Realtor and the Dreaded "Proof of Funds" - Posted by Big Harold

Posted by Nate(DC) on October 20, 2003 at 15:24:22:

Exactly!

NT

Realtor and the Dreaded “Proof of Funds” - Posted by Big Harold

Posted by Big Harold on October 16, 2003 at 18:38:06:

Here we go again.

I’ve found a bank-owned property, TONS of room for rehabbing this and selling for profit - in fact, it has so much room, I can make a great profit just flipping to a rehabber in the area, which is what I plan to do. Problem is, the selling realtor wants proof of funds because I’m making an all-cash offer. Has anybody else here found a way around this? If anybody is in the Central Pennsylvania area, you know Steve Scheib is the king of the bank-owned properties here in Harrisburg - and HE won’t accept my offer without proof! Any suggestions?

I mention him by name because I’m sure I’ll run into him again on this topic, and would like to get past it, not only this time, but in future encounters. Thanks for any help you can provide.

Harold Wilson
Real Estate Investor (Flipper Extraordinaire)

Realtor and the Dreaded - Posted by jasonrei

Posted by jasonrei on October 17, 2003 at 21:12:33:

I run into the same thing. Some months I have well over $100k in my accounts, other times I can’t muster together $10k. I try to get POF letters when I have high balances, and when funds run low I use old POF letters. More than 1 month old and the agents ask for a newer one.

I can’t really offer helpful advice. Maybe you can have someone give you a very short-term loan, you deposit it, get your letter, and give them the money back. I wouldn’t feel right about doing that, but it is an option. I suppose forging a letter is also an option. If I got a forged letter from a prospective buyer I would definitely refuse to do business with them again.

Just a note- I got an offer the other day on a flip (under $40k). The prospective buyer included his POF letter, for $800k! Must be nice!

Re: Probably not the Realtor - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on October 17, 2003 at 16:36:31:

It is probably the condition that the seller (the bank) puts on thier listing with the realtor. When the bank offers the property for sale at a sub wholesale price it is common for them to want all cash. It is also common for them to want proof that you have ALL the cash on hand. It is not unusual for the bank to want to close real fast (3-5 days is not uncommon). So this is the way the Bank offers the listing to the realtor, on a take it or leave it basis.

The bank is not willing to sell dirt cheap and sit and wait to see if the buyer can come up with the money at the same time. I can’t really blame them for this. The solution is real simple, SHOW THEM THE MONEY. All of it, and right now. Then they will not give you a problem, they will know you are serious. If you do not have all the money, on hand you are not ready to play in the banks ballpark. Perhaps you need to learn how to get the cash together, at least long enough to show it to the bank. It is pointless to blame the realtor for the problem. The problem is yours, not his.

Re: Realtor and the Dreaded - Posted by Rob FL

Posted by Rob FL on October 16, 2003 at 21:46:22:

Dimpil and Scott have good intentions but their advice is very ignorant of the real world.

Bank REO departments and Realtors aren’t actually as stupid as most investors think they are. I can’t say the same for alot of beginning investors. REOs sell thousands of properties each year. They know that people who can’t prove they can close usually don’t close. That’s why they require proof of funds. Most REO departments won’t even look at offers without proof of funds. And yes, it’s right in their listing agreements - no proof of funds, no offer.

Nobody including REO departments and Realtors want to tie their property up for 2 or 3 weeks with some wannabe they hopes they can flip a property to a rehabber.

If you can’t provide proof of funds, then deal only with FSBOs.

Re: Realtor and the Dreaded - Posted by rm

Posted by rm on October 16, 2003 at 20:59:41:

Get an approval from an HML.

You don’t have to exercise it, just need to have it to show to the agent.

Re: Realtor and the Dreaded - Posted by Scott (ATL)

Posted by Scott (ATL) on October 16, 2003 at 19:56:32:

While I haven’t run into this issue I imagine he still has to “present your offer”. I don’t think he can say “Unless you have proof of funds your offer doesn’t go to the seller”? (A Realtor is probably better off answering this)

However, I’d suggest just talking to a hard money lender and if the deal is this good you can get a letter from them within hours. Or you can “apply” online and print the “proof of funds” that way. That’s what I did for my personal residence…Quicken.com I didn’t use Quicken as my lender but the letter was “proof” (I got the letter without the credit check).

Scott

Re: Realtor and the Dreaded - Posted by Dimpil

Posted by Dimpil on October 16, 2003 at 19:52:51:

From a previous post then me asking a realtor, they are suppose to take all offers to the seller.

I personally would say, when it’s accept then I’ll give you proof other then that, NO, unless it was my agent and even at that, it’s none of their business to get into my personal financial information. That is beyound their scope of job and license duty, hence that is why they show homes not do your loan. A little thing called the privacy act also prevents a loan officer (bank or broker) from telling the realor your information also.

I’m just not a realtor friendly person. I’ve had too many ‘think’ they control a deal and they bring NO money to the table and never want to cut their fee to make a deal work. I’m just pro controling them vs them controling me so I’m a little harsh.

Re: Realtor and the Dreaded - Posted by Dimpil

Posted by Dimpil on October 17, 2003 at 05:12:08:

In the REAL WORLD. You can make an offer on a property WITHOUT giving a realtor SQUAT. A proof of funds or pre approval letter is not required.

In the REAL WORLD, a pre apporval letter means, SQUAT, because the buyer still must go through underwriting and can still not get a CTC and can still tie a property up for weeks!

I’ve made 6 offers on homes without proof of funds or pre approvals. I only give a approval letter ONCE the offer is accepted as I do not want to waste my TIME either. 3 were accepted. 2 got approval letters. 2 will close on 10-30-03. One will close on November 20 which was an REO for 289,900 with value of 400,000 all without pre approval letter which the realtor claimed the bank wanted up front (I’m keeping that one for my family). I DO NOT THINK SO. And to date I have not given a pre apporval letter. Hummmmm, the real world seem to be playing my way.

Ignorant? NO I just do not like the games realtors play and yes I do firmly believe that most are STUPID as I deal with them A LOT in my business. They have little to NO clue about financing which is ignorant for them because that is a part of their business.

Do you know more realtors lose a deal because they give half baked information about financing? Do you know a realtor will ask, how much is that broker charging you and get offended it it’s not what THEY feel it should be but they get, 3-6%? Hello?

I’m not a realtor friendly person. I screened about 20 before working with the lady I have, although I also have a relationship with a local bank REO’s point guy. So I’m getting properties before they get to realtors (1 home purchase price 18k FMV 70k, 2nd home purchase price 25k FMV 60k). My realtor did get me the $289,900 home but I found the house.

Again, I’m not realtor friendly and I tend to be harsh due to my experience with them. However, SOP may violate my rights and I do believe in exerting my rights.

Re: Realtor and the Dreaded - Posted by Nate(DC)

Posted by Nate(DC) on October 17, 2003 at 17:09:20:

“In the REAL WORLD. You can make an offer on a property WITHOUT giving a realtor SQUAT. A proof of funds or pre approval letter is not required.”

Correct. And it will be laughed at.

“In the REAL WORLD, a pre apporval letter means, SQUAT, because the buyer still must go through underwriting and can still not get a CTC and can still tie a property up for weeks!”

True. That’s why when I list I try to get a buyer with no financing contingency and a large deposit. That way, if the buyer can’t perform, it’s his problem, not the seller’s.

If you tried to buy one of my listings with no letter, no evidence of funds, nothing, I wouldn’t give half a *** about your “rights”. My job as a listing agent is to protect the seller, and if that means telling the seller your offer is half-baked if it doesn’t provide evidence that the others provide, then so be it.

NT

Re: Realtor and the Dreaded - Posted by Rob FL

Posted by Rob FL on October 17, 2003 at 08:20:59:

I agree with you that pre-approval letters mean nothing. I’ve had deals fall through even after loan comitments were issued, so I know pre-approval isn’t worth the paper it’s printed on.

On the other hand dealing with about 500 contracts on REOs over the last few years, I can definitely say that 95% or more of lenders will not even look at your offer without proof of funds. Maybe a few oddball ones will, but that is the exception rather than the rule. I know must of the REO listing agents in my area on a first name basis, so I know they expect.

As for the knowledge of most Realtors. Yes there are good ones and bad ones. But at least all Realtors are required to take a pre and post licensing classes, a state certified test, ethics training, etc. and they also have a broker and other colleagues to assist them with problems. Most brand new investors on the other hand don’t even have 1/10 the training.

When I see questions like the one posted, it makes me cringe.

Again I will say, why would any intelligent person want to deal with a buyer who can’t even prove that he has any ability whatsoever to close? Personally, I won’t agree to any contract to sell until the buyer has provided me some sort of letter and I have actually spoken with the mortgage broker on the phone to verify info.

Oy - Posted by rm

Posted by rm on October 18, 2003 at 21:24:27:

and while you “protect the seller” you’d miss out on his offer… which would have closed.

There are other ways to protect the seller besides requiring a proof of funds letter, which is often not worth the paper it’s printed on.

Re: Realtor and the Dreaded - Posted by JORGE

Posted by JORGE on October 18, 2003 at 20:09:45:

Just curious, what happened to the ethics classes that Realtors have to take? Isn’t it a bit unethical to not give a **** about buyers rights?..just curious… thanks,

Jorge

Re: Realtor and the Dreaded - Posted by dimpil

Posted by dimpil on October 17, 2003 at 09:34:19:

And they are not suppose to provide you anything. The customer, yes, but any one other than that, no. The new Privacy Law is really strict about this.

Re: Oy - Posted by Rob FL

Posted by Rob FL on October 19, 2003 at 12:42:18:

Of course when you ask the investor “If you can’t provide me proof of funds, please tell me what your plans are to come up with the 100K to buy this property” and he can’t answer with “I have 100K in the bank” or “I have 100K credit line” or “I have 100K with lender lined up” but instead starts talking about “flipping the contract to another investor” then you know have a really live one.

Re: Realtor and the Dreaded - Posted by Nate(DC)

Posted by Nate(DC) on October 19, 2003 at 18:16:55:

If I’m the listing agent, I’m representing the seller, not the buyer. I have no fiduciary duty to the buyer, only to the seller. My only obligation to the buyer is to be honest and treat them fairly. That doesn’t mean I have to tell the seller that their offer with no money down and no proof of anything is a good offer.

NT~

Re: Realtor and the Dreaded - Posted by Rob FL

Posted by Rob FL on October 17, 2003 at 11:53:21:

I get written consent if there is ever a problem. Not very difficult to do.

Re: Oy - Posted by rm

Posted by rm on October 19, 2003 at 15:41:10:

I look at it this way.

If an investor has the contacts that the realtor OUGHT to have, then why not?

For example, I called a realtor who does nearly all the Fairbanks REO’s in our area about a comp to see what kind of shape it was in.

It had been fire damaged, and I told him that I had another one in the area in rough shape. I said, “Hey- if you have a list of rehabbers to sell it to, I’ll send you the info- find me a buyer and I’ll pay you a commission.” I asked him, “Do you have a list of rehabbers?”

Hey says, “No, but I did double dip it. I just basically took calls from people who drove by and were interested in it.”

Fact is, 95-99% of realtors are absolutely lazy and inefficient when it comes to marketing. Instead, they major in minors, “protect their sellers” on issues that could be easiliy resolved and more often than not, serve more as obstacles to the sale than facilitators thereof.

Re: Oy - Posted by Rob FL

Posted by Rob FL on October 20, 2003 at 10:14:33:

Then have the rehabber put up a letter showing proof of money to close. How hard is that to do?