What do you qualify as a proof of funds?
Homeowner · Member since 2020 · 29 posts · 12 votes
What do you qualify as a proof of funds?
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Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
1yYou have nothing to prove to anyone, @David Cheng, and there's no need to apologize. It’s your property and you can sell it FIBO, with an agent, by any other legal means, or give it to the ASPCA. Asking for proof of funds is reasonable. A proof of funds letter without any credible evidence to support it is empty rhetoric and a waste of your time. So, who was the real jackass?
When we are asked for a proof of funds, I will write a letter, likely similar to the one you received, and I always include a redacted bank statement. Evidence like this is standard among all HMLs I know. Why else should anyone believe us?
Any agent who believes that providing a complete proof of funds letter, which they don’t even prepare, is jumping through hoops is simply lazy. If he or she were representing me, it would not be for long.
It’s your property, David. Stick to your guns.
34 Replies
- Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes1y
Hi David,
Some people honestly do not like jumping through hoops just to go see a property or entertain offers as it just becomes a headache to gather stuff.
On the other hand, if its a luxury property or something worth a couple million, wasting time on non qualified borrowers is something to also consider.
What is the listed price for this property?
- Homeowner · Member since 2020 · 29 posts · 12 votes1y
$2MM is the listing price.
I've done this many times as a buyer. All it takes is a screenshot of my vanguard. I'm not asking for anything crazy detailed.
- 1yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @David Cheng:
Currently have a listed 4-plex for sale, 100% occupied. As a screening tool, I ask for proof of funds before we bother a tenant and show the property.
To me, any liquidity qualifies: bank letters, bank statements, stocks in an investment account that covers down payment, etc.
Today, I got a letter from a hard money lender saying the buyer is approved for 1/2 the listing price of the property. No proof of liquidity.
When I asked for any proof of liquidity, the realtor says they are not interested in jumping through hoops and called me a jackass.
Is this how business is done now?
@David Cheng Are you only taking cash offers?
Hurst Real Estate, INC4.987 Reviews - Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes1y
Quote from @David Cheng:
$2MM is the listing price.
I've done this many times as a buyer. All it takes is a screenshot of my vanguard. I'm not asking for anything crazy detailed.
I think @Jay Hurst nailed it on the head. When you ask for "proof of funds" it sounds like you will only consider a cash offer NOT a financed offer.
You should be asking for any kind of pre-approval letter as well.
It sounds like you would benefit from hiring a real estate agent to represent you. This is exactly the sort of thing they would handle for you seamlessly. That agent should not have spoken to you that way, but my guess is that they were frustrated. Its harder dealing with FSBO (forsale by owner) properties. Dealing with other agents is much simpler.
- Homeowner · Member since 2020 · 29 posts · 12 votes1y
Quote from @Jay Hurst:
Quote from @David Cheng:
Currently have a listed 4-plex for sale, 100% occupied. As a screening tool, I ask for proof of funds before we bother a tenant and show the property.
To me, any liquidity qualifies: bank letters, bank statements, stocks in an investment account that covers down payment, etc.
Today, I got a letter from a hard money lender saying the buyer is approved for 1/2 the listing price of the property. No proof of liquidity.
When I asked for any proof of liquidity, the realtor says they are not interested in jumping through hoops and called me a jackass.
Is this how business is done now?
@David Cheng Are you only taking cash offers?
No, I don't care how the deal is financed.
Proof of liquidity for the down payment is good enough. They don't even have to get pre approval for the loan. But I need proof of liquidity.
Quote from @David Cheng:
To me, any liquidity qualifies: bank letters, bank statements, stocks in an investment account that covers down payment, etc.
But anyone can get these hard money approvals without any sort of verification.
- Homeowner · Member since 2020 · 29 posts · 12 votes1y
Quote from @Kevin Sobilo:
Quote from @David Cheng:
$2MM is the listing price.
I've done this many times as a buyer. All it takes is a screenshot of my vanguard. I'm not asking for anything crazy detailed.
I think @Jay Hurst nailed it on the head. When you ask for "proof of funds" it sounds like you will only consider a cash offer NOT a financed offer.
You should be asking for any kind of pre-approval letter as well.
It sounds like you would benefit from hiring a real estate agent to represent you. This is exactly the sort of thing they would handle for you seamlessly. That agent should not have spoken to you that way, but my guess is that they were frustrated. Its harder dealing with FSBO (forsale by owner) properties. Dealing with other agents is much simpler.
With due respect, you're saying the Pre approval from a hard money lender is good enough as a POF?
would it change your mind if I tried to call the hard money lender and no one knows who the company is? - Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes1y
You have nothing to prove to anyone, @David Cheng, and there's no need to apologize. It’s your property and you can sell it FIBO, with an agent, by any other legal means, or give it to the ASPCA. Asking for proof of funds is reasonable. A proof of funds letter without any credible evidence to support it is empty rhetoric and a waste of your time. So, who was the real jackass?
When we are asked for a proof of funds, I will write a letter, likely similar to the one you received, and I always include a redacted bank statement. Evidence like this is standard among all HMLs I know. Why else should anyone believe us?
Any agent who believes that providing a complete proof of funds letter, which they don’t even prepare, is jumping through hoops is simply lazy. If he or she were representing me, it would not be for long.
It’s your property, David. Stick to your guns.
- Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes1yThey probably don’t have the funds and are potentially looking to just flip a contract.
Quote from @David Cheng:
$2MM is the listing price.
I've done this many times as a buyer. All it takes is a screenshot of my vanguard. I'm not asking for anything crazy detailed.
- Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes1y
It sounds like this might have been some sort of "creative financing" scenario where the buyer has $0 but is trying to cobble together 3 liens and 8 JV partners to buy something they cant afford. I wouldn't sweat it. If I was in your shoes, I wouldnt waste my time with an unqualified buyer. If they cant be bothered to provide basic proof that they can close before tying up your time, then they will be a nightmare to deal with once under contract.
This is literally what a pre-approval letter from a lender does - it shows that a lender has taken a solid look at the buyer and confirmed that there is a decent probability that they will get the loan needed to close. If they wanted to send a hard money pre-approval for half of the purchase, then either A) the lender needs to confirm that they verified the borrower possesses the remaining cash to close, or B) the borrower needs to show proof of funds for the remainder. I regularly call sellers on behalf of my buyer clients that I have preapproved and walk the seller through the rigor of my preapproval process to prevent this exact situation.
- Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes1y
@David Cheng that agent doesn't sound like someone you'd want to work with anyway. That said, as a buyers agent, I've vetted my clients, and find it a bit insulting for listing agent to demand POF or pre-approval just to show. As a listing agent, I pre-arrange a specific weekly or biweekly time window with existing tenants and arrange all showings within that timeframe, with POF/pre-approval required with offers. If buyer won't accommodate time frame, making it difficult, then we may get picky unless buyers agent convinces me otherwise. I prefer to trust that buyer's agents don't want to waste time with unqualified buyers, especially with occupied homes. If buyer not represented, however, I make sure I have seen pre approval or POF before showing so I don't waste my own time.
- Homeowner · Member since 2020 · 29 posts · 12 votes1y
Quote from @Jeff S.:
You have nothing to prove to anyone, @David Cheng, and there's no need to apologize. It’s your property and you can sell it FIBO, with an agent, by any other legal means, or give it to the ASPCA. Asking for proof of funds is reasonable. A proof of funds letter without any credible evidence to support it is empty rhetoric and a waste of your time. So, who was the real jackass?
When we are asked for a proof of funds, I will write a letter, likely similar to the one you received, and I always include a redacted bank statement. Evidence like this is standard among all HMLs I know. Why else should anyone believe us?
Any agent who believes that providing a complete proof of funds letter, which they don’t even prepare, is jumping through hoops is simply lazy. If he or she were representing me, it would not be for long.
It’s your property, David. Stick to your guns.
Thank you. The buyer agent boasts this is a long term investor of his. And the buyer agent has plenty of transactions in this price range.
So I simply asked the address of a previous deal with this client. To me, this is a 20 second effort on the buyer agent to qualify the buyer.The buyer is no longer interested. 🤷♂️ Oh well...
- Homeowner · Member since 2020 · 29 posts · 12 votes1y
Quote from @Lynn McGeein:
@David Cheng that agent doesn't sound like someone you'd want to work with anyway. That said, as a buyers agent, I've vetted my clients, and find it a bit insulting for listing agent to demand POF or pre-approval just to show. As a listing agent, I pre-arrange a specific weekly or biweekly time window with existing tenants and arrange all showings within that timeframe, with POF/pre-approval required with offers. If buyer won't accommodate time frame, making it difficult, then we may get picky unless buyers agent convinces me otherwise. I prefer to trust that buyer's agents don't want to waste time with unqualified buyers, especially with occupied homes. If buyer not represented, however, I make sure I have seen pre approval or POF before showing so I don't waste my own time.
Would you find it insulting if I asked for a previous address of a deal you've done with your buyer? The buyer agent says this is a long term investor with the buyers agent.
- Homeowner · Member since 2020 · 29 posts · 12 votes1yThis is exactly my read on the situation. Hardened by previous experiences of creative financing professional.
Quote from @Patrick Roberts:
It sounds like this might have been some sort of "creative financing" scenario where the buyer has $0 but is trying to cobble together 3 liens and 8 JV partners to buy something they cant afford. I wouldn't sweat it. If I was in your shoes, I wouldnt waste my time with an unqualified buyer. If they cant be bothered to provide basic proof that they can close before tying up your time, then they will be a nightmare to deal with once under contract.
This is literally what a pre-approval letter from a lender does - it shows that a lender has taken a solid look at the buyer and confirmed that there is a decent probability that they will get the loan needed to close. If they wanted to send a hard money pre-approval for half of the purchase, then either A) the lender needs to confirm that they verified the borrower possesses the remaining cash to close, or B) the borrower needs to show proof of funds for the remainder. I regularly call sellers on behalf of my buyer clients that I have preapproved and walk the seller through the rigor of my preapproval process to prevent this exact situation.
I even called the hard money lender to verify the letter - no dice. - Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes1y
@David Cheng simply tell them to write an offer subject to inspection.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeff S.:
You have nothing to prove to anyone, @David Cheng, and there's no need to apologize. It’s your property and you can sell it FIBO, with an agent, by any other legal means, or give it to the ASPCA. Asking for proof of funds is reasonable. A proof of funds letter without any credible evidence to support it is empty rhetoric and a waste of your time. So, who was the real jackass?
When we are asked for a proof of funds, I will write a letter, likely similar to the one you received, and I always include a redacted bank statement. Evidence like this is standard among all HMLs I know. Why else should anyone believe us?
Any agent who believes that providing a complete proof of funds letter, which they don’t even prepare, is jumping through hoops is simply lazy. If he or she were representing me, it would not be for long.
It’s your property, David. Stick to your guns.
some HML just send out the POF with out doing any look see into the borrower so I agree HML POF is suspect until proven other wise.. Jeff do you send the letter and then a copy of your bank statement.. Myself when I am doing our JV deals that we do I dont bother with the letter just the bank statement and that always works.. With all the wholesalers out there and now the No money down trained up by guru buyers its very reasonable to ask for POF that is real.
I asked for POF a few years ago from a buyer and a HML I had not heard of as the property was in GA. What they gave me was a copy of their client rehab draw trust account.. And it had 7 figures in it but that money is already spoken for.. :) - Realtor · St Augustine, FL · Member since 2023 · 111 posts · 87 votes1y
Hi @David Cheng,
For this pricepoint I agree with the other posters, I'd have an agent represent you. Cut through the people that can't afford it and get serious buyers only.
Asking for POF (lender pre-approval, bank statement, line of credit etc) for a property like you have is perfectly normal. If the buyers are working with an agent, the buyer's agent should already have that. If they are coming direct, it is probably because they see you are representing yourself and hoping for a deal. If it is hard money for half the amount then you need to see something that shows the rest. Don't waste your time with anyone who is pushing back on this. Showing occupied properties can be hard to coordinate and should only be for serious buyers. My 2 cents!
- Homeowner · Member since 2020 · 29 posts · 12 votes1y
Quote from @Mindy Nicol:
Hi @David Cheng,
For this pricepoint I agree with the other posters, I'd have an agent represent you. Cut through the people that can't afford it and get serious buyers only.
Asking for POF (lender pre-approval, bank statement, line of credit etc) for a property like you have is perfectly normal. If the buyers are working with an agent, the buyer's agent should already have that. If they are coming direct, it is probably because they see you are representing yourself and hoping for a deal. If it is hard money for half the amount then you need to see something that shows the rest. Don't waste your time with anyone who is pushing back on this. Showing occupied properties can be hard to coordinate and should only be for serious buyers. My 2 cents!
Thanks for the advice!
This is the family business. The owner is an agent. However, the owner was not available that day and asked me to help out. I didn't want to waste my time on some unqualified buyer as its happened many times before. - Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes1y
“Jeff do you send the letter and then a copy of your bank statement.”
We both know that most proof of funds letters are not worth the paper they’re printed on, @Jay Hinrichs. This is not because they aren’t legit; some are and some aren’t, but because they do not guarantee the deal will be funded. They should really be called “evidence of funds” letters since proof that the money exists only comes when the lender actually funds the loan.
We include a letter with the bank statement because I don’t want a borrower to believe the loan is somehow guaranteed. Though I write that we’ll provide $XXX toward the funding of our borrowers’ next deal, like most lenders, I qualify it by stating that this is not a loan commitment but is pending approval of the property, an acceptable preliminary title report, and some other weasel words.
Why any borrower or their agent would accept this is beyond me, but they do, and it seems to be what they want to keep the deal moving. Mostly, it shows we’re real, licensed, and hopefully presents a professional image. It also weeds out the idiots and non-serious participants, as @David Cheng discovered above.
- Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes1y
@David Cheng I don't blame you 1 bit. So many tire kickers out there. Stay strong with your process. IMO it's the right 1.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
I send an edited pdf of a bank statement. And put a disclaimer these funds will be moved to the LLC for acquisition. Has not failed me once, but rarely get asked.
If the funds exceed the transaction in talk, I don't withdraw or edit or any of that. Some real estate agents think because the funds show more they can play tougher, but I always let them know the funds in there are for specific deals with this one being priced where my bid is. Take it or leave it, don't get cute, and I put them on the clock then.
- Homeowner · Member since 2020 · 29 posts · 12 votes1y
Quote from @V.G Jason:
I send an edited pdf of a bank statement. And put a disclaimer these funds will be moved to the LLC for acquisition. Has not failed me once, but rarely get asked.
If the funds exceed the transaction in talk, I don't withdraw or edit or any of that. Some real estate agents think because the funds show more they can play tougher, but I always let them know the funds in there are for specific deals with this one being priced where my bid is. Take it or leave it, don't get cute, and I put them on the clock then.
I did the same thing with my last land deal as the buyer. I just redacted the account# and showed my investment accounts.
It's high effort and hard to forge if one doesn't have the funds. Takes about 30 seconds if one does have the funds.I wouldn't ask them to do anything that i haven't/wouldn't do myself. Which is why i felt it was a great screening tool.
Thanks everyone for reconfirming my beliefs. - Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes1y
Quote from @David Cheng:
Quote from @Kevin Sobilo:
Quote from @David Cheng:
$2MM is the listing price.
I've done this many times as a buyer. All it takes is a screenshot of my vanguard. I'm not asking for anything crazy detailed.
I think @Jay Hurst nailed it on the head. When you ask for "proof of funds" it sounds like you will only consider a cash offer NOT a financed offer.
You should be asking for any kind of pre-approval letter as well.
It sounds like you would benefit from hiring a real estate agent to represent you. This is exactly the sort of thing they would handle for you seamlessly. That agent should not have spoken to you that way, but my guess is that they were frustrated. Its harder dealing with FSBO (forsale by owner) properties. Dealing with other agents is much simpler.
With due respect, you're saying the Pre approval from a hard money lender is good enough as a POF?
would it change your mind if I tried to call the hard money lender and no one knows who the company is?@David Cheng, I didn't say that.
If you wish to double check every pre-approval letter that is your prerogative but you are choosing to do this work yourself. So, no reason to be bothered by the things that go along with it. If the letter was fake I would have denied showing them the property.
If it was fake, why didn't you mention telling their agent it was fake?
If you had a listing agent they could handle these things for you perhaps even WITHOUT getting all the documentation before the showing. Your hypothetical listing agent may well know the buyer's agent and the buyer's agent might tell them something like "I have sold several properties over the past few years to these buyer's they are solid." A referral like that carries more credibility than a pre-approval letter.
Also, keep in mind a buyer's agent wants to vet their own clients (buyers)! They don't want to waste their time showing people properties they cannot buy.
- 1yNick BelskyBusiness MemberResidential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
Plenty of good responses and insight here already. But...
As a broker, I will only issue a POF if I have personally reviewed the borrower's liquidity and can state with confidence that they have enough funds to close. On my POF, I also state this and that funds are verified. There is some gray area here from the seller's perspective as not all brokers operate at the same level as I do. I am very thorough and vet my clients before issuing such letters. Not trying to waste anyone's time, regardless of the party.
With that said, I have my contact information on the POF and sellers/agents are more than welcome to reach out to me to verify the the POF or simply chat about the deal, the process, or anything else. I will not, under any circumstances, send a copy of the borrower's financials documents to a seller/agent. That is not my place and is not conducive behavior for a fiduciary. If a deal is dependent upon such a thing, it would need to be sent from the borrower to the seller or their respective agents. To my surprise, I can count on two hands how many times a seller/agent has actually called/emailed me to verify the POF.
Often, one can obtain a letter from their bank stating the account holder's name, the date, current balance, etc... and that should be more than enough to meet anyone's requests. I would never provide a full bank statement to a seller... no way; that is too much.
Cheers!
Belsky Mortgage, LLC526 Reviews - 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
I think a LOT of difference between SFR and commercial properties in this regard. As for SFR a pre approval letter is of value because most institutional lenders will close the loan with the main qualification being the buyer himself, as long as the property appraises for a certain value.
Loans secured by commercial real estate are much more dependent on the property itself and all its characteristics, not just the appraised value. I’ve had pre approval letters submitted to me from legitimate institutional lenders for a property I was selling that was a type that lender didn’t even lend on. As a result I’m much more concerned with a borrower showing funds for at least a reasonable down payment.
A problem with a screen shot of say a buyer’s Vanguard account is that it’s so easy to use PDF tools which can alter the numbers and be virtually undetectable.
Here are the common responses (when asked for proof of funds) of buyers that have little - or no shot of closing the purchase of a commercial property
1. I am bringing in partners that have money
2. I’ll provide that once we have an executed contract
3. Here’s my personal financial statement
4. Provides “proof” of funds but the account is in some else’s name
5. Provides “proof” of funds but the account is a corporate retirement plan that the buyer can not access without quitting his job or paying huge taxes, penalties and fees
6. I am going to syndicate this deal
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