What is a Proof of Funds Letter? (And Why Do I Need One)

“Proof of funds” is simply proof that you have the money available to purchase a property. When wholesaling, you’re making cash offers, so you need to show that you have cash available. In many cases, it’s the gatekeeper to doing wholesale deals. When dealing with institutions like banks, hedge funds, companies, or even when purchasing properties listed on the MLS, the seller (or Realtor) will almost always ask for proof of funds – individual sellers, not so much. 

Now if you’ve got $100k lying around, all you need to do is send a screenshot of your bank account to the seller and it will suffice 65% of the time. The other 35%, the seller will ask you for a copy of an actual bank statement dated within the last 30 days… simple right? Well if you’re like most new wholesalers, this can be a major hurdle since you probably don’t have that kind of money sitting around… but that’s ok, you’re going to simply use a “Proof of Funds Letter” which is a letter that states that you have the funds available to you.

Now before I tell you how to proceed, let me give you some advice. If you search this topic on real estate forums and some of the well-known blogs like biggerpockets.com, you’re gonna find some good info on the subject. Unfortunately, you’re also gonna find a lot of naysayers telling you how impossible this is, and how proof of funds letters don’t work. You’re also talking to people who aren’t necessarily wholesalers; they think of proof of funds as showing cash in your personal account and that’s it; these guys are not thinking outside the box. If you don’t have cash, they recommend getting pre-approved for a loan and showing that to the seller. LOL! Try using a pre-approval letter for your wholesale deals and let me know how that works out for ya.

Look, do you wanna listen to the people telling you the problems, telling you why things won’t work, OR do you wanna listen to the guy giving you solutions, who has used POF letters more times than he can count, AND who’s showing you exactly how to make it work? 

Good. Now a quick disclaimer:

I AM NOT:  an attorney, and I am not giving you any legal advice 

I AM: a full-time wholesaler who has been doing this for years. Do I have a 100% success rate using proof of funds letters? Of course not. Do you get a better response rate when you have your own cash to show? Of course you do. But realize this, if you make 100 offers, you probably only need to have one accepted to make your monthly income.

Wholesaling Truth: The Successful Wholesaler is an expert at being rejected. He/She hears “No” Hundreds, if not Thousands of Times More than He/She hears “Yes.” The more rejections you get, the more money you make….

Back to your proof of funds letter. This is a letter from somebody else (it can be a family member, hard money lender or private lender), stating that you have the funds available to. The person writing you the letter needs to be able to verify that the funds are available, when asked to do so. Now here’s a question I get asked all the time:  If your proof of funds is technically a loan, how can you make a cash offer? (Here’s where the trolls…. I mean people…. on the forums tell you that you can’t write these offers as cash).

My response: just do it anyway. You won’t get offers accepted if you don’t make cash offers. If the seller questions you or even objects, you simply respond that the funds are liquid, the funds are available in cash, and that the offer is NOT contingent on financing. Her’e where you’ve got to SELL IT. Be confident, let the seller know that you ALWAYS write your offers this way, you ALWAYS wire the funds in on the day of closing, and you wrote your last 100 offers this way (and closed) without incident. 7 times out of 10, they say OK and you proceed with the “cash offer.” In the cases where they say no, you try a few other options (that we’ll talk about later) and if they still won’t accept, just say thanks for your time, and move to the next one. 

So now that we’ve got that covered, I’m going to show you how and where you can get your own proof of funds letters –  Some are better and will get accepted more often than others. Some are free while others have costs. Some are cheap, and some are expensive. Some sources charge per letter, while others charge you a monthly, annual, or lifetime fee for unlimited letters. I’ll be reviewing and listing the advantages and disadvantages of each type of letter. If you have a letter or source you’d like me to review, please leave the URL in the comment box below. 

Before we check out the sources and reviews however, we’ll look at the various components of the ideal POF letter. Click the link below to get started:

Sample POF Letter (Sample Proof of Funds Letter)