Do I Need Proof Of Funds To Purchase Real Estate?

Do I Need Proof Of Funds To Purchase Real Estate?

Joe: Hey, it’s Joe. “Do I need a proof of funds letter for real estate purchasing?” Well, no. You don’t. If you do this with zero down you don’t need proof of funds because you don’t need any money to buy the property. So, proof of funds becomes ridiculous. It’s just not necessary.

Joe: If you want proof of funds, you can get somebody who’s got money and have them prove that they’ve got funds that could be used to purchase a deal. Let’s say you’re doing a wholesale deal and you don’t have any money, so you need proof of funds. Somebody wants proof of funds for a property and the only way you can pull it off is through proof of funds. You could go find an investor who’s interested in buying that property from you for a little bit more than you’re paying the seller and you can use their proof of funds to do that. So, it’s not that hard to get proof of funds if you’ve got a good deal.

Joe: If you don’t have a good deal, it’s not going to be that easy to do. I’ve even done proof of funds for my own students on deals that I was involved in with them. But it’s really rare that we actually need it. What I’ll do instead is say, “Just go back to the seller and tell them here’s how we’re going to structure the deal,” and don’t offer them proof of funds and see if they’ll go for it. And most of the time, they do. Proof of funds isn’t necessary.

Joe: The only time you need proof of funds is if you’re actually buying with cash. So, if you’re buying from a bank, let’s say you’re buying a property that was foreclosed upon, the bank took it back, and REO – Real Estate Owned. And typically those properties get listed by real estate agents and you’re looking at the real estate listings and you see, oh, there’s a property that I would like to buy. It’s under market value. And usually you find out about it the day that it comes on the market because if it’s a good deal they’re going to get five or six offers on it that same day.

Joe: So you make an offer on it, you’re offer gets accepted, and you say that you’re going to buy cash. Sometimes they’re going to want to say I want to see the cash, I want to see that you can actually do this. So, you provide them proof of funds. Simply go to your bank account, do a screenshot of your bank account showing where that cash is and send that over to them. And that usually will do it.

Joe: But I find, and we’ve bought a lot of properties from banks through realtors, especially during 2008 to 2012 when there were just so many of them on the market and we would make offers on them the day they came on the market, full price offers, and sometimes we’d still get beaten out, you know, one in two, or one in three times, when we made those offers, we would get beaten out.

Joe: By the end of that period, we were making offers and we’d get one out eight, one out of ten. So it was becoming more and more difficult to do that, buying from realtors with that because there just weren’t as many properties that were being foreclosed upon.

Joe: But, I found that realtors never asked us for our proof of funds when we did that. We just told them, “We’re paying cash,” and they asked us, “Do you have that cash,” we said, “Yes, we do.” And that was all they asked.

Joe: Now, if we had done that and we gave them a deposit, let’s say we gave them $500 or $1,000 deposit. We would have lost our deposit if we hadn’t closed because we made it, most of those types of deals are “as is” and no contingencies. So, they weren’t contingent upon the condition of the property. And because they were coming from a bank, we just made them no contingencies. We’re going to buy this property. We went through the property. We already knew the condition, which was usually pretty bad, and we accepted that there may be things that we don’t know about. And that typically worked out pretty well for us.

Joe: All right. Good luck.