Proof of Funds: What Buyers Need
Proof of funds is documentation that shows you have the financial capacity to close on a real estate purchase. Sellers, listing agents, and REO asset managers require proof of funds to verify that your offer is backed by real money, not just wishful thinking. For wholesalers who may not have six figures sitting in a bank account, understanding how to obtain and present proof of funds is essential for getting offers accepted.
What qualifies as proof of funds
- Bank statement: A recent statement (within 30 days) showing a cash balance sufficient to cover the purchase price. This is the gold standard that all sellers accept.
- Brokerage account statement: A statement from a stock or investment brokerage showing liquid assets
- Hard money pre-approval letter: A letter from a hard money lender confirming they will fund the purchase at the stated price. This is the most common POF for investors who are not paying cash.
- Private lender commitment letter: A letter from a private money lender committing to fund the purchase
- Line of credit statement: Documentation of an available credit line sufficient for the purchase
- Transactional funding commitment: A letter from a transactional funding company confirming availability of funds for a double close
When proof of funds is required
- With every cash offer: Listing agents routinely require POF with all cash offers. Without it, your offer goes to the bottom of the pile or is rejected outright.
- REO and HUD offers: Bank-owned properties and HUD homes require POF as a condition of bid submission
- Competitive situations: In multiple-offer scenarios, POF strengthens your position by showing you are a serious, qualified buyer
- Motivated sellers: Even motivated sellers who are eager to accept an offer want assurance that the buyer can actually close
POF options for wholesalers
Most wholesalers do not have $200K sitting in a checking account. Here are legitimate ways to demonstrate financial capacity:
Hard money pre-approval
Apply with a hard money lender and obtain a pre-approval letter stating they will fund deals up to a certain amount. This is the easiest and most common approach. Many hard money lenders provide pre-approval letters within 24-48 hours of application.
Transactional funding POF
Transactional funding companies provide proof of funds letters to wholesalers who are registered with them. Some charge a small fee ($25-$100) for the letter, while others provide it free as part of their client relationship.
Private lender letter
If you have a private lender relationship, ask them to provide a commitment letter stating their willingness to fund purchases up to a specified amount. The letter should be on their letterhead (or professional stationery) and include their contact information.
JV partner's funds
If you have a joint venture partner who provides the capital, they can supply proof of funds documentation. The offer can be submitted in the JV entity's name or with a clause allowing assignment to the funding partner.
What NOT to do
- Do not fabricate bank statements: Creating fake bank statements is fraud. It is illegal, and modern verification processes will catch it.
- Do not use someone else's funds without permission: Presenting another person's bank statement as your own without their knowledge and consent is dishonest and potentially criminal.
- Do not use POF services that are scams: Some services offer to temporarily deposit funds into your account to create a legitimate-looking bank statement, then withdraw the funds. This is bank fraud.
Related articles
- Hard Money vs Private Money
- How to Verify Proof of Funds
- Transactional Funding Guide
- Protecting Your Earnest Money