Proof of funds... Realtor Problem... Help - Posted by Charles

Real Estate Investing
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Posted by Frank Chin on June 12, 2001 at 07:45:19:

Hi Steven:

OK, maybe we weren’t all that helpful.

On the other hand, we all agreed that Charles did not go about it the right way. Perhaps there should be more of a discussion of what he should do the next time.

First is the question of making offers. I beleive those making offers should better understand seller motivation.

I done a few posts along those lines because many posting on this board talk about seller concerns as OBSTACLES rather than as an opportunity to refine the offer. Indeed, your reference to my story as “unnecessary and un-useful” is the prevailing thought. What does the need of the seller to sell quick has anything to do with the fliipers need to make a quick buck ??? We just not interested because we are investors!!!

Hopefully, Charles will become a successful investor someday and stand in the shoes of the seller.

Second, many standard contracts drawn up by sellers, seller’s agents, or his attorney, at least around here, precludes assignnment of the contract, unless agreed to by the seller. So if I were to attempt a flip around here, I would have to tell the seller, and have the contract amended to allow this.

Third, the trick is finding the right motivated sellers. Someone selling though an agent in a hot market is not interested dealing with someone flipping his property. On the other hand, someone who is on the verge of relocating may be, so flipper serves the purpose of finding the ultimate buyer.

Fourth, it appears flipping works best with inexperienced sellers and realtors. This is because experienced sellers and realtors ask too many questions, such as proof of funds and credit.

Its interesting to see many recent posts regarding flipping scams and governmantal efforts to crack down. While I beleive many of my fellow investors on this board are ethical, you can easily see what the combination of an unsophisticated seller, and a slightly unethical, or newbie flipper can lead too.

At best, you can have someone in a financial crisis needing to sell quick being helped by a flipper tying up the property trying to get to get top dollar- and not able to perform. At worst, he can be snookered, and become another front page story.

Hopefully, if Charles is out there making offers, he can direct them to the right type of sellers in the right circumstances. If not, he’ll be wasting everyone’s time including his. Sooner or later, realtors would avoid him, or worst, he’ll be tired of making offers.

Hope this post is slightly more helpful.

Frank Chin

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Proof of funds… Realtor Problem… Help - Posted by Charles

Posted by Charles on June 10, 2001 at 18:47:29:

I’ve set up a $1,000 escrow account with my RE lawyer. I’ve used it on 3 offers that I’ve made on Fisbo’s… without a problem. “$1,000 deposit to be place in escrow with buyers attorney upon the acceptance of this offer”

HOWEVER… Saturday evening I made an offer on one house through a realtor. Since we had to use her contracts… I used an addenda with a financing contingency. (She was so busy trying to write up her contract that she didn’t READ the addenda)

I heard in the past that you could list that you were putting 10, 20, 30 % down… since it was all going to be sorted out at closing from the financing of your end buyer.

So i put 20%down… due at closing with the balance financed at closing. $1,000 deposit placed in escrow at buyers attorney’s office upon acceptance of offer.

OK…now here’s the Kicker. She asked for my Attorney’s name and address( that’s ok with me because the $1,000 is there in escrow) NEXT… she asked for proof of funds.

Now… I thought proof of funds were only required on ALL cash offers? Did she not see the financing contingency in the Addenda ( since she didn’t read it anyway).

I’m flipping. AND in addition I DON’T HAVE proof of funds for that kind of money AND credit is shaky. Told her I would fax it to her. Question is… How do i resolve the proof of funds issue… Make her read the financing contingency in the Addenda?

OR try to get a letter of intent( will that suffice?) from this new local mortgage company that wants to work with me and know I’m doing simultaneous closes and flips?( they want to finance my end buyers… In fact they want me to come work with them part time as a loan officer). Which way do i go?

Thanks in Advance
Chuck

Thanks in advance

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Re: Proof of funds… Realtor Problem… Help - Posted by Billm

Posted by Billm on June 12, 2001 at 01:51:52:

As a broker who represents a seller, I’m obligated to keep my seller’s interest protected. Part of that service involves making reasonable enquiry re: a buyers ability to perform as per the offer. Experienced brokers/agents know the ropes and understand where the most likely bumps and problems arise. Sounds like you ran into an agent that has some experience.

If you intend to pursue flips, etc, you’ll be better served by using your OWN “buyer’s agent” who is experienced and knowledgable in these concepts. You’ll very likely negotiate better prices and terms and have a buffer to deflect the selling agent’s questions.

In the future, if you plan on flipping, and the property is listed by a competent agent, you’ll have to be a bit more particular as to how you draft your offer to the seller. Maybe you’ll offer options instead of earnest money. But that’s a subject for another day…

Bill in OR.

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Disgusted by Frank, PBoone and Ed’s reply - Posted by StevenS(CPA)

Posted by StevenS(CPA) on June 11, 2001 at 18:58:55:

OK,

First off, I will accept that it may not have been a good idea of what Charles did. And I have nothing but respect and admiration for Frank, PBoone (who I know have been posting to this newsgroup for a least 3 years) and Ed,
(Whom I also know have been here for awhile).

What Chares did wasn’t perfect, but aren?t by actually making offers how you learn?

I’ve been reading CRE newsgroup for years, and I used to post a lot but I’ve been very busy in my own business. But this group has always talked about how to get around having to pre-qualify and creative ways for coming up with deposits, downpayments and other snags.

But all three of you treated Charles like he had no business even making an offer. Frank, I think yours was the most disappointing because you seem to only want to talk to buyers who have $100,000.00 in their checking account and million-dollar credit. And I’m sure I would want those types of buyers too, but WE are not those types of buyers. We are investors. We are not retail buyers. And even if I had $100,000 in my checking account I wouldn’t put it down on a house. And I definitely wouldn’t want the seller to know that information!

I’m sure more than 50% of the people who read and use this newsgroup do not have the best credit or have barrels full of money in the backyard to throw around. If they did then they wouldn’t have to read our advice.

He was approaching this deal as an investor. Not a retail buyer. So the fact that he couldn’t qualify with your traditional realtor doesn’t matter. The advice and story about how you find retail buyers was unnecessary and un-useful. And if yours was the only post I ever read about doing creative real estate deals, I wouldn’t be in this business and 90% of everyone else that reads these post wouldn’t be either.

And Ed, I don’t know anyone who is in a business where you have to write contracts and make offers all day long have not, more than on one occasion, put something in a contract that they wish could have been left out. That’s called learning too. And it’s why “out clauses” are so important. Yes. It’s would be wonderful if I had money lined up, attorney?s, title company and contractors ready to go, and a great deal to just roll in and close.

But like the saying goes, “if it were that easy, everyone would be doing it.” Not everything happens in that order that’s why being creative is so important. And when you talk about FRAUD, that’s a whole new level of accusation. I don’t think this person was talking about stealing this house or doing anything criminal. He was trying to buy a house creatively. And he’s new. And you may have scared him from ever making another offer or a hundred other people who have read your post. So, YES! It would be wonderful to have all your ducks lined up before making an offer. But waiting for the perfect time to make an offer, never comes when you’re just starting out and it sometimes never comes. I’ve been in deals where I thought everything was perfect and a home run that fell apart at the closing table and I’ve had deals that I knew where long shots that came together better than I could have even planned it. You just never know, but waiting for everything to be in place before making an offer is just silly.

Next is PBoone, this person is trying to find a deal that an investor is willing to invest in. PB, you said that he should have gotten an investor (willing to back him up with cash) BEFORE he got a deal worth funding. How many times have all of you read, find the deal and the money will come. But you’re advocating finding the money and the deals will come. And it’s never worked that way for me and I’m sure it hasn?t for most of the successful people in this business. But PB, if you have a way of gathering up hundreds of thousands of dollars without having cash, credit or even a deal on the table, please let me know because I’m doing something wrong.

And finally, I’m NOT in any way advocating that what he did was right. Being dishonest is always wrong. But with realtor’s controlling more than 90% of all properties sold, most of us have to deal with them sooner or later. And I don’t know of 1 in a hundred realtors who if you came up to them and said, “I have no money, bad credit and no experience. Can you take hours out of your busy schedule to show me some houses?”

THE NUMBER ONE WAY TO LEARN THIS BUSINESS IS BY MAKING OFFERS! Nothing compares to it or substitutes for getting out there and doing it. You can read everyday for the rest of your life and you won’t make a dime in this business until you actually sign your name at the bottom of an offer.

So Chuck, congratulations on taking charge of your financial future. You made a mistake and I really can’t help you make right the snag you got yourself into. But don’t let that stop you from making your next offer. Learn from this one and go on to the next. One thing you’ll learn very quickly is it takes a lot of hits before you strike gold and this was just your first hit. So my advice is, Keep Hitting!

Sorry if this was a bit hard on the ones who replied to Charles post. On any other occassion I know I agree with you 100%.

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Re: Proof of funds… Realtor Problem… Help - Posted by Frank Chin

Posted by Frank Chin on June 11, 2001 at 09:02:39:

I agree with the other posts here.

I recently sold a property and had my Realtor prequalify the buyer. I specifically asked the realtor to ascertain if the buyer actually had the funds, and the credit needed to qualify for the mortgage.

The realtor had the buyer prequalify for the mortgage and I received a letter from the mortgage company indicating that the buyer is indeed qualified. With properties in NYC selling for close to a half million, that’s the least the realtor can do for his commission.

Why did I do this?

I priced the property slightly below market to move it quickly. Indeed the property sold in a day, and I received several credible offers within the first two weeks.

One thought in the back of my mind is that someone would realize the price is indeed below market, tie it up, and try to find a monied partner. In fact, one tenant of mine wanted to do this.

If I allowed this the happen, then the whole purpose of underpricing would be undermined. Instead of selling quickly, I’ll be stuck with someone rying to make a buck at my expense at best. But worst, wasted months of my time if he can’t close.

If I’m going spend a few more months sweating it out, I might as well wait for a REAL buyer, sell it at FULL price and keep all the profits for myself.

Frank Chin

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Investor Ethics - Posted by PBoone

Posted by PBoone on June 10, 2001 at 22:09:21:

You have run into a snag that is good for us all, I agree w/ ed… If you are going to play the game, do it with dignity.
Now take a step back, plan, find investors (with cash)then make offers. You do not have to deceive in order to be successful in this business.
Pat

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Re: Proof of funds… Realtor Problem… Help - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on June 10, 2001 at 20:36:45:

Sounds to me like the Realtor is doing just what she is supposed to do, that would be to protect the interests of the seller.

You, Chuck, are the one who put 20% down on the contract. If you don’t have it and can’t get it then that fact needs to be known right now. If the new company that wants to help you out, in spite of your questionable credit is willing to give you a letter guaranteeing that the funds are available, then I would bet that would be acceptable. I doubt that is going to happen.

Now put yourself in the place of the seller. Here comes some guy who has $1,000 (whoop-de-doo), and is going to find somebody to “flip” to. He has questionable credit to boot, and he wants you to take your house off the market and wail until he finds a fish (with cash or good credit) who is willing to pay full price plus the flippers profit…Think about it, and my guess is that you would not be willing to just sit and wait for this guy with the $1,000 to work his magic.

Actually when you write something on a purchase offer, like “I have 20% down”, and you know that statement is not true; a lot of folks would call that fraud.