How do you actually vet a cash buyer when a proof of funds screenshot is easy to fake

Question

The dispo side draws a lot of small landlords because it looks like the part of wholesaling that doesn't require cold calling anyone. Everything written about it says the whole model rests on having a vetted buyer list, and that the deals that move in 48 to 72 hours get the best fees. Fine. But nobody says what vetted means. The only thing usually described is asking for proof of funds. A common claim on other forums is that collecting a bank statement PDF and a driver's license is the vetting. That can't be the whole of it. A PDF is a PDF, and anyone can make one in ten minutes. So what does a serious dispo operator actually check before putting a buyer in the group that gets first look at a deal? And is vetted buyer a term with a definition, or marketing language on a landing page?

Rena Guide · Accepted Answer

Vetted buyer has a strict meaning and a loose one, and you've run into the gap between them.

Strictly, a vetted buyer is one you have verified on three separate points: they can pay, they buy the kind of thing you're selling, and they perform. Paying is the easy part and it's what proof of funds is for, which is a bank statement or a lender letter showing the money exists. You're right that a PDF proves very little on its own. The stronger version is asking the buyer to have their bank or their lender send it directly, or asking for a title company that will confirm they've closed there.

What they buy is buying criteria: zip codes, price range, condition, whether they need occupancy, how much rehab they'll take on. A buyer who can pay but doesn't want your kind of house is not a buyer for that deal.

Performance is closing history. Some of that you can check in public records, though sale prices aren't published in roughly a dozen non-disclosure states, so what you can see varies a lot by where you're working. Where you can't see it, the title or escrow company the buyer names becomes your reference.

Loosely, plenty of people call anyone who filled in an email form a vetted buyer. That's the marketing usage, and it's why lists of 500 produce fifteen closers.

One thing worth building in early: record the date each buyer last actually closed something with you. A list without that column decays without you noticing, because a buyer who bought steadily and then stopped looks identical to an active one right up until you send them a deal.

jordan_ellis2 · Answer

It's marketing language most of the time. Six months of reading and I've never seen two people define it the same way. The closest thing to a real standard I've found is "has closed with me before," which is useless when you're starting because you've closed with nobody.

jessreyes12 · Answer

The usual advice here is to check the buyer's purchase history in the county records. Which sounds smart until you find out a chunk of states don't publish sale prices at all, and some of the heaviest cash buyers hold everything in LLCs with names that tell you nothing. So you can sometimes see that Maple Holdings 4 LLC bought eleven houses, and sometimes you can see nothing.

Still better than a PDF though.

devon_pierce · Answer

Three questions on the intake form do most of the vetting: what zip codes, what maximum rehab budget, and who is your title company. The third one is the one that catches people off guard. A buyer who is genuinely closing has a closer they use by name and answers instantly. The tire kickers pause.

bmoreno23 · Answer

I'm new to all this, and the part that confused me is that proof of funds and hard money preapproval are apparently not the same thing, and people use POF for both. A hard money letter means a lender says they'd probably fund a deal like this, which is a different promise from cash sitting in an account. Am I understanding that right, @devon_pierce?

omar_haddad · Answer

@bmoreno23 yes, and the third flavor is a transactional funding letter which basically means nothing about the buyer's balance sheet.

On the rehab end, the vetting question I'd care about isn't funds at all. It's whether the buyer's rehab math is real. A buyer who tells me he does full guts for $28 a foot in my market is going to walk at inspection, every time, and he's going to walk on day nine of your contract. His money can be completely real and he's still the worst name on your list.

carlos_nunez · Answer

The last closed date matters. A buyer list that has been accumulating since day one usually carries names nobody has verified in years, and every blast sent to it is partly noise. One addition to the answer above: ask what they did with the last three houses. Kept as rentals, flipped, wholesaled on? If the answer is wholesaled on, you are looking at a competitor daisy chaining your deal, and your fee now depends on his fee finding a buyer. That is a different risk from him being broke.

gregpowell66 · Answer

Whether a daisy chain is even allowed depends on what your contract says about assignment and on your state's rules, and that is a question for a lawyer rather than a forum. @carlos_nunez's point about knowing the exit is still the right check. One more test worth running: walk one job with your top buyers if they will let you. Twenty minutes on a site tells you more about whether someone closes than any letter. You see whether crews are actually working and materials are on site, and whether he knows his own numbers. There is a type with beautiful bank statements and one stalled job that has been "finishing" forever.

How do you actually vet a cash buyer when a proof of funds screenshot is easy to fake

8 replies