Proof Of Funds-HELP!
Saint Louis, MO · Member since 2017 · 43 posts · 16 votes
I am working with a realtor who has sent me a list of properties on the MLS. I have done a walk through on several of the properties, sent her my offers, and before she writes up the contracts her broker is asking for proof of income. I am not the end buyer, and as a new investor I don't have those kinds of funds laying around in my bank account right now. Also, it doesn't sound right asking the end buyer for money right now before we go to a title company and close on a deal. To my knowledge I thought the money would be held in escrow and the seller gets the money/proof they need then. I don't know what to do and I need help fast!
Thanks,
Barbara Gardner
@Ian Walsh Thank you Ian :)
@Tyler Watkins Thank you Tyler for sharing that with me! I found it very helpful. I have connected with end buyers but this is my first deal so we have not established any history on deals quite yet.
Visit the Wholesaler forums on BP .....tons of info there and what you don't find already posted just create your own post like you did here. Search the podcast for info on wholesale tips as well . I've done a few wholesale deals ,I'd be happy to answer any questions or point you in the direction of someone who can. Good luck !!!!!
@Barbara Gardner Yikes!! I didn't even read every post in this thread, but ouch. Everyone is entitled to their opinion, but there are some things here that I a vehemently disagree with... so let me try and give some clarity. There's a lot here so I'll try and just and hit you with bullet points:
1. If you want to wholesale, get advice from wholesalers who are actually wholesaling:) Crazy concept right!? But seriously, If you're getting advice from flippers, realtors, or keyboard "experts," they're likely to tell you how or why you CAN'T do something or maybe they dislike a method because it's negatively impacted them in the past. A reason we can get paid as wholesalers is because we can be creative and do deals that others think are impossible. That said, a lot of the ideas I'm about to present will most likely be met with cynicism. Again, while everyone is entitled to their beliefs, I can show proof of these concepts in action. I've used them successfully, continue to use them with consistency and they can be replicated.
2. Congratulations on beginning this journey. There will be a lot of naysayers that will play on your fears and tell you that you can't do things. Learn to silence them and that voice in yourself quickly. I see you made a comment about not being a "real buyer." This is a mindset shift you need to make immediately. I say this from personal experience. Not having any money when I first started, I often suffered from "imposter syndrome," often feeling like I was somehow being dishonest of inauthentic when presenting offers... it caused a lot of paralysis on my end. Then I realized this.... a lot of my cash buyers (my list is over 12,000), do not have cash just sitting in the bank (some do, but not all). Rather, they are using hard money or private money to purchase deals from me. This is Rich Dad 101 - using OPM (other peoples money)... its a fundamental concept related to wealth creation. As long as they close, I don't really care where the money comes from. I realized that I was essentially doing the same thing... Offering to buy a house with cash if the property meets my standards during the inspection period. If the house is a good deal, you WILL have that money... either from the end buyer or in the form of transactional funding. Whether you buy the deal and resell it for a profit 5 years after closing, or 5 minutes after closing is irrelevant. This mental shift helped me to confidently make offers.
3. "You can't do deals on the MLS" - You can. I do these deals every month... so anyone who says you can't... is just wrong. True, the spreads on these deals are typically lower, and my best deals are direct deals that come from paid marketing....but, these deals are low hanging fruit and so I just grab them. They're also good for beginners who don't have a large marketing budget to get started. The MLS is merely a real estate marketplace.... don't make it more than that. With paid marketing you're typically looking for motivated sellers. While you can do that here, I typically look for physically distressed inventory (that typically won't qualify for a mortgage). You can go to a site like Zillow and set up automated keyword searches for terms indicative of distress. Words like: "TLC, mold, Chinese drywall, vacant, permits" etc. I made a video where I show an MLS deal I did from start to finish (making my offer to closing - the spread was about $17k.... who says it can't be done again?)
[When you do these deals, expect to make a LOT of offers, expect to get a LOT of no's, You MUST MUST MUST follow up often (pending deals fall through all the time) - most of the deals I get are NOT accepted the first time, but only after following up... sometimes for months, and realize that you only need one to hit. You can literally make 100 offers (seems like a lot but it isn't... do 20 a day and be done in a week) and even if you get 99 no's, you only need 1 yes to have a good month.]
3. Never, never, never disclose to any agent that you are not the end buyer. This is not going to be a very unpopular piece of advice, especially among the Realtors here, but it will tremendously affect your business. I could rant about this and the reasons why for a long time, but at the end of the day, just understand that your offers simply won't be accepted. Like I mentioned before, you ARE the buyer. Whether you resell 5 years after closing or 5 minutes after closing is irrelevant... just focus on closing.
4. Do NOT use a buyers agent. A couple reasons for this (i.e. It isn't fair to make them do a lot of extra work for properties you aren't interested in) but here's the main one and it appeals to self interest:
You need to make the offer directly to the listing agent.
Why? Because they will fight harder to push your deal through because it’s in their best interest. Here in FL the agent commission is 6%
So lets say I make an offer on 123 Main Street directly through the listing agent for $100,000:
The listing agent makes the full 6% - $6,000
Now let’s say John Doe comes along and makes an offer of $120,000. $20,000 higher! But he also brings in his own agent.
Now the listing agent has to split the commission. 6% of $120,000 = $7,200. That $7,200 needs to get split in half (3% each) so now each agent makes $3,600
The listing agent has kids to feed. Despite one offer being $20,000 higher, do you think she’ll push for the one that puts $6,000 or $3,600 in her pocket?
Yes, agents have a fiduciary responsibility to the seller.. but that does mean they don't show bias? Some do it consciously and aggressively... while others subconsciously and passively. Some might make other prospective buyers jump through hoops and qualifying stages that you might be able to "avoid." Sometimes the seller is a bank or entity, and their profit isn't always top of mind. And that’s why you always work direct with the listing agent. Also, make it easy for them. Handle the paperwork when you can (I have a blog post on this for details).
5. Proof of Funds... The only real proof of funds is cash in the bank. But, if you don't have it... don't give up, work with what you've got. Investors on here will tell you you can't do deals without it. But that isn't true. Ignore the naysayers, they don't care about your pockets like that, and a lot of the info they give is because it has negatively impacted them at some point in the past... I sympathize, but you gotta focus on you. That said, there are plenty of places online where you can find free or paid POF letters. Are these great? No. Will they be rejected often? Yes. But like I said before, you're a beginner. Do what you have to do... take a lot of rejection and keep plowing through. That's the wonderful thing about you wholesaling, and why people say the first deal is the hardest. There's a relatively high barrier to entry because you have to work through logistical challenges in the beginning and a lot of rejection that most people can't handle (and so they quit). After your first few deals however, you'll have enough money for paid marketing. You'll have enough money to show a real bank statement for POF. You'll have money to outsource and so the business gets easier. Be grateful for this barrier to entry. If it were too easy, everyone would do it and it would fail to be profitable. So back to the POF, while it's imperfect and will get rejected often, remember, you don't need to be successful every time... just use it until it's accepted. I have two important videos on my youtube channel on POF's, I recommend watching them. That said I'll make the following points:
- Sometimes, the POF isn't requested by the seller OR isn't a contingency of the contract... it's more of a screener/filter. If you present yourself in a professional and authoritative manner (i.e. you're experienced and know what you're doing), you can often get the contract without submitting a POF. Also, push for the executed contract... once you have it signed, you're in contract... even if you haven't submitted the POF (more details in that video)
- Back in the day I used really ****** one-page POF's that just said someone would loan me some money - stuff I found online. Got rejected often, but I still did several deals with these (you can still use these terrible ones on Hubzu btw). Nowadays I recommend a site called getpof.com run by Keith Yackey. It's a paid letter, but isn't terribly expensive. I like this site because not only does it give you a proof of funds letter, but they also provide you with a verifiable bank statement. Does it work all the time.... no, but until you get where you need to be, use it and it will work some of the time
- I'm at a point in my career where I can produce my own statement for most deals I bid on. Prior to this however, I got a little creative and got a letter from a local hard money lender I met at a local REIA. I explained I was a wholesaler trying to get my hands on as many deals as I could. I agreed to send any buyers that needed funding to them (and they were reputable and offered competitive rates so I was comfortable doing so) to them in exchange for a letter with bank statement. I created a win/win situation that worked pretty well.
Keep pushing forward, don't quit and ignore the naysayers. Hit me up if I can help. I'm not on BP much but facebook or email works.
Best of luck!
Mike
@Mike Hill Thank you sooooooo much! I agree with everything you said and I highly appreciate the clarity that you've given me. And yes you are 100% right about everyone being entitled to their opinon, It's just nicer when people who have gained the experience ahead of me give me more clarity vs. what sounds like bashing. But thats neither here nor there I am just glad to have been lead in the right way by people like yourself and others who have given great advice on this forum and website. I truly take heed to everything you all are saying and going forward I will apply the help given. You're truly appreciated! :)
@Adrian Becoat Will do! thanks for your advice Adrian :)
Best of luck to you and your business ventures also.
@Mike Hill So you are telling the OP to produce fake proof of funds ? WTH. Did i read that correctly ? I mean if that'll work, it'll work but geeez that's hustlin harddd. idk.
@Mike Hill So you are telling the OP to produce fake proof of funds ? WTH. Did i read that correctly ? I mean if that'll work, it'll work but geeez that's hustlin harddd. idk.
Where did you read that? lol.... I'm confused
And that's where the forums get irritating... when people try and put words into your mouth.
So let's not play that game....
I'm trying to provide help to someone asking for it. Not much interested in being a keyboard warrior
In any event for someone actually looking for answers, the point I was making was this.... If you come across a good deal, the money will be there for the closing from either your end buyer or in the form of transactional funding.
While some proof of funds are a legit requirement (i.e. when dealing with short sales), many are more or less a screening technique employed by an agent or seller to know that you can close (which is fair).
There are hard money lenders, or places online that will give you a proof of funds that's essentially like a pre-qualification letter for a hard money loan and will be acceptable to the agent and/or seller. This is at the sellers discretion (like I CLEARLY stated in my post to anyone who actually read it.. not all sellers will accept it and that's OK). If they don't have an issue with it... then it shouldnt be a problem. Some people think that's hustilin hard (with three d's)... I mean, I don't think so, but whatever floats your boat... nobody is forcing you to buy those deals.
There are many buyers out there who don't have the time to scour for these deals and will happily compensate you in the form of a fee for your ability to get them these properties. It's a good strategy, particularly for beginners searching for solutions to problems.
@Maugno M. on a side note, if a wholesaler used that technique to bring you a house that could generate you some nice cash flow or allow you to flip it for $50k or whatever... I don't think you'd complain...
Just my 2 cents... and if you didn't want it, there'd by a thousand others who did.
Most of my buyers just want to get paid, they don't really care how the deals come about.
I agree with @Mike Hill .
You are only limited by your own lack of imagination.