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
- Real Estate Agent · Saint Joseph, MI · Member since 2015 · 73 posts · 22 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.
I think thats a great idea for the weekly schedule blocks for showings on occupied properties! I have not heard of that before but ill be using it! Great idea!
@David Cheng, I get your position on requiring proof of liquidity for a high-value property like your $2 million fourplex. It makes sense to have standards, especially when you’re working with tenant-occupied properties and need to minimize unnecessary showings. A straightforward response like, 'Thanks for your interest, but we’ll need confirmation that the buyer can cover the full (or close to full) listing amount,' seems fair. This way, it saves time for everyone and keeps expectations clear.
That said, I understand the frustration others are expressing, especially around proof-of-funds requirements for more conventionally priced properties—those under $750K, for instance. I recently looked at a property in the $260K range that didn’t require proof of funds for a showing, though it would’ve needed one for an offer since it had to be a cash purchase. For properties like these, the condition and price often don’t warrant upfront financial vetting, and too many barriers can add friction to the process.
When it comes to lead times, I agree they’re essential for occupied homes—if tenants are involved, a 12-24 hour heads-up allows everyone to prepare. But for vacant properties, I think a 'show and go' policy would be ideal: the buyer’s agent can confirm directly with the listing agent, and then they’re free to view the property without delay. It keeps things flexible and accessible, which can make a big difference for everyone’s schedules.
At the end of the day, I don’t think your approach is unreasonable at all, David, especially for higher-value properties. And for conventionally priced listings, a bit more flexibility on showings could make it a smoother process. Just my thoughts—appreciate everyone’s insights on this topic!
- 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
I appreciate your comments, from a broker/agent perspective are well thought out. I’d like to expand the “reach” of the topic a little with my below comment
“For properties like these, the condition and price often don’t warrant upfront financial vetting, and too many barriers can add friction to the process.‘
The real estate brokerage industry in the United States is all about making the process of transacting real estate “frictionless”. However, in their attempt to make it as easy as possible for a buyer to make the purchase decision, they’ve created a convention whereby the buyer has what amounts to a “free look” or option with virtually no obligation or real commitment. Almost all contracts have a due diligence period, are subject to financing, subject to inspection report, and anything else the buyer or his attorney can throw in. So instead of a real contract to purchase, you have an option for purchase.
In most other countries, the entire down payment, or a significant part of it, is required at the time a purchase contract is submitted. Further, there is usually no contingencies, due diligence, inspections, and arranging financing gets done BEFORE the property is tied up. Thereby the seller doesn’t end up taking the property off the market for t0 days, and gets “compensated” $100 when the borrower exercises his option to withdraw from the deal.
Not saying which transactional methodology is BETTER, just pointing out the difference. Of course a seller is free to require whatever conditions he desires… but the reality is that in anything but the rare ultra hot seller’s market requiring “stiffer” qualifications to make an offer will result in a lower price.
- 1yEarl WhitePro MemberAttorney · Rutherford, NJ · Member since 2020 · 60 posts · 37 votes
Many great responses I won't reiterate.
Of course it's reasonable to ask for proof of funds for the down-payment. Particularly in a multiple offer situation, buyer should be happy to prove they can complete the sale. As mentioned though, it is just a random PDF that could be doctored. If you really need to resolve this issue: (1) get on the phone with their lender to understand the situation; (2) cash deal - you could get something on letterhead from bank and call to confirm, or get an attorney representation for the same.
In my opinion, this issue can to some degree resolved by contract terms. If a buyer is coming down with a high-down payment and quickly making a large deposit into escrow fighting tooth and nail about proof of funds may be a red herring.
Credibility is also a factor here. If the buyer has proof of completing multiple projects and their real estate agent has a documented business history they are probably not wasting their time playing a game about a POF as failing to perform is just a waste of everyone's time (may have legal fees incurred as well).
If it's an unknown newly formed LLC, an offer with minimal cash to escrow, with a shady attorney and realtor, I'd then be taking a hard look at proof of funds.
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes1y
Requiring proof of funds for an occupied quad is completely reasonable, and it sounds like it worked as intended. I usually list MF buildings with a unit vacant for showings if possible, or if occupied then host showing windows as needed (line up all potential buyers to see the property during an hour or two window, listing agent present). It's best to limit the number of individual showings in order to minimize impact on tenants. It's also not uncommon for an offer to be required in order to see occupied units. $2.5-3M is about where agents starting requiring POF/Prequal for showings in my market (single family homes, for tenant-occupied MF it can be any price point).
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Earl White:
Many great responses I won't reiterate.
Of course it's reasonable to ask for proof of funds for the down-payment. Particularly in a multiple offer situation, buyer should be happy to prove they can complete the sale. As mentioned though, it is just a random PDF that could be doctored. If you really need to resolve this issue: (1) get on the phone with their lender to understand the situation; (2) cash deal - you could get something on letterhead from bank and call to confirm, or get an attorney representation for the same.
In my opinion, this issue can to some degree resolved by contract terms. If a buyer is coming down with a high-down payment and quickly making a large deposit into escrow fighting tooth and nail about proof of funds may be a red herring.
Credibility is also a factor here. If the buyer has proof of completing multiple projects and their real estate agent has a documented business history they are probably not wasting their time playing a game about a POF as failing to perform is just a waste of everyone's time (may have legal fees incurred as well).
If it's an unknown newly formed LLC, an offer with minimal cash to escrow, with a shady attorney and realtor, I'd then be taking a hard look at proof of funds.
I'd be a little more hesitant on the second to last point. Their track record, at least to me, doesn't make it any more or less credible. Bottom line is do you have the funds under your name with immediate access, in a legal form. A successful reputation assumes trust, and I think trust is too fragile to extend. That's not to say do not enter transactions, just don't adjust your requirements for acceptance. Keep it trim.
- Real Estate Agent · Saint Joseph, MI · Member since 2015 · 73 posts · 22 votes1y
I actually laughed out loud at your comment about the seller being 'compensated' $100 when a buyer exercises their option to withdraw—it's such a painfully accurate observation. When a deal falls through, especially for reasons beyond the seller's control, it can really impact the MLS record and even stigmatize the listing. Personally, if I see a property that went back on the market after being under contract, my first assumption is, 'What did the buyer find wrong with it?' I don't immediately think it was due to a medical issue or some unexpected personal circumstance, even though I have been there; it's usually more along the lines of, 'They must've found something unsatisfactory with the property.'
In fact, I've seen this happen frequently, where properties are marketed as eligible for specific financing options, like VA loans, only for buyers to realize later that the home doesn't actually meet those requirements. Buyers might see 'VA eligible' and think it's ready for their financing, but then during inspection, they discover it needs more work than they expected. This only adds to the frustration, as it affects buyer confidence and raises doubts about the property's condition and eligibility.
I also didn’t realize that, in other countries, buyers are often required to put down a significant portion of the payment upfront before even getting under contract. That approach seems like it would reduce the chance of deals falling through, and I can understand why it would be standard practice. If everyone was following that same rule, I’d gladly do my due diligence ahead of time. In fact, I think it would be beneficial for everyone involved and could really reduce the stigma on sellers who end up with a failed transaction through no fault of their own.
But in a hot market like the one we’re in now, where homes are practically flying off the shelf, it can feel like a waste of money to do all the inspections and checks up front, especially if someone else might snap up the property before you’ve even finished your due diligence. There’s also the added pressure of not wanting to lose out on a property, which makes it harder to justify putting up serious money before going under contract.
On the other hand, if such a system were standard, it might push sellers to be more transparent from the start, so buyers know exactly what they’re walking into. I remember a presenter in a real estate class recently saying, 'Buyers are liars, and sellers are even worse,' which got a good laugh from everyone because it rings pretty true in this business. Transparency could go a long way in creating a smoother process and ensuring fewer surprises down the road.
Thanks for bringing up this perspective, Don—it's definitely made me think about how different market standards could impact the way we handle transactions here. This kind of system could really shift the dynamics and possibly make the process fairer for both buyers and sellers."
- 12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes1y
a preapproval letter or if a cash deal proof of assets
- Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes1y
Lol someone says they're not interested in jumping through hoops means they're not serious or their buyer is all smoke no fire.
Don't let it get to you, just tire kickers trying to get a quick and easy one in.
- 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
I think the Agent is making a big deal out of nothing. It costs 0 effort to provide a bank statement or screenshot of proof of downpayment.
What would definitely solidify the offer is getting the hard money lender on the line to verify that this property has been thoroughly underwritten. Like you said, It's very easy to get a Pre-Approval from a HML, however, many will get cold feet if the deal is not good.
If it's your only offer on the table, then maybe you may want to consider listing your property to obtain more qualified offers. An agent with a lending background is definitely helpful to prevent you from wasting time.
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