If you’re looking to buy an investment property, the seller may require you to provide proof of funds before they agree to close the deal. If this is your first time sharing proof of funds with a prospective seller, you might need clarification about how to obtain it. Keep reading to learn more about the proof of funds letter and discover an easy way to get one.
What Is a Proof of Funds Letter?
The proof of funds for real estate is an official document that guarantees you have sufficient funds to pay for the real estate transaction. Banks, money market accounts, or credit unions issue proof of funds letters to clients.
However, getting a proof of fund letter is not as simple as logging into your current bank account and downloading a copy of your latest bank statement. You have to make a formal request to the institution where you hold your money, and the institution issues it after checking the balance in your account.
Why Do Sellers Require a Proof of Funds Letter from Investors?
Sellers often require a proof of funds letter from investors to confirm that the investor has the financial resources to complete the purchase. This document helps to ensure that the transaction will go smoothly and helps to avoid any delays or complications that could arise if the investor cannot follow through with the purchase. Here are a few reasons why sellers require proof of funds before going ahead with the sale:
1. To Vet Genuine Real Estate Investors
Proof of funds helps to confirm that the investor is serious about making the purchase and has the financial resources to do so. It can provide the seller peace of mind and help ensure the transaction goes smoothly.
2. To Aid in Negotiations
In addition to helping to confirm the investor’s financial capacity, a proof of funds letter can also be used to negotiate the purchase price of a property. If an investor can provide evidence of their significant funds, the seller may be more willing to negotiate on the price. However, if an investor cannot provide proof of sufficient funds, the seller may be less inclined to negotiate or require a larger down payment.
3. To Show Credibility
Sometimes sellers are wary of real estate investors, especially if the investor doesn’t have years of experience in the field. The seller might want to check if the investor has a legitimate source of income. They will want to confirm if the investor has assets from traditional sources, such as a bank account, instead of non-traditional sources like crypto that might be challenging to liquidate.
Is Proof of Funds the Same as Down Payment?
While down payments and proof of funds seem similar, a proof of funds letter differs from the down payment. The proof of funds is a comprehensive document that demonstrates that the investor has the financial capacity to complete the transaction. The down payment is a specific sum the investor pays the seller to confirm the purchase. The down payment comes later during the transaction, whereas the proof of funds letter happens earlier, typically before the seller agrees to the sale.
How Can I Obtain a Proof of Funds Letter?
If, for any reason, your bank fails to provide a proof of funds letter or you don’t have sufficient funds in your account, you can reach out to DoubleClose.com. As the leading transactional lender in the country, we offer proof of funds for real estate investors. Fill out this form, and we’ll send you a proof of funds letter in PDF.