Ways to Handle Requests for Proof of Funds Especially When You Don’t Have It
There are a number of ways to raise the funds for multifamily real estate investment even if you don’t have your own cash or good credit. The problem, however, is that the seller might start asking questions about proof of funds that you would raise. You don’t have money in the bank account but you are going to use the cash using escrow, but that money is also to be raised.
Point of this talking is that this situation can lead to some roadblocks coming in the way while signing a real estate contract because sellers need solid grounds before even initiating the deal. With that said, if you fail to give proof of funds, the seller may not enter into the deal even if you offer high price for the property.
The reason is that the sellers wouldn’t trust you to close the deal. While the actual proofs can surely satisfy the sellers, there are a number of things you can do if you don’t have proof. Here, we are going to mention some ways that you can consider when you start getting requests for the proof of funds.
Respond while being professionally defensive
When you are asked about the proof of funds, you are actually asked about your ability to close the deal. If the sellers are sure about your ability to close the deal, they would ask you this question.
So, when you are asked this question, you can respond in this way:
“I understand you’re concerned about our ability to close since we will be raising the money. But I already have the verbal commitment from my investors for the money we’ll need to do the deal. It’ll be in the escrow account when we close, but I don’t have it in a bank account right now. So I can’t give you a proof of funds.
But how about this? Why don’t we get together and get to know each other? If you don’t feel 100% comfortable with moving ahead with us, we’ll part as friends. What do you say?”
With that said, building trust is the most important thing in order to do the business. So, you can meet broker or seller, and tell them about your track record and also about what you are planning to do.
Show the seller the investors’ intent to invest
There is another way you can satisfy the seller, and that is to show them the intent of your investors to invest in the deal. It will show the sellers the investors’ interest in purchasing the property.
Remember, a letter of intent is not something that binds the parties to initiate the deal on legal grounds. It rather enhances the credibility of a deal which wouldn’t involve the showing of proof of funds.