Cash buyers who provide a proof of funds letter for offers...is this a legit guru tip?

Question

This past weekend I attended my local REIA meeting as I often do.  This month the speaker was a wholesaling guru who's now moved into Rehabs.  Anyway, he suggested contacting local rehabbers and asking questions about what they were looking for..you know the normal questions.  But he threw in one that I'd never heard of.  He said that as wholesalers we should also ask cash buyers if they were willing to provide a proof of funds letter to submit with offers.  Of course this would be used only when attempting to secure properties that fit the cash buyers requirements.  Have any of you ever had a cash buyer provide your proof of funds letter or or even asked this question to your cash buyers?  And if so, how successful have you been?  I thought it was interesting, but don't know how well this would work in my particular market.

J Scott · Answer

Shania -

It sounds like he was suggesting you use your *potential* end-buyer's POF as your POF for the offer *YOU* submit...

This sounds like a very bad idea to me.

The seller of the property wants proof that the person who is contractually obligated to close this deal can close this deal.  Until you either:

1. Assign the contract, or

2. Have another contract obligating your end-buyer to the purchase, or

3. Have an agreement from your end-buyer that he will provide you the funds to close,

you must be able to prove that you can satisfy *YOUR* contractual obligation to close this deal.  Offering a proof of funds from someone who has no vested interest in the deal (and may never) does not satisfy this requirement.

Just my opinion...

Wayne Brooks · Answer

Like most Guru pitches, it sounds sort of okay until you think about what they actually said, and then compare it against reality.

Will Barnard · Answer

Agreed, now if you don't have all the money to close, you can still lock it up, just do it right and vest your offer with financing and provide your lender approval letter. This is completely different and also legitimate than the aforementioned use of a third party's POF

Braden C. · Answer

POFs needs to be in the name of the person or business that is on the contract. If you can't prove it, you shouldn't be making the offer. This is the area that gives wholesalers a bad name, if you can't close on it yourself then should you be putting it under contract? I am not giving an opinion either way but I will say that you should be pretty darn sure that you can perform.

Will Barnard · Answer

Secondly, as the rehabber, good luck getting me to agree to give you MY bank statement for use on making offers for YOU! Is NOT going to happen.

Matt Devincenzo · Answer

Edwin Ramirez there has been discussions about this here before.

POF is a proof that you have the funds in your bank account and that they are available to close.

If you were using a HM lender to close then you need to submit a financed offer with a pre approval of HM funds. Technically if you are using someone else's funds no matter who they are it is not a POF because they can still pull the funding at the last minute.

A lot of people here, and me included feel that's the appropriate way to go about it because without the money at your disposal you don't fully control the deal.

Edwin Ramirez · Answer

Newbie. As a newbie in the wholesaling I have a question, how may I be able to find or get a POF letter with out using or having your own proof of found to tie up a property?

Shania Hill · Answer

It's ok Kevin.  Your answer actually made me think about what was proposed.  As a person of integrity in my trained profession of Social Work, I would never contemplate doing anything that wasn't legitimate.  I will be applying that same level of integrity to my real estate endeavors.

Kevin Kaczmarek · Answer

That actually was not was I was implying. Sorry for the mixup. I was looking at it from purely a wholesale selling strategy. The proof of funds would come from the buyer of the property from you.

Shania, from your follow-up question I would never suggest you use proof of funds other than your own. I would say to never use that strategy (I re-read your question) to mis-represent yourself to agents or brokers that might accept your offer.

Sorry for the confusion!!

Shania Hill · Answer

That's what I thought he was implying and it didn't soung right to me.  Although, I actually asked the question to a local buyer and he agreed to present me with a POF after I'd tied up that contract.  But that, obviously, makes sense.

Cash buyers who provide a proof of funds letter for offers...is this a legit guru tip?

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