Proof of Funds Magic - How to Get Your Offers to the Top of the Stack
Numbers don't lie.
According to RealtyTrac.com, through November 2009:
* There were 693,000 foreclosure sales
* 3.6 million foreclosure filings
The National Association of Realtors:
* National Median home price is $172,600, down 4% year-over-year
On the commercial side, according to the FDIC:
"...more than 150 publicly traded U.S lenders own nonperforming loans that equal 5% or more of their holdings, a level that can wipe out a banks equity and threaten it’s survival..." (This means that these lenders will have to rearrange their balance sheets and unload non-performing assets or risk being shut-down or taken over by regulators)
All of this points to...
continued opportunity in distressed real estate investing. The question then becomes: how do you best take advantage of this opportunity? What is the best way to buy distressed investment properties?
CASH
Cold, hard, greenbacks.
For those of you that buy REOs (bank owned properties), you probably know what a Proof of Funds is. A Proof of Funds is a bank statement that shows that you have the cash to close on the property that you are offering on. If you aren’t making all cash offers, you are losing out on a lot of deals. Private money will solve this problem for you.
REO listing agents and top buyers agents won’t take your offers seriously unless you have a ROCK SOLID Proof of Funds statement showing you have plenty of money to close the deal. Sending offers on bank-owned properties or short sales with a financing contingency is a sure-fire way to get them shredded unless you are offering full price – and who wants to offer full price? Definitely not me!
If you send a big Proof of Funds statement along with each offer, you have the freedom to crush the bank for as much as you want. Why? Because you have the cash. You have the gold. The golden rule of business is: he who has the gold make the rules. The more cash you have, the more rules you can make. Private money is the single best way to show you have the cash to close the deal. A statement with a line of credit isn't going to work most times and a letter from an investor stating that you will have the funds available isn't going to cut it either.
Most banks will only take offers seriously if the company or person making the offer shows a statement that the money is readily available in a liquid funds account.
Side Benefit
I am routinely amazed at the level of response I get from REO agents when I send offers through with a high 6 figure or 7 figure company bank account statement. They snap to attention like army soldiers. Why? Because my buying power means that I am not just looking for one deal – I can buy as many houses as they have listed – so now they want to do more business with me. Like magic more deals are sent my way and I get put to the top of the list for fresh ones as they come out. These people are in the business of moving houses - hey, when there's a hungry monster(e.g. buyer), better feed it, right?
When you bring private money into your business and you start sending out big Proof of Funds statements with your offers, you will take a huge leap forward in respect with listing and buyers agents alike. They will want to help you more. Take you to lunch. Get your input. This means a steady pipeline of deals and regular cash outs when you flip the property or plug a tenant in.
A big Proof of Funds statement is magic. It’s like a giant magnet for REO and other distress deals - which, as the numbers show, are where the bargains are going to be.
According to RealtyTrac.com, through November 2009:
* There were 693,000 foreclosure sales
* 3.6 million foreclosure filings
The National Association of Realtors:
* National Median home price is $172,600, down 4% year-over-year
On the commercial side, according to the FDIC:
"...more than 150 publicly traded U.S lenders own nonperforming loans that equal 5% or more of their holdings, a level that can wipe out a banks equity and threaten it’s survival..." (This means that these lenders will have to rearrange their balance sheets and unload non-performing assets or risk being shut-down or taken over by regulators)
All of this points to...
continued opportunity in distressed real estate investing. The question then becomes: how do you best take advantage of this opportunity? What is the best way to buy distressed investment properties?
CASH
Cold, hard, greenbacks.
For those of you that buy REOs (bank owned properties), you probably know what a Proof of Funds is. A Proof of Funds is a bank statement that shows that you have the cash to close on the property that you are offering on. If you aren’t making all cash offers, you are losing out on a lot of deals. Private money will solve this problem for you.
REO listing agents and top buyers agents won’t take your offers seriously unless you have a ROCK SOLID Proof of Funds statement showing you have plenty of money to close the deal. Sending offers on bank-owned properties or short sales with a financing contingency is a sure-fire way to get them shredded unless you are offering full price – and who wants to offer full price? Definitely not me!
If you send a big Proof of Funds statement along with each offer, you have the freedom to crush the bank for as much as you want. Why? Because you have the cash. You have the gold. The golden rule of business is: he who has the gold make the rules. The more cash you have, the more rules you can make. Private money is the single best way to show you have the cash to close the deal. A statement with a line of credit isn't going to work most times and a letter from an investor stating that you will have the funds available isn't going to cut it either.
Most banks will only take offers seriously if the company or person making the offer shows a statement that the money is readily available in a liquid funds account.
Side Benefit
I am routinely amazed at the level of response I get from REO agents when I send offers through with a high 6 figure or 7 figure company bank account statement. They snap to attention like army soldiers. Why? Because my buying power means that I am not just looking for one deal – I can buy as many houses as they have listed – so now they want to do more business with me. Like magic more deals are sent my way and I get put to the top of the list for fresh ones as they come out. These people are in the business of moving houses - hey, when there's a hungry monster(e.g. buyer), better feed it, right?
When you bring private money into your business and you start sending out big Proof of Funds statements with your offers, you will take a huge leap forward in respect with listing and buyers agents alike. They will want to help you more. Take you to lunch. Get your input. This means a steady pipeline of deals and regular cash outs when you flip the property or plug a tenant in.
A big Proof of Funds statement is magic. It’s like a giant magnet for REO and other distress deals - which, as the numbers show, are where the bargains are going to be.
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