Have you ever wanted to make an offer on a home and have the seller or their agent tell you that they need a “proof of funds”? Probably…and when that happened did you question who it is really for? Aren’t agents obligated to submit every offer…without additional requirements? Agents today are relating to their buyers that the demand for a “proof of funds” (actually evidence that current funds exist in cash or loan commitment) is something selling agents are demanding for their own protection. Well, if your cynical side is running the show on this issue please take a minute to finish reading this post.
It is true that many of the major servicers/owners of defaulted mortgages and foreclosed properties are now utilizing on-line offer systems that allow the seller to have a complete snapshot of all bids for a property. In most cases these bidding systems do not have an initial method for uploading proof of funds. So, the conclusion some are reaching is that this requirement is one that the selling agent is creating and enforcing. This is no closer to the truth than Lance Armstrong’s multiple claims to not be using PED’s.
While the electronic bidding systems are now a large part of the foreclosed property landscape, ultimately there still is a contract package that must be submitted. With that contract package, there are certain supplementary documents. Jennifer Wilmoth, my partner and one of the largest volume REO brokers in America, stated “We must have a proof of funds statement when submitting final contracts for a seller to execute in all cases for the clients we work for. No exceptions. So, why would we want to submit a bid for an agent or buyer unless we know that a satisfactory proof exists? With the time lines these offers must follow, and the competition for many homes, if one does not exist when submitting a bid it likely will not be available when completing the contract package.”ing
Lets look at HUD homes for an example. A buyers agent can submit a bid electronically for a HUD home and in that process they acknowledge that the buyer has funds to perform on the proposal. Their bid could be accepted the next morning and then there is only two business days for a HUD contract package (including the Proof of Funds) to be in an office in another part of the country. The entire contract package needs to be completed when submitting the electronic bid! Same goes for Fannie Mae bidding at HomePath.com. Much the same for other servicers also.
Bottom line is that proof of a buyers ability to perform on an offer is still very much a part of the corporate seller’s requirements..even when using an electronic bidding platform. The listing agents are relaying sellers requirements, it is just that the delivery method has changed.