Proof of funds letters versus recorded closings when you're vetting the buyer list

The non-refundable earnest money answer is the one I'd weight, and I say that as someone who has spent four months building a spreadsheet instead of doing anything.

A POF is a document about the past. A wire of $10,000 that the buyer can't get back if they walk is a statement about right now, and it's the only one of your four inputs that costs the buyer something to make. References from other wholesalers are useful but you're asking someone who wants that buyer's next deal to grade him honestly.

What I can't work out is whether demanding hard earnest money shrinks the list so much that the speed advantage disappears. If half your buyers won't wire non-refundable and the reason you're valuable is a 48 hour match, you may have traded the thing you sell for the thing you can verify.

Sorry, basic question, does POF mean the buyer's bank sends a letter or does the buyer just send a screenshot of an account?

Rigging, both happen, and that's the reason canton is skeptical.

Proof of funds, or POF, is documentation that a buyer has money available to close. It can be a bank statement, a letter from a bank or a hard money lender saying the buyer qualifies for a certain amount, or a screenshot of an account balance. None of it is standardized and none of it is a commitment. A lender letter usually says the buyer could borrow up to some figure if the property meets the lender's criteria, so it tells you about the buyer and nothing about the specific house.

Earnest money deposit, or EMD, is cash the buyer puts up when they sign. Whether it's refundable depends on the contract terms and on state law where the property sits, so that part needs a local real estate attorney to set up correctly the first time.

On canton's recording point, the deed transfer is generally public record, but the price is not public everywhere. About a dozen states are non-disclosure states, which means the sale price isn't recorded for public view, and practice differs county to county even within disclosure states. Check the county recorder or assessor site for the markets you care about before you assume you can verify a buyer's history from records.

The usual order operators use is closing history first, then how the buyer behaves on a live deal, with POF as a screening filter rather than proof.

The signal I'd add from the build side is how the buyer inspects. A real cash buyer who does this weekly walks a house in 25 minutes, knows what a foundation crack costs him, and gives you a number the same day. A buyer who sends a general contractor out for a formal bid and then asks for a two-week extension is going to renegotiate you, every time, and his POF letter will be immaculate.

I've had two assignments retraded on me by buyers with clean bank letters. Both times the retrade was framed as scope discovery, and both times the buyer had never actually renovated in that price band. So I'd put "has closed on this exact house type at this price band" above raw closing count. Somebody with fourteen turnkey rental purchases isn't a buyer for a burnout, whatever his balance says.

I follow most of this but I'm confused about one step. If half the buyer list turns out to be borrowing hard money to close, is that still a cash buyer for your purposes, or is the whole list really a financed list with extra steps? I've been reading about the lending side and the impression I have is that a hard money close can still hit a two-week window, which would make the distinction less useful than it sounds. Genuinely asking, because canton's point about not being able to tell the two apart from the record assumes it matters.

Vellum, it matters when the appraisal or the lender's scope review comes back low, because that's the day your cash buyer discovers he isn't one.

I'd want to see the buyer's fall-through rate more than any single document, and I'd want the operator to have that number written down. If a dispo shop has moved 40 contracts and can tell me nine died and which buyers killed them, that's a real business with real records. If nobody tracks it, the list is a spreadsheet of phone numbers and the vetting is a story.

Canton, when you asked for the 60 names, did anyone offer you closing counts per buyer? That answer alone would tell you a lot about whether the network is a network or a contact export.

On the land side the verification problem is worse and it changed how I think about this. Nobody's buyer list for infill lots has recorded comps you can lean on, because half the transfers are family or entity transfers at a dollar and the useful pricing sits in listing archives that go stale.

What I ended up using is the title company. The closing agent who handled a buyer's last four deals will confirm whether the buyer funded on time, and they'll do it without editorializing. That's a cleaner reference than another wholesaler, whose interest in the answer is obvious. Doesn't work in every market and some agents won't say a word about a past client, which is their right, but it's cost me nothing to ask.

Also, canton, the fact that six of 60 POFs were visibly recycled is itself the finding. It tells you the operator never read them.

The letter you got with no drawn balance is the one I'd focus on. A line of credit letter from a lender is an expression of appetite at a point in time and the terms behind it can change with no notice to you, so anyone relying on it should confirm current terms in writing with that lender before treating the buyer as funded.

What I'd ask the operator for instead is his own funding record. Of the last 20 assignments, how many buyers wired on the scheduled date, how many needed an extension, how many needed a second lender. That's the same question a warehouse line asks a mortgage originator, and it's answerable if the records exist. Parcel's title company route gets you the same information from the other end, and I'd do both.