I have a client that wants to ask the lender for proof of funds. The clients wants ensure that the lender has the funds to lend before he sends any fee. I've been in commercial lending for a while but I'm pretty new to real estate lending. During my time in commercial lending, I've never had a client ask for a POF from a lender to prove that the lender has the funds to lend.

Is asking a lender for a POF common? Would a lender normally provide this?

Originally posted by @Anthony Johnson :

I have a client that wants to ask the lender for proof of funds. The clients wants ensure that the lender has the funds to lend before he sends any fee. I've been in commercial lending for a while but I'm pretty new to real estate lending. During my time in commercial lending, I've never had a client ask for a POF from a lender to prove that the lender has the funds to lend.

Is asking a lender for a POF common? Would a lender normally provide this?

 I do commercial loans and I’ve never heard of it either

@Anthony Johnson is your client working with a bank or mortgage broker? If yes then I would say that is strange.

Now if they are working with some type of private or hard money lender I would maybe understand the question a little more, but I would then wonder why your client is working with someone they aren't sure has the funds to begin with.  Somewhat strange all around.

@Shawn Krieger:
Originally posted by @Bob Woelfel :

@Anthony Johnson is your client working with a bank or mortgage broker? If yes then I would say that is strange.

Now if they are working with some type of private or hard money lender I would maybe understand the question a little more, but I would then wonder why your client is working with someone they aren't sure has the funds to begin with.  Somewhat strange all around.

To give a little more background, we have a private lender that we’re working with. The client has explained to me she has had a bad experience before with other real estate professionals, wherein she paid an upfront fee and received nothing in return.

Since we’ve began our discussions with the lender, the lender has given a reference and the client was able to ask the questions she wanted. Throughout our discussions, the lender has informed us that they do not use an escrow company. 

It’s not a small funding amount (several million). The origination fee is 3%, and of the 3%, 1% is due when commitment letter is issued. Before paying the 1%, the client wants to 1) funds will be placed in escrow until closing; or 2) lender produces proof of funds when the commitment letter comes in.

The lender has stated to the client that they do not use escrow companies so option (1) is out, leaving obtaining POF upon issuing the commitment letter. Throughout my time in commercial lending, I've done business with many companies and have worked for several lending firms. They do not use escrow companies, so I didn't see this as a big deal. I did a commercial mortgage worth several million, and no escrow services were used.

@Anthony Johnson this is a little above the field I typically play on, but it sounds like your client has had a bad experience before and this process is making them uneasy as well.  There's a decent chance everything could be fine, but just as good of a chance that your client pays the 1% and gets nothing again.  If this is standard operating procedure then you might feel fine with it, but if your clients gets nothing there's a chance they may come back to you and be upset.  Wish I could help more.

I have been doing commercial lending for some time and I have not heard of a client requiring POF. I have heard on several occasions of "private" lenders taking fees and then not executing. Sounds like your client has been through this before.

What type of transaction are you dealing with? 

Originally posted by @Dan Wallace :

I have been doing commercial lending for some time and I have not heard of a client requiring POF. I have heard on several occasions of "private" lenders taking fees and then not executing. Sounds like your client has been through this before.

What type of transaction are you dealing with? 

 Real estate/construction

Originally posted by @Anthony Johnson :

I have a client that wants to ask the lender for proof of funds. The clients wants ensure that the lender has the funds to lend before he sends any fee. I've been in commercial lending for a while but I'm pretty new to real estate lending. During my time in commercial lending, I've never had a client ask for a POF from a lender to prove that the lender has the funds to lend.

Is asking a lender for a POF common? Would a lender normally provide this?

 If the lender is asking for an upfront fee that's not a good.  I would move forward with a different lender.

Originally posted by @Shaun Weekes :

Originally posted by @Anthony Johnson:

I have a client that wants to ask the lender for proof of funds. The clients wants ensure that the lender has the funds to lend before he sends any fee. I've been in commercial lending for a while but I'm pretty new to real estate lending. During my time in commercial lending, I've never had a client ask for a POF from a lender to prove that the lender has the funds to lend.

Is asking a lender for a POF common? Would a lender normally provide this?

 If the lender is asking for an upfront fee that's not a good.  I would move forward with a different lender.

 Can’t do that if all of them are asking for an upfront fee. That’s pretty standard with these types of transactions.

@Anthony Johnson it’s not common. You can usually research lenders who are legit. Like COGO, Groundfloor and Visio. Not so much on individuals. I always recommend individuals who want to lend money do so with a platform or servicing company.

How is this person your client? Are you the realtor, advising counsel, equity partner, loan broker?

I would never turn over an upfront fee of $30,000 (1% of 3mil) to a lender I have never dealt with before and had no idea can even fund the loan. I would only place that with MY attorney with POF that this amount will be wired and applied at closing.

Frankly, I find it odd that any Real Estate developer involved in multi million dollar construction deals doesn't already have a good standing relationship with a preferred lender. Your client may be just as questionable as the lenders she previously sought.