Proof of funds question

19 Replies

Hi,

Is there a company that would provide proof of funds for a fee? We would like to include a proof of funds letter with our offers sent.

We want to make sure it's a legitimate company/bank and not a free generated proof of funds letter off the internet.

Any feedback would greatly be appreciated.

Thanks,

Jay

This post has been removed.

Are you trying to write cash offers? If so, proof of funds really means a bank statement with the same name as the name on the offer. If you're going to use hard money, write the offer as financed and include a pre-approval letter. If you're trying to wholesale, you probably want to do your own marketing.

Can you explain the structure of that sort of business arrangement to me? How would it all work for both parties involved?

And also: where do you picture the actual funds-to-purchase coming from? From the Proof Of Funds Letter furnisher or from some other source?

stephen

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posted by @Account Closed :
Hi,
Is there a company that would provide proof of funds for a fee? We would like to include a proof of funds letter with our offers sent.

We want to make sure it's a legitimate company/bank and not a free generated proof of funds letter off the internet.

Any feedback would greatly be appreciated.

Thanks,

Jay

The free stuff generated off the internet as far as I can tell are real companies.

They offer the free letters hoping that you will use them for transactional funding.

I know Jon hates them and says they don't work, but just about every property I have bought in the last 3+ years I have used these free internet things. Why? Because I have had many more issues with giving actual pre-approvals and bank statements then these things. Why? Because they say exactly what the want to see I guess.

I put in a lot of offers and don't want to bother my actual lenders for every one that I put in. Even when I do just use my own cash, which I have many times, I have had issues if some name doesn't match exactly or some BS like that.

It is different in different places but since you are in MA our standard offer forms don't ever say "cash" it is contingent on financing or not. Saying it isn't contingent on financing doesn't mean cash, you just kiss your deposit away if you don't close.

Say it is like waiving the inspection. If you put down a deposit and then find $30K of structural work you didn't pick up until your contractor looks at it. Well you aren't going to buy it but they keep your deposit.

The moral of the story (and something I think most will agree with me on) is that don't put in offers you don't KNOW you can close on. Whatever BS paperwork someone needs to stick in a folder to never be looked at again doesn't really matter as long as you perform.

If you want a legit proof of funds from a legit lender you need to cultivate a relationship with a legit lender and ask them for one.

If your proof of funds is some anonymous letter from the net or from someone who is not really your lender it is fraudulent to provide it. When you go to sell the property is that what you want buyers to show you? Junk off the internet?

This just seems a weird question. If you have the money or the lender, it is easy to show proof.

It sounds like you are asking how to get proof that you have something when you don't really have it. Think about the ethics of that.

Originally posted by @Account Closed :
Hi,
Is there a company that would provide proof of funds for a fee? We would like to include a proof of funds letter with our offers sent.

We want to make sure it's a legitimate company/bank and not a free generated proof of funds letter off the internet.

Any feedback would greatly be appreciated.

Thanks,

Jay

HI Jay,

I assume these aren't your funds because you'd just take a bank online activity snap shot right to show proof of funds with your pre-approval letter? Are you using private/hard money to buy as a cash purchase and need proof of funds?

@Eric Michaels like Shaun mentioned earlier in his post,
I don't want to be bothering the lender every single time for a letter from them. My thought is to write the offer as a cash offer with proof of funds attached and switch to financing with same closing terms.

I am a lender. If you are a customer, I have no problem giving you a POF. The whole don't want to bother him is bogus I think. He expects to provide them for his customers.

@Albert Bui You are correct. Doing business with a commercial loan lender.

Originally posted by @Account Closed :
@Albert Bui You are correct. Doing business with a commercial loan lender.

I assume the commercial lender will require a down payment right? How much are you putting down unless you are cross collateralizing other assets as "down payment," then in that case you may get a straight loan and no down payment needed. Please Advise.

It would be hard to get a proof of funds from a commercial letter for that beyond the pre-approval/letter of intent since banks operate on fractional reserve lending and that money is being printed out of thin air or they probably operate from a line of credit or warehouse line of credit.

Originally posted by @Eric Michaels :
I am a lender. If you are a customer, I have no problem giving you a POF. The whole don't want to bother him is bogus I think. He expects to provide them for his customers.

While I agree that if someone is a real customer a lender is going help you get what you need to get the deal.

Though at the same time for example I averaged over 3.5 offers per DAY in 2012, and put more in on Sundays than on any other day. Now I did buy a lot of places, but less than 1% of my offers ended up as a purchase. At what point would it have been annoying even if you were getting a handful of loans? What if you did like 300 before you actually got a loan, would you have felt I was a real customer?

Originally posted by @Jochy Perez:
@Albert Bui You are correct. Doing business with a commercial loan lender.

If you are using an institutional lender then why can't you get a generic pre-approval from them? Something saying you and your company are pre approved to buy (whatever type of properties) in the range of (Whatever range you are actually approved to buy in).

If you want to get a bank loan on a non-financed offer you will run into many more issues since they take a long time and they will need to do a lot of stuff. I was working on the assumption you had private lenders that would be funding you.

Rich guys that want a high yield passive investment don't want you calling them every couple of days to get paperwork on offers that don't pan out. Well banks, that IS their job.

Well, I can email 3.5 attachments a day without too much sweat. Or you can photocopy my bank statement 3.5 times a day too. Not that hard. When you are my customer, I give a blanket approval and a copy of this months bank statement. Done for the month.

If you made 300 offers before doing a loan you are not my customer yet. As for the catch 22 of trying to do your first deal before you get a POF from me. That is an issue for newbies. No one said it was easy. But no, I am not going to give you 300 POF's before you do one deal with me.

What I was trying to point out is the contradiction that many here seem to ignore when they say they want legit POF without actually having a lender or the cash.

Bottom line is...want a legit POF? Get a legit lender.

Originally posted by @Account Closed :
Albert Bui 25% down on my end.

The lender should offer a pre-approval letter no problem I would question your lending sourcing if they cannot provide this or if they provide a standard boiler plate Pre-approval letter. Usually proof of funds refers to your down payment fund and closing costs, will a snap shot of your bank statement not work?

@Eric Michaels I actually don't think we disagree for the most part.

One needs to have a legit lender.

I guess where I differ is I don't really care what piece of paper I give someone since I am legit and my lenders are legit and I am going to close.

By the time I talk to my lenders I usually have an accepted offer, have my earnest money on the line, done my own due diligence, have had my attorney run preliminary title and have a hard quote from my contractor.

I know Jon hates them and says they don't work, but just about every property I have bought in the last 3+ years I have used these free internet things. Why? Because I have had many more issues with giving actual pre-approvals and bank statements then these things. Why? Because they say exactly what the want to see I guess.

To be clear, I don't hate these letters. And I don't use them so I have no direct experience. Others have posted that they've tried to use them and been rejected. I think those are mostly wholesalers.

I do think its risky to make a all cash offer if you don't have cash. You have no contingency if you financing does fall through, so you risk losing your EM.

Originally posted by @Jon Holdman Holdman oldman:
I know Jon hates them and says they don't work, but just about every property I have bought in the last 3+ years I have used these free internet things. Why? Because I have had many more issues with giving actual pre-approvals and bank statements then these things. Why? Because they say exactly what the want to see I guess.

To be clear, I don't hate these letters. And I don't use them so I have no direct experience. Others have posted that they've tried to use them and been rejected. I think those are mostly wholesalers.

I do think its risky to make a all cash offer if you don't have cash. You have no contingency if you financing does fall through, so you risk losing your EM.

I apologize @Jon Holdman, I did not mean to put words in your mouth. I only meant that I have read many times in the past that you have given similar warnings about the possible drawbacks to using these types of letters as you do in the quoted passage.

My direct experience has been that I have used these on many properties I have bought. I also have never been told an offer was rejected because they didn't think my proof of funds letter was real. Ironically I started using these because I was giving REAL proof of funds and they would not accept them. Like I gave a proof of funds from a local institutional HML but it was a 6 month letter that was set to expire 3 days before the scheduled closing (I was not using the lender so I was not going to ask for an updated one), I then showed that I actually had the liquid funds in the bank. However I didn't have enough in any one account so I showed them 2. They did not like that one was in the name of the LLC making the purchase and one was under my own name. Finally I gave them a pre-approval letter I had from a legit bank that was for more than the purchase price. The first level drone rejected it because it had both mine and my wife's names on it, that person was okay with it once I pointed out she was also a member of the LLC. Boss drone said it didn't work since it was in our names and not the LLC.

I then did a Google search for free POF letters found one, put in that my LLC was approved for the exact amount offered to purchase that particular property and sent them the PDF and they rubber stamped everything else.

I have not wasted time with "real" verification since.

Proof-of-funds is not a commitment from a lender anymore than it is your commitment to borrow from them. As mentioned, you don't pay for these and as easy as they are to get, it's hard for me to believe anyone believes them.

If your first goal is to get your offer accepted, then any POF that your seller will accept will work. Hopefully, you've got legitimate, reliable, financing arranged from either your POF provider or someone else. If not, you're going to piss a lot of people off, waste a lot of time, and potentially cost your earnest money or worse, your reputation.

We do exactly what Shaun and Eric described and provide a generic letter saying the borrower is approved for $XXX in funding toward real estate, and we include a recent bank statement. This letter could be handed out 1000 times a month for all I care. It specifically says that it is not a commitment to fund, which makes a POF all but worthless as far as I'm concerned. Sellers want to see them for reasons I've never understood and many won't do a deal with out a POF.

Every once in a while a seller's agent will call to see if we are legit. Really, all this proves is that the phone number he or she called is working. One benefit to using someone you know is when a seller's agent calls and mentions your name, your POF provider doesn't say, "Who?"

To be only slightly less cynical, this is an opportunity to sell ourselves on behalf of our borrower by talking them up a bit and getting the seller to say yes to them. You can't get this from an anonymous POF you found on the Web.

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