Proof of Funds

[FL Beachgirl]

So I found this REO.
The bank that currently owns it has it listed for ARV (of course) even though it needs probably 50% of that amount in rehab (if I were to do absolutely everything it needed...not that I'm going to mind you) and is requiring a "Proof of Funds" statement to be submitted with any offers presented. Well, being a :newbie: investor (yes I still say new after 2 years because the only "deal" I've completed in full in the last 2 years has been the purchase of the home I'm living in for less than market value with semi creative financing from another investor) I don't have $150,000. just sitting in the bank waiting for The Big One to fall into my lap. I know I can get a private lender to provide funds for me....after my offer is accepted, but what do I do about the "liquid funds" the seller wants proof of in the mean time?
The letter they sent along with the listing said
"3) CASH offers must include proof of liquid cash, on hand, to complete the transaction. Again, lines of credit, "hard money", etc., do not qualify for "cash", and will require a prequalification letter from This Bank Home Loans" along with some other nastiness following it. I don't want to apply for a loan from them because I don't want them to know what my rehab is really going to cost me to do (there's wholesale costs and resale costs...I already have an agreement with a contractor to get the rehab done for wholesale of course), it's none of thier damn business AND I don't want to goof with my credit score by applying for a loan I don't intend to take.

Anybody got any bright ideas? (please don't say wholesale it to someone because I don't want to...already considered it)
Anybody willing to help me out in this mighty small pinch? I'll of course provide far better details in email or over the phone if neccessary. Please don't send me a PM here, I probably won't notice it (always forget to check those things LOL) but my email is beachhomes@cfl.rr.com if someone might be interested in helping...if you're just going to give advice, please post it here in the thread so someone else who might run across this dilema may gain from it as well ;)

Thanks in advance :madnoel:
Jennifer

[ZNICK]

If you have a private lender who would fund it, can you use his notarized letter for proof of funds? I've seen it work for others.

Z

[FL Beachgirl]

I think the only way that would work is if the Private Lender was also on the contract to purchase with me. I wouldn't have a problem doing that but I would ask that they signed and notorized a quit claim deed before signing the contract that I would file immediately after closing (as in on the way home from closing)
This bank is truely making it a pain in the backside to purchase this property. What gets me is it's been vacant for 2+ years (I ran into the original owner yesterday who actually built the property and still lives 2 doors down...boy was he full of useful information <grin>)
I understand that a bank has to have 3x the amount of a loan sitting in reserves so I am kind of confused as to why they would make this such a difficult transaction to complete since they have had this on the books for so long. Wouldn't it make more sense to make it easy to buy property from them so they can make a new loan that's actually making them money?


Jennifer

p.s. Hey Nick, how have you been anyway? Been awhile since I've seen you around ;) Glad to see (from other posts) that you've been so busy...wish I could say the same about myself....working hard on it doesn't make it happen hehe

[ZNICK]

I've been doing well. Some good deals, some better, hehe. I hope all's well on your end. Keep plugging away, it will happen. It's odd, my 1st 6 months in the biz I couldn't find a deal anywhere, then suddenly there's a lot of them.

Banks are odd sometimes about the whole proof of funds thing. I'd think they'd just be happy to have a buyer, and if it falls through, it falls through. It's not like proof of funds guarantees a close anyway.

Z

[FL Beachgirl]

Well, if I could find someone who would be willing to help me out with a proof of funds letter I could start knocking down the dominoes and get this deal in the works...but as it stands I can't do anything until I can submit an offer which I can't do without the letter ;(
I even called my mother this morning and asked her to get a second on her house just so she could give me an account statement. Of course she won't do it but whatever...go figure.

Jen

[ThreeRiversREI]

I think Znick had the right idea. Take the deal to your private lender and see if you can get a pre-approval letter, not just a pre-qualification letter, and submit that with your offer. The worst thing that can happen is the bank says no, which they may even if you DID have the cash in hand.

By being pre-approved you're showing a higher level of commitment on the part of your lender than just a pre-qualification letter. Hopefully it'll be enough. If not, you may have to pass on this deal and get started on finding the next one.

[ZNICK]

Another thing that will get the bank's attention is a healthy earnest money deposit. $5k turns heads... but make sure you're covered by a good weasel clause.

Another idea is to put the deposit in escrow with an attorney or title company, then get a letter from them stating they have the $ in escrow waiting for the bank to accept the offer.

Z

[FL Beachgirl]

Yea that's the other thing, I'm stuck using a FARBAR, not my own paperwork (no weasel clause) thier addendum is 3 pages long and the escrow deposit has to be with thier title company because "they're out of state".
I'm getting a bigger and bigger headache with each thing that comes up. If it weren't such a nice piece of property I would have snickered and kept driving.

Anyway, I have other problems with it as well, it seems that I'm having issues with people returning my calls as well. I think I'm going to let things with this one cool for a few days and see what happens. I've got other stuff to work on in the meantime anyway.

Thanks guys for your advice...I'll let you know if anything new happens with it.

Jennifer

[Aldo]

The 'weasel clause' is something contained in your offer-to-purchase which will allow you to back out without penalty if the deal starts taking a wrong direction. Your approval/disapproval of a home inspection is an ideal example.

Here's another thought. Could it be that your offer has been their best offer? They might be trying to make you sweat (by not returning calls, etc.) with the hope that you cave in and make a better offer. Stand your ground!

Of course, the required funds is the major issue here, but that amount will change as the purchase price changes. Lower price = lower downstroke.

[FL Beachgirl]

Yep, I know what a weasel clause is. However they are insisting on an AS - IS FARBAR contract with thier 3 page long addendum....thus I would be unable to use my paperwork which has quite a few nice weasel clauses in there.
Something new has come up today though. I went to my Saturday morning class this morning and found someone who will not only do private funds for me, but is willing and able to have a liquid cash account available for when I submit the offer. I'm unsure at this time how it's going to work out but I am going to put in a phone call on Monday and go over details and see if it's a viable option to use. I'm firm believer in "if it sounds too good to be true it probably is so proceed with extreme caution". I don't want to get all kinds of over excited and lose my house and my deal over a stupid mistake.

So that's where it's at right now ;)

Jennifer

[Aldo]

I hope your new contact works out as hoped. You appear to have your ducks in a row, so you proably already know what is forthcoming. But, every deal has a yellow light, so be sure to stop when traffic gets too heavy.

[FL Beachgirl]

Well, my money source turned out to be a big fat Dud. ;(
Apparently in order to qualify with her she needed to see "something that shows that I am not in arrears with the IRS" but she didn't want to see returns or W-2's.
Being a stay at home mom for years and now having the hubby on disability we don't have to file at the moment and we haven't for a couple of years, so there has been nothing to file. I explained that to her and she automatically said she wouldn't be able to help me. <uugh> I guess I need to keep looking.

I did however get a call from someone else last night from someone looking to bail out on another property that's going to auction in January. I did the prequal phone call and am going to see them this afternoon to look at the house and interview them further........wish me luck.

Jennifer