As another example, many people ask for LOI's right up front before any due diligence has occurred. Why do they do this? I have no idea and sometimes I'll go ahead with it to get additional information about a property or properties, and sometimes I won't depending on what I know and/or how I feel about the source.
Asking for a Letter of Intent before divulging basic information about a property is entirely WRONG. For those of you reading this that practice this modus operandi, please consider not doing this. A buyer has a right to inspect and ask questions about a product until they are satisfied whether they want to buy it or not. This applies to real estate, cars, trucks, electronics, food, whatever! I wish the supposed professionals in our business would get that straight in their minds. What purpose does it serve to ask someone to submit an LOI on something they really don't have any idea about, aside maybe an address and in some cases, that isn't even given. You are wasting your time and theirs, period.
The last point is something that most professionals already practice but some do not. I choose to handle our business this way:
When I give an offer, I include a proof of funds regardless of whether I am asked or not. If the property I want to buy is $200,000, then my proof of funds will show this amount. If the property is $1,000,000, then my proof of funds will be for $1,000,000. Do the new folks understand why I am doing this? If you don't know why, I'm going to tell you: The reason is because it is nobody's business how much I have in my bank account except me. The seller or the seller rep only needs to know that I have enough to consummate the deal, nothing more. They do not need to know my bank account balance.
I have been asked by some sellers to provide proof of funds right up front before we've even decided what properties we want to purchase from the seller. Umm, nope, I'm not going to do that. Why should I provide that information before knowing I have something of value that I want to buy? Do I need to show my bank account prior to putting in an offer? NO, I DO NOT, and neither do YOU.
Let's not forget folks that seller's need buyers and we're buyers. We do not need sellers as buyers. We need sellers that have something of value that we want to buy. There is a drastic difference in need here, so please understand this and do not make the mistake of thinking that it is a reciprocal relationship. It certainly is not. Uncooperative sellers deserve exactly what they dish out....a no sale.
I had a rather annoying situation with a realtor recently. She wanted an LOI and POF (proof of funds) before we even identified what we may want to place an offer on through her pipeline. Well, as you now know our practice, the answer was no, but rather than saying no, I went through the trouble of showing several portions of HUD-1's we've closed in the past two months. They showed purchase price, and other pertinent details to show we were serious. I also posted a link to our buying entity from the Secretary of State and a link confirming ownership and signing authority from the same site. I gave her POF without giving her POF, but that was not enough for her. The realtor chose to play hard ball and ignored my valid request for additional information about the properties she had available. We do not deal with difficult people and unrealistic and unreasonable ones are the first to get dropped and so she is now history.
I like writing these articles because in many cases, I take real life events and discuss them. I do not gloss over them as some writers do to make real estate look easy and fast money. It is neither easy nor is the money fast.
So in summary, as a buyer, do not provide proof of funds until you place an offer and only provide proof of funds to show you can consummate the deal, nothing more. You do not show $1,000,000 in your bank account when you're buying a $50,000 property for example. Doing so, reduces your negotiating ability and it gives too much information to the other party that they do not need. It helps them, but does not help you. They only need to know that you can close the deal and nothing more.
I hope this has been a helpful article for all those fine folks out there in cyberspace and that it has helped steer certain sellers into proper professional behavior because serious buyers do not play games. They buy real deals fast and they pay cash but they only like to deal with nice, reasonable people. If you as a seller or seller rep find yourself getting frustrated with buyers, then you either need an attitude adjustment, or you need to pick a different occupation. Not having patience and being uncooperative with reasonable requests will hit you hard in your pocket book. Do not make this amateur mistake those of you who know who you are. :)
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Until next time, enjoy your week!