REO Agent won't accept my private money POF

Wholesaling
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REO Agent won't accept my private money POF

Michael Lerch
Investor · Grand Rapids, MI · Member since 2012 · 224 posts · 40 votes

I'm a wholesaler and I've wanted to start making offers on the MLS. My friend is my buyer agent. I have a private money lender in the mix to use as transactional funding so I can close the deal.

First offer on an REO I make and the agent won't accept a POF from a private lender. Says it has to be my cash or conventional loan from a lending institution. My agent did some digging and said if I can come up with the terms of the loan from the private lender (% down, interest rate, how many months) that they would finally look at my offer. This sucks since my private lender is willing to fund the transaction, but only for a day or 2 until I close with my cash buyer.

How are other wholesalers making offers on REOs these days? Do I just get my private lender to make up terms on the POF for the sake of getting things done? ... Oh... I may have answered my own question. I guess it doesn't really matter what terms are set if I close the next day anyway. :)

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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y

Michael:  Long time no see.  Welcome back.

The agent has probably had plenty of offers with POFs from hmls fall through. After all, you're not going to close on it unless you find a buyer, right? REO agents are on to wholesalers with vague POFs from hmls. It's a dead give-away that you're planning to wholesale. :) If I were an REO agent, I would probably reject offers with open ended hml POFs too.

What the agent is asking for is a loan commitment, something specific that shows your lender is actually planning and willing to fund this particular deal.  Is your lender willing to provide such a commitment?  I suspect not, since they are really just a transactional lender.

You may just want to move on to listings  with a different agent. What amount of funds are we talking about here? 

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    12y

    I have never heard of a REO agent that does not accept a POF from a hard money lender.

    This is strange to me. I have submitted probably 3 dozen offers on REO properties this year alone and never once has an agent even brought this up.

    I am interested to hear if others have the same experience as you @Michael Lerch

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y

    Michael:  Long time no see.  Welcome back.

    The agent has probably had plenty of offers with POFs from hmls fall through. After all, you're not going to close on it unless you find a buyer, right? REO agents are on to wholesalers with vague POFs from hmls. It's a dead give-away that you're planning to wholesale. :) If I were an REO agent, I would probably reject offers with open ended hml POFs too.

    What the agent is asking for is a loan commitment, something specific that shows your lender is actually planning and willing to fund this particular deal.  Is your lender willing to provide such a commitment?  I suspect not, since they are really just a transactional lender.

    You may just want to move on to listings  with a different agent. What amount of funds are we talking about here? 

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    To be clear, a POF is Cash, in Your(buyer's) name, in a bank account. Anything from a lender, is a "preapproval", and would need to spell out such terms. And of course, a preapproval from a "private" lender doesn't mean much. As @Account Closed mentioned, a "POF" from a private lender is a sure sign of someone trying to wholesale, and informed buyers aren't going to bite.

    1Reply
  • Michael Lerch
    OP
    Investor · Grand Rapids, MI · Member since 2012 · 224 posts · 40 votes
    12y

    Ah Thanks @Wayne Brooks and @K. Marie Poe. I figured it had to be something like that. 

    My private lender may or may not be on board with it. I figure if we set terms like a normal loan (talking 20k-40k offers here) and it won't matter in the end because I'm still doing a double close. I'm legitimately closing the first deal between me and the Bank with terms set in the POF/preapproval. Then closing with cash buyer same day so it doesn't matter what terms I put. If I don't close because I don't find a buyer that would be sad, but hey it's my EMD on the line so that's the risk I take. The offers I'm making are fairly low so if and when they get accepted I don't think I'll have any problem moving them with my cash buyers I know.

    also thanks for the welcome back K! I've been reading, but not commenting/starting new threads so much. I should really get back to doing that :)

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  • Michael Lerch
    OP
    Investor · Grand Rapids, MI · Member since 2012 · 224 posts · 40 votes
    12y

    also I thought it would be different having a local private lender vs. Joe Shmoes HML guru POF spammer lol but I guess it's all the same to them.

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  • Eric M.
    Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
    12y

    THANK YOU @wayne 

    @Wayne Brooks !!!!

    A Pre-approval letter is not at all equivalent to a Proof of Funds.  Pre-approval letters aren't worth the paper they are printed on.

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    I am an REO agent and I agree with the previous posters. You don't really have proof of funds. You have a letter from someone saying they will give you some money. Anyone could create this and it means nothing.

    In some cases I can get a gift letter approved. This is usually when a family member will be giving money to another family member to buy the home. I have to have the actual proof of funds from the famil member with money; bank account statement. Then a letter saying the family member is gifting it To the other member for the purchase of the home. This is for owner occupants not investors. An investor using this technique screams I don't have any money and it will be a miracle if this closes.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Michael REO's and short sales have cash offers if priced right within 24 hours of the latest with listing on residential stuff.

    How much earnest money are you putting up non-refundable?? 200,300,2000?? I would suspect it's little to nothing.

    I get why people wholesale and all of this stuff but frankly to a broker/agent it's all a bunch of waste of time. The broker/agent gets paid when it closes. They want certainty of close.

    In commercial real estate for instance my clients close deals. They have to show proof of funds, job income or business ( self-employed ), complete financial statement showing liquidity and net worth levels. I also have lenders lined up in advance ready to go on the assets we find and know how to structure the debt to make it a win for the lender and the buyer with the returns they want. I do all this upfront so when we go into contract it moves to a smooth closing. Other private sellers, brokers and agents work with me because I cut through the bull.

    Michael you want a low price accepted, probably minimal earnest money which means nothing, and not use a HML but a transactional funder to flip the back to back close. That is such a long shot to happen all the way through that I can understand why an REO broker would say no thanks. They look bad to their client feeding them assets but to you it's just another deal to make coin on and if something goes wrong on to the next one. Asset managers that REO brokers work with many times get base plus a bonus on the files they move. They don't want to take a risk either of deal fallout. You don't mess with people's money in a transaction. I think you might do better with off market type stuff.

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  • Michael Lerch
    OP
    Investor · Grand Rapids, MI · Member since 2012 · 224 posts · 40 votes
    12y

    I hear ya Joel but I'm not trying to leave any agent hanging and not close. If I get it for what I'm asking it'd be pretty crazy if I didn't get a cash buyer for it. I've learned the hard way with offering too much in the past. Maybe I'll have to forego REOs. Trying to get another source of deals because my area is pretty saturated thanks to guru targeting so I certainly can't fault the agents for being gun shy.

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