HELP! Verification Of Funds
We're new at this and wholesaling since we don't have the cash to outright buy properties. However, everyone keeps asking us for verification of funds when we say we're going to make a cash offer. We tell them that the cash is not a problem (because we have buyers lined up), but they still put it in the contract that we have to show proof of OUR funds before we can buy the house, or else we lose our earnest money. How do we get around this?
Get the proof of funds from YOUR cash buyers and tell the people that these are the cash buyers you work with... If applicable, show them any contracts signed with the actual cash buyers to prove that you work with them.
The Cash buyers shouldn't have a problem getting proof of funds to you...
Good Luck!
[addsig]
This is my first deal, so I don't have any past contracts with my buyers yet. Also, wouldn't my buyers be offended if I call them up and ask them for proof of funds? I hate to sound squeemish, but on the same hand, I'd hate to chase away my possible buyers. The other issue is that I don't know yet which of my buyers would be purchasing this prop from me. It is my understanding that I don't send them out to the prop until I have an acceptance from the bank, and therefor, I wouldn't know which one to ask for verifcation of funds. Lastly, will the bank accept somebody else's proof of funds as my own? I'm not going into this with investors of any sort; I'm simply planning on doing a simultaneous closing from the bank to myself, then from myself to my buyer.
Thanks again for your help and quick replies!
If you have any of the following, they can be used:
1) stocks
2)bonds
3) ira
4)mutual funds
5) Cd's
6)pension
I always have one of the above handy when making cash offers. Just because I show them this information doesn't mean I'm going to use it.
As you see I never show them my checking or savings account info. You can show any type of asset.
If you have absolutely no money to show. Then you will need a preapproval letter. Or as sugested above, you should be asking your buyers for the same prove you are required to show.
Lori
[addsig]
(I have no cash and no assets)
And in your experience (again, I'm new at this), asking your buyers for proof of funds doesn't turn them off?
I have a few possible buyers from a buyers list I compiled last week. Do I get verification from each of them?
How do I present my buyers' VOF (verifciation of funds) to the seller (bank)? Do I just show it to them and tell them that this is my "investor's" money?
I don't know if this further clarification is required, but this is a forclosure. Should I just save those until I actually have funds, and do FSBO for now?
You said:
"We tell them that the cash is not a problem (because we have buyers lined up), but they still put it in the contract that we have to show proof of OUR funds before we can buy the house"
I'm a newbie too, but my first thought would be to use your own contract not theirs. One that doesn't include that particular statement.
PROS - won't this work? I would assume this may be different under an REO deal, but you state this is foreclosure. BUT if you happen to be working with an agent (no-no), do you HAVE to use their contract vs. your own?
Why is dealing with an agent a no-no? (Is it because you have to use their contracts)? I wasn't aware there was another way to make offers on foreclosures. Is there?
Another on-topic question: Do they all ask for verification of funds, or am I just dealing with a sticky situation? This is my second time hitting the same road block.
One last quesiton about Verification of Funds: Couldn't I just remove that from the contract and submit it as my offer, or will that kill the deal?
This is the easies concept I think all "newbies" will be able to understand:
Getting houses under contract is like going to a used car lot.
The first person with the money gets to drive the car away. Think about it, you wouldn't expect a car salesman to hold a car for 30 days without a HUGE downpayment right?
That is why you need to show proof of funding.
Lori
[addsig]
Hey,
I am trying to piece this together from your messages, but it sounds like you are buying an REO (because you keep mentioning bank).
The bottom line on dealing with REO is: BANKS DO NOT PLAY GAMES. If you said CASH, they want to see CASH, not a possible sale to another individual.
My guess is the bank has NOT signed the contract until after you provide proof.
When buying REO's, you will need either a verification of YOUR funds or a preapproval letter for YOU. Unless your buyer wants to be a partner with you, their VOF letter will mean nothing to the bank holding the property. Banks will not allow you to assign your contract, so you will have to be able to close the deal BEFORE you sell the property. Banks like simple straight forward offers. Get creative and you'll be flat out rejected, plain and simple.
And if you're going to be buying REO's, get used to working with agents. Practically all REO's go thru some real estate agent now.
Roger
Thank you all for your help! I bought the Ron Legrand series, and he simply says to make cash offers and then find buyers. Nothing is spoken of verification of funds, so I was concerned when I was asked about this.
Thanks to your posts, we understand that this is normal (banks asking for VOF), and I guess there's no way around it unless we find partners.
We are serious about doing this full time, but I guess we'll have to start with bid-dogging (?) until we have the funds to buy houses cash. Does that sound about right?[ Edited by MinAnShawn on Date 05/03/2004 ]
You state you are serious about doing this full time. If that is the case, do you have a business plan set up? I have never seen anyone been able to be a full time investor without any money. You need reserves because every deal isnot the same. Some you will more than likely lose money on. I've seen many people make it and just as many file BK.
Good Luck
Lori
[addsig]
Just a suggestion here that may not work but, stop making cash offers. REO officer's see offers with mortgage contingencies all the time. By offering cash you are raising a red flag. Make 20% down stroke offers with reasonable mortgage contingencies (15 year am and 8% rate) and the bank probably will not question whether you can actually close on that deal or not.
If you do, in fact close the deal with your investor no-one is going to care that you didn't actually do it with a mortgage.
Hey,
Dealing with REOs is tough...don't let anyone else tell you otherwise.
My best guess is the bank's got very tired of people trying to buy houses for "pennies on the dollars" or someother nonsense.
If you send in a contract indicating you will obtain a loan, be prepared to presont a VERY strong Prequalification letter. Most likely, it will state your credit report has already been pulled and is okay and you have proof of downpayment.
Until you are comfortable, you might want to consider working with someone else (birddog).
Why don't you have your buyers put the funds into an account managed by you on their behalf, to avoid this in the future. Just have an agreement that stipulate that its for VOF.
Think if you have any friends, relatives, acquaintences, etc that could be your "Private Lender". They of course are not your private lender, but you just use their proof of funds with a letter saying that they are your private lender.
Brenda
A request for verification of funds from a potential cash buyer before entering into an agreement to purchase is normal and necessary to protect the seller. I am sure if you were the seller you would ask for it. If not you would be making a mistake and setting yourself up for grief.