Question about POF letter with REO properties (Transactional funding)

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Question about POF letter with REO properties (Transactional funding)

Katrina P.
Investor · Randallstown, MD · Member since 2010 · 185 posts · 57 votes

I just got off the phone with a Realtor whom I told I have Proof of Funds for a REO property. He asked me was it an FHA loan, and I said "no, it's transactional funding". He didn't know what I was talking about, and asked me to explain. He wanted to know if it was a cash offer, and I told him it was financing from an investor. He said, "well, your're going to need to show a bank statement from the investor, proving that the money is in the bank". He also didn't know what a back-to-back closing was. How do I handle situations like this with Realtors? How do I explain transactional funding to them when I'm asked? Is it actually cash from an investor, and will I need to show that money available? I am just getting my feet wet in this business, and learning as I go. I'm reading on this site at the fastest rate I can, but haven't come acrros this yet. Any advice?

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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y

Hi, I am all about being truthful and disclosing deals, but you also don't have to tip your hand so far, especially with Realtors that don't have a clue.

Does your investor have a company name? If so you're getting a loan from XYZ mortgage. If the Realtor says he never heard of it, just say that's where I get my loans and leave it at that!

You don't want the listing agent to present your offer like it's an unlikely deal because he has no knowledge of the company, but getting into your sources of funds is really none of his business, other than the liklyhood of your being qualified. A letter should do it just as a letter from any other lender.

I have played dumb sometimes, I don't always say I've been there done that, so if a Realtor I don't know quetions me, I turn the tables, well have you heard something bad about XYZ? Do I have to get my money from a paticular lender for this type of deal? Tell me what you think, I'd like to buy this house.....such comments usually shuts them up!

Good luck, Bill

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    Hi, I am all about being truthful and disclosing deals, but you also don't have to tip your hand so far, especially with Realtors that don't have a clue.

    Does your investor have a company name? If so you're getting a loan from XYZ mortgage. If the Realtor says he never heard of it, just say that's where I get my loans and leave it at that!

    You don't want the listing agent to present your offer like it's an unlikely deal because he has no knowledge of the company, but getting into your sources of funds is really none of his business, other than the liklyhood of your being qualified. A letter should do it just as a letter from any other lender.

    I have played dumb sometimes, I don't always say I've been there done that, so if a Realtor I don't know quetions me, I turn the tables, well have you heard something bad about XYZ? Do I have to get my money from a paticular lender for this type of deal? Tell me what you think, I'd like to buy this house.....such comments usually shuts them up!

    Good luck, Bill

    3Reply
  • Eric M.
    Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
    16y

    I agree that you don't need to get into what Trans funding is and all that. You have a proof of funds letter from a mortgage lender. If the REO bank wants more, they can ask for more.
    As far as the back to back closing, you may have to explain that because I hope you are disclosing in your offer that you intend to resell the property immediately.
    When you explain it don't say Double or Simultaneous Close.
    You just explain that you have a buyer lined up and after the REO purchase closes, then you will be selling it to the other buyer. Hopefully you have a Title company lined up. If the realtor gives you grief, refer him to your contact at the Title company.
    It sounds like you don't have a realtor representing you. That might be a good idea. You need to find an experienced Realtor who understands investing and they can act as your educator with the listing agents.
    Good Luck.

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  • Mark UpdegraffBusiness Member
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 692 votes
    16y
    Originally posted by Financexaminer:

    Does your investor have a company name? If so you're getting a loan from XYZ mortgage. If the Realtor says he never heard of it, just say that's where I get my loans and leave it at that!
    A letter should do it just as a letter from any other lender.


    Bill, Great advice as usual! Do you happen to have such a letter in generic form that we could use?

    Thanks so much!
    Sincerely,
    Mark

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    I really don't see explaining anything beyond the closing with the bank. They will probably ask if it is owner occupied or an investment, I just tell them the truth, I'm buying as an investment, maybe a rental and sell it later on, don't know, I don't own it yet! It's none of their business what your plans are! It's either owner occupied or non-owner occupied, and IMO, they really don't need to know that, all they need to know is what my offer is, can I perform and if they are willing to close at that price, period! So anything beyond that is unnecessary, unless it is required by law!

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  • Kevin Smith
    St Petersburg, FL · Member since 2009 · 35 posts · 4 votes
    16y

    Yes I agree totally with the above post. The only thing i will tell them up front is that I'm an investor thats about it. I made the mistake of telling an agent I was a wholesaler, I think the only thing saved me was the agent was also an investor as well. His only concern was if I didn't find a buyer would i still buy the property. I told him yes and I did so he was happy.

    1Reply
  • Ted Akers
    Centennial, CO · Member since 2009 · 758 posts · 251 votes
    16y

    Good response here by Bill. One other answer might be that you submitted as a cash offer to strengthen the offer because that eliminates financing contingencies or outs. Most transactional funders will not provide hard POF's to not have account information floating around out there. I would not encourage it, but if push comes to shove you may be able to have your transactional lender speak to them. This is a double edged sword though in that if the realtor asks detailed questions the funder cannot (or should not) decieve them about how transactional funding works.

    3Reply
  • Nick Abbate
    Real Estate Investor · Phoenix, AZ · Member since 2010 · 155 posts · 16 votes
    16y

    I actually just had this happen, I was putting in a contract on a REO and got the POF off Mr. Akers site, Thanks Ted, and I submitted it with my offer. The bank didn't ask any questions and just accepted. On the second page of the POF it says it is transactional funding. So that should be it, no explaining. I didn't need to do any on mine.

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  • Matt Meyers
    Real Estate Investor · South Elgin, IL · Member since 2010 · 9 posts · 0 votes
    16y

    I talked to an REO listing agent today and I explained to him that I would be submitting cash offers and my funds would be coming from a private lender that I have secured. I told the agent that my POF letter would be coming from my private lender stating that I have funds available to purchase properties but the agent said that was unacceptable and I would have to have a POF letter from my bank with my name on it. How is what I'm doing any different than getting a letter from a Transactional Funding source? How can I successfully submit cash offers with acceptable POF letters on REO's when I a have a private lender backing my deals? HELP!
    [EMAIL REMOVED]

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  • Shari Peterson
    Lender · St. Louis, MO · Member since 2009 · 348 posts · 164 votes
    16y

    Matt, of all of the POF letters I have provided, I only have received a handful of calls from realtors who are doing more due diligence. For those that I do talk to, I answer their questions honestly. My point, however, is not to worry about it so much because it rarely happens. If you run into an obstacle with one realtor, just move on to the next deal.

    1Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    16y

    Unless your funding from the private lender is totally unconditional, you're not really making a cash offer. Write the offer as a financed purchase and use the approval letter from the lender.

    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    I am not sure how deals work in several other states in this thread, but here in CA, if you don;t show a bank statement (not an approval letter from a Trans. funder) you are not offering an "all cash deal".
    The deals I go after are usually those in a condition that would not meet lender approvals (gutted kicthens, etc) and as such, require all cash offers. Here in CA, you are extremely lucky if a bank accepts an "all cash offer" with a pof from a lender (transactional or otherwise)
    I get deals done here with real POF's (bank statements and other liquid asset statements) showing my personal, my company, or my trust name.
    This is the hurdle most newbies run into as far as proofing up with their all cash offers.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    16y

    The issue I run into on my listed properties as a broker for my clientsis middleman investors who have no money and are facilitators.

    They don't want to put any skin in the game and a paultry earnest money.My REO sellers usually WILL NOT allow assigning.

    Basically the buyer investor wants no liability and if they can sell to another buyer for a fee the deal will happen.If not the bank just wasted months of time because the bank won't know the capability of the C buyer when found to close a deal.

    I have no problem with investors who want to purchase and close and then resell as long as it's not predicated on finding a C buyer.

    There are plenty of direct cash buyers out there or investors buying directly to not have to tie up a property for a bank.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y
    Originally posted by Joel Owens:
    The issue I run into on my listed properties as a broker for my clientsis middleman investors who have no money and are facilitators.

    They don't want to put any skin in the game and a paultry earnest money.My REO sellers usually WILL NOT allow assigning.

    Basically the buyer investor wants no liability and if they can sell to another buyer for a fee the deal will happen.If not the bank just wasted months of time because the bank won't know the capability of the C buyer when found to close a deal.

    I have no problem with investors who want to purchase and close and then resell as long as it's not predicated on finding a C buyer.

    There are plenty of direct cash buyers out there or investors buying directly to not have to tie up a property for a bank.
    Joel your information provided explains exactly why doing the REO business takes real cash, not a TF letter in hopes to complete a simultaneous closing.

    The key for you as an agent is to only deal with the real cash buyers such as myself who can show real bank statements in my company name, show proof of previous transactions through title and those who are willing to put up larger EMD's.

    Many of my offers go with at least $10k in EMD on $250k purchases and sometimes more. I put $45k down on a $400k purchase just a few months ago. This tells the seller (the bank) that they have a real offer backed up by a large deposit.
    Large emd, quick close, and real POF is what gets these deals accepted and closed.

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