This journey is never boring. Once you've figured out an immediate problem, you get a little further on and discover another one you didn't anticipate.
This is one of those times :)
So we've got some cash, and some HELOC money, though more HELOC than straight cash at the moment.
I have read around the forums that a 'buffer' value beyond the asking price is what sellers really want to see in SOME account.
For the ATL market, especially things near downtown in developing areas, as a cash sale, should I have asking price plus some percentage beyond that to demonstrate proof of funds?
For proof of funds, is it basically a checking account balance? I'm asking because it would, of course, be cheaper to keep that HELOC money IN the HELOC until we are sure we're going to make a (likely all cash) purchase. Likely we'll be doing some flipping or BRRR so keeping in the HELOC until the day it's needed keeps the holding costs of the money down.
Here's an example:
If I wanted to buy a dollhouse that costs $0.50, and I have $0.40 in a cash account, several dollars in a 401k, and a few dollars in a HELOC, could I show the HELOC or 401 as proof of funds? Should I show $0.50 available? Or would $0.75 look better? $1.00?
@Steve French Interesting question. I can see the rational for showing a buffer, but also can see the other side, where the seller sees the potential to get more out of you.
Who are you showing proof of funds to? Your agent or the sellers agent? If it were the seller's agent I'd show them proof of the HELOC and keep the cash to myself. I know guys who always show the same IRA account a PoF even though they have tons of cash in a money market. At the end of the day all that matters is that you have the money and not where it comes from.
Negotiations are a partial information game and you need to be aware of what info you give out and how the other side could gain from it.
@Bill F. yeah, initially we naively put the just purchase price (minus earnest money) in an account specifically for that purpose, thinking 'cash offer' means 'hard, unencumbered, cash.'
Our (buyer's) agent asked for no such thing, this is the seller request for proof of funds for a cash purchase.
I'll see if HELOC balance is possible, seems like there should be no issue around that, and then pull the money when we are actually going to buy a property.
Yeah, we didn't want to show our hand at all but it sounded like the last seller didn't like seeing just the sales amount, but my wife/partner didn't want to show a big chunk of our warchest either.
I always believe in showing it all. I had investors who show $1M plus for $100 k purchases......never bought into the the “they have money so we can ask for more”, just silly.
@Wayne Brooks that's how I feel about it. I'm paying cash, I don't feel like I'm losing too much by showing an overwhelming ability to financially close the deal. At the end of the day, I want the seller to say 'yes' but it's up to us to decide where the value exceeds our own 'yes' threshold.
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