Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
Is anyone having to show prof of funds for every offer u submit? How is your agent making you propose a bid? Are agent wants us to show prof of funds for every bid . It's this common ?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
This is really simple. If you're writing your offers as "cash", you better actually be able to show you have the cash. If you don't have cash, don't write cash offers. Write them as financed and provide a pre-approval letter from your lender.
If you're a wholesaler and don't have either cash or a real pre-approval letter (i.e., one where a lender has actually approved you for a loan, not something you printed off the internet), don't make offers on listed properties. Get out there and do you own marketing and digging and find sellers. Agents know your offers aren't real offers. That is, you have no intention of buying the property. You're effectively just another agent. You want to play in that space then just get your license, find buyers and work inside the system to help your buyers find properties.
Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
13y
Jason Patterson,
Tips for Dealing with Real Estate Agents
Asking for proof of funds at the time an offer is made is either a rookie move or a reaction to the flood of unqualified people posing as real estate investors.
“The research firm RealtyTrac recently issued its mid-year flipping report, which shows that investors flipped more than 136,000 single-family homes during the first half of 2013. That’s 19% higher than the pace last year and 74% percent higher than in 2011.”
If the request for proof of funds is originating from a real estate agent, it may also be a violation of state real estate laws governing real estate agents. In many states, real estate agents are required to present the seller with all offers. It is not a legal requirement to present proof of funds or even earnest money.
Whether it is legal or not, most successful investors will drop the offer instantly and move on. Most successful investors will never prove their worth or ability to strangers or to people outside the finance world. Privacy is of most important to highly successful people.
If I may offer an uninformed observation, have you given the impression you are not financially capable of doing what you say you can do? Does the way you present yourself damage your image?
In the case of an all cash offer, put a quick trigger on the offer (quick close). At the same time, most states require the listing real estate agent to continue to market the property and present all offers until the property closes (backup offers).
When considering the entire picture, there is a huge flood of people posing as real estate investors, flippers, wholesalers, or whatever title in the present real estate market, many have very limited funds or capability to qualify for a loan.
Many “fast money” real estate investors (or whatever title) have no ability to purchase a property. While books suggest many ways of tying up properties with little or no money, it is causing a reaction from real estate agents, lenders, sellers, and the ones of us who make the real estate business a career and not a get rich quick scheme. Yes, harsh words, but worth consideration when addressing challenges and new rules of the business.
Wholesaler · Brooklandville, MD · Member since 2013 · 149 posts · 29 votes
13y
How would wholesalers get around this? Would we get in contact with the buyer we have in mind and ask them? I guess the line of "i'll get my acquistion officer"
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Tom, I enjoy you posts, obviously from am experienced background. But I don't think most state laws require continued marketing while a property is under contract. I think lala land California has something regulating short sales. We have local realtor boards trying to regulate this somewhat, but I know of no state laws.
As for POF's with offers, yes I am required to present all offers, but I convince my sellers not to consider one with no POF/solid pre-approval. Banks in either SS or REO situations won't even look at them anyway. And yes, this is partly from all the wannabe flippers, and "POF's" I get from some supposed online source.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
This is really simple. If you're writing your offers as "cash", you better actually be able to show you have the cash. If you don't have cash, don't write cash offers. Write them as financed and provide a pre-approval letter from your lender.
If you're a wholesaler and don't have either cash or a real pre-approval letter (i.e., one where a lender has actually approved you for a loan, not something you printed off the internet), don't make offers on listed properties. Get out there and do you own marketing and digging and find sellers. Agents know your offers aren't real offers. That is, you have no intention of buying the property. You're effectively just another agent. You want to play in that space then just get your license, find buyers and work inside the system to help your buyers find properties.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Tom Goans:
Whether it is legal or not, most successful investors will drop the offer instantly and move on.
Somehow, I'm pretty sure you don't speak for "most successful investors." If you put a cash offer on an REO, HUD property and most short sales without POF, the seller will typical ignore the offer. Do you think "most successful investors" don't offer on REO, HUD or short sale properties?
I sell a lot of properties to "successful" investors -- hedge funds and large institutional investors who are buying dozens of properties per week/month around the country. They always submit proof of funds -- often with bank balances in the 7- or 8-figures -- without us even having to ask (which we would, if they didn't submit it). They clearly disagree you, and I would guess "most successful investors" disagree with you.
When considering the entire picture, there is a huge flood of people posing as real estate investors, flippers, wholesalers, or whatever title in the present real estate market, many have very limited funds or capability to qualify for a loan.
So, you'll make the statement that there are lots of people who pretend to have money but don't, and then say it's unreasonable for a seller to ask for POF? I'm guessing you don't sell many properties to cash buyers...if you did, you'd likely have a different perspective.
To the OP, I would suggest re-reading what Jon Holdman writes above...
Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes
13y
I agree with Jon Holdman's comment 110%!
"Get out there and do you own marketing and digging and find sellers. Agents know your offers aren't real offers. That is, you have no intention of buying the property. You're effectively just another agent."
Real Estate Investor · Deer Park, TX · Member since 2013 · 30 posts · 4 votes
13y
Tom Goans and Jon Holdman thank you for your candid remarks. Jason Patterson is my business partner and some of all you say is accurate. I believe a) we are trying to learn the ropes of what is commonly accepted practice, and b) the realtor we are working with is fairly new working with investors and wants to be sure her bases are covered. We want to be sure the right people are in place on our team. If the requests they are making this early in the game are not commonplace, we want to make the right moves early on to ensure our success in the long run.
Tom, your experience definitely shines through in your response. We are definitely looking to make real estate a career as well, not a "get rich scheme" as you stated. We are new though and just in the beginning stages of our career and do need to build some additional capital to move on from "fix and flip" or "assignment" deals to "buy and hold" properties etc.
Jon, we do have legitimate cash funds to purchase the properties we make offers on, with legitimate proof of funds letters (not a blanket letter that I can print from the internet). I simply wondered if it was necessary to have to "prove" this each and every time we make an offer, since the number of offers will be high. My thought is: are there less cumbersome ways to accomplish the task of making offers?
Real Estate Investor · Deer Park, TX · Member since 2013 · 30 posts · 4 votes
13y
Dev Horn and Jon Holdman ~ please let it be noted that this is just a question of when dealing with our realtor. We certainly take to heart our own marketing, finding our own sellers. We do not solely use our realtor/the MLS for finding deals.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Jennifer Gibbs:
Jon, we do have legitimate cash funds to purchase the properties we make offers on, with legitimate proof of funds letters (not a blanket letter that I can print from the internet). I simply wondered if it was necessary to have to "prove" this each and every time we make an offer, since the number of offers will be high. My thought is: are there less cumbersome ways to accomplish the task of making offers?
Do you *need* to prove it? Nope. But, you'll likely find that MANY/MOST/ALL of your offers are ignored or not taken seriously if you won't provide POF.
As for dealing with it being cumbersome, it shouldn't be. I simply take a screenshot of my online bank account balance and include that with my offers. I take a new screenshot once per month (so the POF is always within the last 30 days) and create a PDF of the page.
It takes about 3 minutes per month to create the new PDF page and takes about 3 seconds per offer to attach the extra page. Shouldn't add more than 10 minutes per year to your offer process (though HUD will likely require a letter from your bank when you get HUD offers accepted, so that will take some extra time if you do HUD deals).
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Jennifer Gibbs from what you write it sounds like you're wholesaling. Do keep in mind you're going to have a hard time assigning deals you find on the MLS. Good deals off the MLS are often REOs and those almost never allow assignments. In addition, if a wholesaler send me a deal, I look for it on the MLS. All too often what I find is a deal right off the MLS that's been marked up by the wholesaler from the listing price. Why would I buy such a deal from a wholesaler when I could have just bought it off the MLS at a lower price?
"Proof of fund" simply means a bank statement for an account that has the same name as the name on the offer. Assuming that's what you have, include it with your offer. Make the earnest money large, i.e., 10% of the offer amount. I wouldn't include the actual earnest money with the offer, but say "EM to be provided by certified funds within 48 hours of mutual execution of contract" or something similar. That's what it really takes to make cash offers that will be taken seriously.
Real Estate Investor · Deer Park, TX · Member since 2013 · 30 posts · 4 votes
13y
Thank you. J Scott I like your once a month statement option.
Jon Holdman thanks for the advice: "I wouldn't include the actual earnest money with the offer, but say "EM to be provided by certified funds within 48 hours of mutual execution of contract"." This was something that was heartily discussed w/our realtor. I am certain she is looking out for our best interest but she wanted EM included w/the offers to begin with. Took a bit to convince her that is not going to be a good strategy for me. Will ask her to write in that statement instead of leaving blank, as she has been doing.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Jennifer, depends on your state forms. Ours actually have for EM deposits....$ upon acceptance, additional $ upon end of inspection period, etc. "Typical" is a copy of EM check with offer, then deposited with title co. upon acceptance.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Usually on the offer you can include a copy of a personal or company check. Most offers aren't going to be accepted, so if you want to actually buy, you need to make lots of offers. What you want to avoid is actually laying out a bunch of certified funds, which actually come out of your account. I've been burned providing certified money too early in the process. That was a short sale that was rejected and the bank foreclosed. Needless to say, the former owners weren't anxious to sign the form to release my EM back to me.
Real Estate Investor · Deer Park, TX · Member since 2013 · 30 posts · 4 votes
13y
Wayne Brooks, our state form only gives option to acknowledge that the EM contract and EM funds are received and indicate the $$ amount. No section for notes write in, etc. I suppose realtor could write in $$ amount and then Jon's comment in the ____ section after (in the form of). I don't see why this would not work.
Real Estate Investor · Deer Park, TX · Member since 2013 · 30 posts · 4 votes
13y
Jon Holdman ~ that is EXACTLY what I am trying to avoid. I'm happy to provide a copy of our business check to show that we mean business but do not want to have to actually write these checks each time. I think we got that part settled with our realtor. Now it is just the part of leaving that section of the EM contract blank. Don't want our offers to be considered invalid because it doesn't show anything! We have tried to include contingency clauses that would ensure our EM would be returned if the deal was not successfully closed, but ... Since we are rather green it's just a matter of going through the motions I suppose and figuring out what is acceptable until we get our real "system" down pat...
Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes
13y
Great topic, Jason Patterson! This is one of those critical elements that many investors don't understand. Excellent input from Jon & J Scott (and Jennifer). Very informative thread...
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Jon, I understand that. But, our contracts specifically state if the foreclosure auction occurs, this contract is void and EM shall be automatically returned. This allows title co. to release without seller signature. This could be added to any SS contract. I wouldn't let a seller, in foreclosure, tie up his property for 90 days if the buyer had no EM in the game.
Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
13y
Jennifer Gibbs,
The research firm RealtyTrac recently issued its mid-year flipping report, which shows that investors flipped more than 136,000 single-family homes during the first half of 2013. That is 19% higher than the pace last year and 74% percent higher than in 2011.
Flippers—defined as people who buy a home and then sell it within six months—have made an average gross profit of $18,391 on their investments so far this year, compared with just $5,321 during the first half of 2012. During the same period in 2011, flippers lost an average of $13,206.
Flippers make housing experts uneasy because they are speculators who can distort normal supply and demand dynamics. They contributed to the housing bubble from 2004 to 2006 by helping generate a frenzy of demand in some areas, one reason prices rose well above fundamental levels. Many flippers lost a bundle when the housing market crashed.
Jennifer, I welcome you to what is my passion, called the real estate business. The business can offer far more than monetary rewards. You will have the opportunity to affect other’s lives in very positive ways. You can be a problem solver. A hero. The opportunities are endless. The only limitation is you.
Real Estate Investor · Deer Park, TX · Member since 2013 · 30 posts · 4 votes
13y
Originally posted by Tom Goans:
Jennifer, I welcome you to what is my passion, called the real estate business. The business can offer far more than monetary rewards. You will have the opportunity to affect other’s lives in very positive ways. You can be a problem solver. A hero. The opportunities are endless. The only limitation is you.
I wish you a long, happy, and successful career.
Thank you again for your input. I agree that flippers can negatively impact the market in one light. My short term goal is to fix and flip properties at this time. I want to help stimulate communities which have been neglected and which would benefit from having distressed houses purchased by someone like myself, fixed up, and sold to a new beginning family for an affordable price. The communities I invest in as a whole will see improved curb appeal, and gradually improved market values.
Like you, I want more than money from the real estate business. I want to see overall improved communities, I want to help my friends and neighbors, and be able to give more than I already do. If I can do this, I'll be satisfied.
Continued success to you as well. I am determined to look back and be able to join the ranks of successful investors such as yourself and the others who've contributed to this conversation.
Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
13y
Originally posted by Dev Horn:
Great topic, Jason Patterson! This is one of those critical elements that many investors don't understand. Excellent input from Jon & J Scott (and Jennifer). Very informative thread...
Yes we are still learning. We understand how Real State works and its concepts. We ARE invested in real estate to the max. We do use other methods of finding motivated sellers and have had good luck finding some, but to be disappointed after we ran number and what there bottom dollar asking price was. And to what Jon said, anyone can look at a MLS and submit a bid. There are tons of people looking at it. Funny thing is you do see a lot of wholesalers that list there properties on there and they are marked way u to a point where there is nothing left not even a nibble!. I mean some of them need 20 to 30 k in repair and would be OVER market value after rehab.
I have seen of newbies or how the pros say it " WannaBes" make mistakes. Yes we are newbies, but not "wannaBes" and we are trying not to make any mistakes.
Thanks for all the input. :-)
Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes
13y
"Opportunities multiply as they are seized." ~ John Wicker
Everyone started out as a "newbie". The great thing about BP is we all have access to people here that are knowledgeable and want to help. I hope you feel that in your interaction with all of us here. We all want you to SUCCEED!