When a commercial real estate investor seeks to acquire a property producing income using a number of innovative financing methods, one of the most important factors of his success lies in his ability to provide evidence of Adequate and verifiable funds to the client and the client. the lender. The audit of funds can enhance the credibility of investors with the seller and satisfy the obligation of lenders to know that the borrower has the necessary funds to complete their transaction.
Proof of funds
Lenders and sellers have several acceptable ways to show P.O.F. to close your commercial real estate transaction:
- Bank statements or bank verification
- Brokerage or audit account statements
- Checking the blocked account
"Banking Verification" This is the most acceptable and widely used method to confirm that investors can complete the proposed transaction. As such, the money must be placed in a bank account and confirmed by statements or a letter from the banker. This is a "hard" (as opposed to soft) verification method because the money is deposited into an account in the name of the buyer to serve as proof that the Buyer can complete the transaction.
"Brokerage Account Verification" Similar to bank accounts, brokerage accounts indicate the acceptable means for making a purchase transaction. Similarly, the statements or letters of the brokerage representative will satisfy the requirement to prove financial soundness. It is also a "hard" method.
"Checking the blocked account" This is the only method that can constitute physical or material evidence of the necessary assets, the custodian simply having to write a confirmation letter stating that the borrower has funds necessary to complete the transaction. This becomes difficult when the money is transferred into an escrow pending closing.
Finally, there are companies whose sole purpose is to provide proof of the financial capacity of commercial real estate investors to carry out their transactions. Many of them provide "proof of financing" and transactional financing. P.O.F. is required at the beginning of the transaction and the transactional financing is for the closing day only. Both of these methods are an integral part of the arsenal of investors when they use creative financing.