How to Verify Proof of Funds

Question

When you wholesale, how do you verify proof of funds exactly? Is there something you need to do, or does the title company do it?

Arktavious Sally · Answer

Samantha I will normally verify POF before I assign contract and get a EMD. If I'm dealing with a cash buyer that I have never done a deal with and I'm working with a small time frame I will ask for a larger EMD than normal 3-5k. The shorter my time frame of getting deal closed the more skin in the game my buyer will have.

Wayne Brooks · Answer

Samantha, probably not.  You would basically need to prove the HML will Not fund the deal.  Verify any financing/POF Before you accept a contract.  You usually won't be working on the tight time frame as in your example.

Arktavious Sally · Answer

@Samantha M.

I hope that helps. Good Luck..

Arktavious Sally · Answer

To clarify then, you need to verify the PoF first before you assign the contract and accept any non refundable deposit, is that correct? Yes..

Samantha M. · Answer

@Wayne Brooks  and @Arktavious Sally  Thank you very much. To clarify then, you need to verify the PoF first before you assign the contract and accept any non refundable deposit, is that correct?

What if you are in the field, how do you verify proof of funds, and its a buyer you haven't don't business with. Do you ask them to bring proof of funds and a check for earnest money prior to arriving at the showing in case they decide to close?

If Cash: just a bank statement will suffice

If a line of credit or HML: maybe give the bank or hard money lender a call and verify that they are working with the buyer and have the funds to close

Does all of this sound good? Thank you everyone so much.

Samantha M. · Answer

They forfeit their EMD yes, but thats not exactly what  I mean.

Here is what I mean, if you got a house under contract today September 3rd and were set to close September 10th. Lets say you got a buyer on board, and he gives you a non refundable deposit and fills out the assignment of contract September 6th. You take the nonrefundable deposit over to the title company and then lets say its a bank line you call to verify PoF. You call the bank contact and find out, in fact, the buyer does not have the funds. Now you have a contract with non refundable earnest money tied up on a house they can't even close on.

Can you terminate the assignment with the investor to prevent this property from getting tied up in light of the PoF falling through? Would you need some sort of clause that specifically states, contract contingent on approval of proof of funds to cancel your assignment with the buyer?

Hope that made sense, thanks guys

Arktavious Sally · Answer

@Samantha M.

Once your buyer gives you their Non Refundable EMD and can't close, they forfeit their EMD. Anytime I'm dealing with a HML or buyer that I'm not familiar with or have no relationship with then I will call lender and verify they are doing deal. Time is of the essence to get deal to closing table..

Samantha M. · Answer

What would happen if you accept a non refundable deposit down for your contract, the buyer provides proof of funds (perhaps bank line or hard money). You call the company issuing the line of credit and they say its no good. Could you terminate the assignment of contract with that buyer? Would you need a clause in your assignment that states contingent upon approval of proof of funds?

Curt Davis · Answer

If your wanting to make a cash offer using private money or hard money, contact the listing agent and tell them what your doing.  The lender will tell you if you need to write it up as a cash or finance offer.

Wayne Brooks · Answer

Samantha, those definitely are to as dependable.  So are pure crap.  Call them up and talk to them about their funding conditions, LTV's etc. to try and figure out if you think they'll fund, Before you accept their offer.

How to Verify Proof of Funds

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