appraisal contingency when they make the offer. Then hold the buyer to the strict contract dates. If they don't fund on time, give them a 24/48 hr notice to perform. If they don't perform, cancel the contract, keep the good faith and get another buyer. Cash buyers can be managed.
I agree, large deposit and no contingencies (inspection could be ok within x amount of days)
Thanks Andrew, Joel, Lee!
time and tme again i keep seeing these 'ALL CASH OFFERS' getting accepted cuz they're so attractive to sellers then when it comes to going to contract, they still want the loan/appraisal contingencies to stay, indeed. which is a huge warning flag, as is asking for over 30 days to close with cash. (if really have the cash on hand, why need over a month to deliver it at close?)
likewise, cannot stress enough 'PROOF OF FUNDS' is no longer proof of a real cash buyer!
when i see proof of funds letter instead of VODs (verifications of deposits like legit bank statements) it wreaks of wholesaler and hard money contingencies coming sooner or later.
wholesalers and hard money borrowers do need to stop throwing around 'all cash offers' and phony 'proofs of funds' cuz its making the wholesalers who do have all cash buyers lined up, and hard money borrowers who do have a private loan commitment, seem shady.
if ur a wholesaler with a cash buyer ready, disclose it, dont say ur the all cash buyer. likewise if ur a hard money borrower disclose the fact u have a private loan committment, dont forge proof of funds cuz it looks 'better' than explainin ur getting a private cash loan!
Require the buyer to show proof of funds in the buyer's (or buyer's company) bank or other financial institution. Funds from any other source would generally indicate the buyer is borrowing funds.
Never accept anything but a verification of deposits as a proof of funds. Without that they are not a cash buyer. I list and sell bank owned and HUD properties as a broker. That's all either of them will accept.
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