When buying a property cash, what bank statements are required?

Question

I am trying to purchase a home, which is foreclosed but also says is only selling for fractional ownership. It is listed for 10,000. I would like to make a higher offer for the entire property. The realtor told me that I was able to make a offer but that I would need a bank statement to show for the cash offer. I think I just answered my own question because I realized I’m making a offer an it is not a final deal. But if anyone would like to elaborate or give me tips on how to go about this property (my first investment); it’s greatly appreciated!

Dan Handford · Answer

To answer your question: the easiest way to show this is to print out a month-end bank statement and redact all identification on the document including account numbers. This is usually sufficient as proof of funds in this type of situation.

Lynnette E. · Answer

Likely you will have a very difficult time getting the entire property.

If you want to make an offer, the bank statement I generally obtain for cash purchases is often called a 'proof of funds' letter.  I ask the bank employee to write a letter "to whom it concerns" that I have xx amount available in an account at that bank.  Nothing more.  They sign and notarize it.  I have them do a few at a time, one at my first offer amount, one in between, and another at my max price.  Saves me getting a new one with each offer as we negotiate.  I NEVER give them a printout of my bank statement with how much I have.  That is not their business.

For fractional ownership, to determine what they see as the value, run their numbers.  So $10,000 for say 1/3 ownership means they think the whole property is worth $30,000.  If its $10,000 for 10% ownership, they think it is worth $100,000.  So you can offer accordingly for full ownership.

BUT do NOT expect them to sell it all.  Fractional ownership is generally offered in 2 situations-there is a vacation shared aspect for the property use, or a problem between the co-owners.

For a fractional ownership, maybe 12 people co-own a property in Hawaii.  They each have a month that they are able to go there and use it.  So the property still has other owners who want to use the property part time, and share the expenses.  The seller only owns the fraction he/she is selling.

The other case, for example, 2 people co-owned a piece of property.  One wants to sell, the other does not.  Maybe a break up of some sorts, maybe an inherited property.  So the person is selling the part they own, but have no control over the other portion.  This may also be a very difficult situation as you will be buying the 'ill will' of the person you now co-own with.  You could end up with issues sharing expenses, and communicating in general.  The other owner may be living in the house, and not paying for anything, taxes, maintenance, etc.  This is especially true if they inherited the house and were the 'special child' that mommie still supported, until her death.  You will not be able to evict, and that type will never pay for taxes, insurance, etc.  Its a bad situation.

My dad was in this situation with one of his brothers as I was growing up.  Their father willed a piece of undeveloped land to both my dad and his brother.  My dad owned the lot on one side, his brother wanted to buy the lot on the other side, but never did.  My dad and his father had hoped to build houses on the land and retire there.  Grandpa thought they would subdivide his lot and both add half to their lot.  My uncle did not want to subdivide it.  For ten years my dad paid for the taxes, insurance and weed clearance along the road as required by the County.  My uncle would never pay for anything.  Called my dad cheap for asking him to pay something that was only a few thousand dollars a year. Over the ten years he spent about $20k on this property that was worth about that much in value.   My dad just wanted out of the property, so he gave his half to his sister, who got along with the brother.  Together they sold it within a few months.  My uncle could not ask my aunt to pay for anything, she was a teacher and did not have extra thousands to give.  And he was never going to pay anything.  Co-ownerships can be very difficult situations.

In either of these cases, do not expect to be able to rehab and flip or rent the property.

Make sure you know the situation you are buying into and meet the other owners as part of the due diligence.  Ask if there is paperwork, besides the deed, that provides any agreements about the co-owning situation.  For the vacation situations there will be.

In any case, its probably not the type of property an investor generally does well with.