Purchase Offers/ Proof of funds when using private lender money.

[Giovanni Cortorreal]

It is my understanding that real estate purchases using private money lenders are made as cash offers. However, when the offer is for a bank REO the bank want a proof of funds letter that shows that the person making the offer has the money in an account under his/her name showing that the funding is in place.
The problem is that the private lender is not releasing the funds to me so that I may place it in my account prior to making the offer. The funds will not be release until a wire transfer is requested by the closing agent.
In my research I also read that the potential private lenders information are kept in your database and presented the investment opportunity only after the distress property is placed under contract.

Can anyone out there explain the process and let me know if I’m mistaken in my understanding? I am still trying to understand how it all works so don’t afraid to correct my understanding.

Thanks for all your help; I look forward for your responses.