Major Question: I have several investors lined up to provide me funds for an investment purchase. The investors have not submitted their funds to me and will not until I am under contract for the purchase.
What letter or proof can I provide the bank that I have the funds (the investors) at my disposal and can close the deal???
Thanks.
You either need to get a preapproval letter from a HML, or talk to your private investors and tell them that you have to have proof of funds before you make an offer…
When making offers you will often need a to show that you have the ability to close the deal.
This means you either have “cash” in the bank, (HELOC, etc.) and/or a pre-approval or pre-qualification letter written by the person(s) or bank or lender , etc. who will be loaning you the money.
Chris P.
Herman - I received your PM but thought I would answer in only one place.
You do not need a pre-qualification or pre-approval letter from each of the lenders who you have spoken with. At the time of your offers the lenders aren’t providing you with “committment” to lend.
You said in your email that you have many lenders you are working with. That’s great. And since it sounds as if you have built a relationship with one or more of the lenders who are willing to lend you money for your deals, then they will write some kind of letter for you…it’s pretty much standard operating procedure (in my experience anyway). An experienced lender knows that you need to have this with your offers.
A pre-qual letter isn’t committing either of you to each-other; it’s just showing the seller that you have spoken with a lender who is willing to lend you money. Your offer will show that you are borrowing money, but not that you are borrowing it from one specific source.
Once your offer is accepted you can go to whatever lender you choose to obtain the actual loan.
Chris
I have also heard that multiple lenders can form some kind of “trust” that would be the lending entity and you would be the custodian. I am not sure how it all gets set up, and have not done any research yet, but sounds like something you may want to check out.
If I were you I would without a doubt read up on limited partnerships and syndications. This is probably the best way for you to move forward if you are involving different investors. You act as the general partner and control the operations of the company and the limited partners have exposure only to their invested monies. I can recommend a great book about this if you’re interested.
Open escrow and have investors deposit with escrow. Send escrow information to bank. The other option is to form an LLC for the purchase and have investors fund the LLC through escrow.
Thanks for the feedback on this. Some of the private message feedback I have received stated that I could write the offer and contract, submit to the bank, once they accept the offer, then provide proof of funds.
I’m working through realtors on this and the buyer and seller agents refuse to even submit the offer without the proof of funds.
Does anyone have experience bypassing realtors and going directly to the lender with the offer and contract, once the offer is accepted, THEN providing proof of funds?
Thanks all.
It’s the seller’s right to require proof of funds and may have instructed the agent not to accept an offer without it. Mainly so that they don’t accept the offer and have the property off the market just to have it fall through because buyer couldn’t close.
In this day and age, it’s your pre-qual letter or proof of funds that is the strength of your offer.