June 24th, 2011 11:47 AM by AJ Gentry
As the local Kansas City real estate market continues to see changes, I am seeing more and more buyer clients each year that are wanting to invest their hard earned money in real estate. I call these cash buyers. I applaud these clients of mine and always encourage my buyer clients to purchase real estate as an investment, especially if they have cash sitting in a very low interest earning account. Hey, by the way, anyone buying a home for any reason is classified as an "investor" to me! Don't forget that. Purchasing real estate is an investment to your future! Even as a first time home buyer you are an investor. No matter if you are wanting to purchase a primary residence, purchase a property to lease to your son/daughter/family member, purchase a second home or simply to lease out, real estate is and always has been a good investment to your future.
Let me first say that in my business I treat everyone equally. Law requires me to but I would treat everyone equally even if it did not. In the given market, when you write an offer to purchase a property, you must provide proof you can pay for the property or the seller might not even consider your offer. Fair is fair, right? If you are a first time home buyer and have not sold a property before you don't know what it is like to be a seller. Let me tell you, as a seller, by agreeing to an offer and creating a purchase contract, you want to know before you put your home under a "pending" status that you have a buyer under contract that can pay for it. Crazier things have happened with buyers!
When I work with some of my cash buyers, many times they are offended when I tell them I have to have a confirmation letter of funds or proof of funds from their financial institution before I will turn in an offer to a seller for them. If the funds are tied up in one or several accounts, I can still submit the offer for them to the seller but we come to an agreed amount of days to get me the proof of funds. We write in this agreed amount of days for the buyer to obtain their letter in the contract so the seller can see it spelled out. This request for a letter is written in the standard Kansas City Association of REALTOR's contracts! Please see quote below from page 1 of the Residential Real Estate Sales Contract:
110 g. In the event of a cash sale, BUYER shall provide written verification from a depository of funds on deposit within ____ calendar days (5 days if left blank) which together with the financing mentioned above, if any, are sufficient to complete the Closing on this Contract.
When I ask my buyers to obtain a confirmation letter of funds or proof of funds from their financial institution, I have gotten many responses over the years - most of them not very nice! Let me try to explain this...as a seller you need to have a preapproval letter or proof of funds letter to consider an offer, period. At least that is what I would request when I sell a property and I want everyone treated equally. This is important Kansas City! You know you have the money in an account to pay for this property and are offended when your agent asks you for a proof of funds letter. You have to remember that the seller does not know you, probably will never meet you, and the real estate contract states you have "x" amount of days to provide a letter. I must have this letter from you, the cash buyer. I am not being mean to you or treating you unfairly. I would request that Donald Trump provide me with a confirmation letter of funds or anyone else = every cash buyer. By me requesting this letter I am actually protecting your interests!
We all know if you are obtaining financing to purchase a property you need to have a preapproval letter, not prequalified letter, by the time you make an offer. It makes your offer stronger in the eyes of the seller. Treat the confirmation letter of funds as your preapproval letter and buying your property will be smooth sailing.
I hope this blog post helps some of you. I think taking your hard earned cash and investing it in Kansas City real estate is a very smart idea but don't be upset or offended by me or your agent when we ask you for a letter of funds with both cash and financed offers. Be prepared to provide a letter and the seller will be more willing to work with you on your offer.
Happy Home Searching! I am always here to help and offer my advice.