MY FIRST WHOLESALE DEAL THROUGH RE AGENT - DO I NEED POF?

Question

In specific, I am working with the LISTING AGENT.  What are all the documents I need to complete this transaction? Mind you, I am WHOLESALING this property, not purchasing myself. Do I need to contact my cash buyers list ahead of placing property under contract? Is it wise to have Affidavit and Memorandum contract? THANKS!

Lydia R. · Answer

@Austin S. Pogue To put it simply, yes you will absolutely need a proof of funds to complete this transaction. There are a lot of people out there who will advise you to create a fake proof of funds...that is fraud, please dont do that.

I would strongly urge you to be transparent with the listing agent what you are doing because if you are doing an assignment then the seller and the agent will find out at closing what you are doing and that will most likely cause problems for you. Also, I hope that you have negotiated a price far below the list price because any investor that you offer this contract to is going to do some basic due diligence which will show that the property is actively listed for sale. Pretty sure the buyer will have an issue with that as well. Proof of funds is probably the least of your worries.

Wholesaling off the MLS is a no no in my book.

Wayne Brooks · Answer

@Austin S. Pogue @Leigha Chew Yep, any half awake agent is going to require a legit POF from a “cash buyer”.  A POF is a bank statement showing the Buyer on the contract has the funds in Their name. The letters from “transactional lenders” is of course not a POF, just a loose commitment to lend funds, which again any decent agent will know is useless since it’s only for double closings, if you find another buyer who actually has cash.

There’s no such this as an Affidavit and Memorandum Contract...there is an affidavit/memorandum of contract, but that’s not something the seller signs and you have to use it properly or there are legal consequences to you.

Other than that, the whole idea of wholesaling off the mls is essentially worthless....you’re shopping in the Retail market for a wholesale deal, that has already been exposed to the retail buyer, for something you can resell at a higher price, to an investor who is looking for a below market price.  It’s like going to a dealership used lot to buy a car that you’d then put on Craigslist to try and sell for a profit.

And yes, marketing a property you have under contract to assign does violate the licensing law in many states.

Jay Hinrichs · Answer

in your market most likely a waste of time.. also do check the state of CA BRE website there is a link right on the first page to turn in those violating the licensure laws.. contracting property with no ability to buy it then try to resell it for a fee.. is an activity that will violate the licensure laws.. before you go spending a ton of time and money on this pursuit you may want to get the other side of the coin .. not just the wholesale richs side of the coin that just sells the sizzle with no regards to reality of the market and the laws of the land..   Just sayin..

Ola Dantis · Answer

@Austin S. Pogue Welcome to BP!

To make things much straightforward for yourself as a wholesaler, try to target off-market deals because you could get into some legal quagmire with the MLS/Agent listings.

Most wholesalers find and target motivated sellers who wouldn't typically put their properties on the market for a variety of reasons.

Lydia R. · Answer

@Leigha Chew I wouldnt say that a POF from a transactional funding company is fraudulent, but I would say its misleading. Typically transactional funding is used for funding double closings. A letter from a HML would probably be better. The best thing is to deal with off market sellers so that POF isnt an issue.

John Thedford · Answer

That is how most unlicensed brokers work. They use deceit to trick sellers into signing when they have no intention of buying the property. That is a fact. The legal term is FRAUD.

Leigha Chew · Answer

Hi @Lydia T., would you consider the POF from these transactional funding companies to be fraudulent? I've watched several videos and read a few books that suggests this method, but I personally question the validity since they are not coming directly from a traditional source.

Leah Stuever · Answer

First: most MLS sellers will not go with a wholesale

Second: Yes. Most buyers want proof of funds with the offer.

Leigha Chew · Answer

Hi Austin, I have a similar question about POF when wholesaling as well. Most of the info I've found is that a POF can be received from transactional funding companies (most can be found online with a single google search). I'm not sure if all sellers require a POF from your cash buyers but it could be better to have, rather than not. In almost all RE transactions a buyer is required to show POF (when working with an agent and broker). I'm curious to see more of the responses you receive on this post so I will be following. :) Best of luck and also check out YouTube. There's a ton of really helpful info there.

Jay Hinrichs · Answer

OK.. then check with that state for licensure ..  also I would advise U never record a memorandum against a property if you do not personally have the cash to buy it.. that is clouding/slandering  someone's title and if the seller gets pissed enough.. U can have some serious legal issues you will have to deal with..  lastly any of the experienced wholesalers on this site will tell you MLS deals rarely can be wholesaled.. any decent agent will sniff you out a mile away.. the only place I see this rampant is in Texas.. with New western and some of the other big real estate shops but keep in mind those guys are licensed.

MY FIRST WHOLESALE DEAL THROUGH RE AGENT - DO I NEED POF?

Most Popular Reply