What is a “proof of funds” letter & why might I need one?

When viewing a listing or writing a cash offer, you may be asked for a “proof of funds” letter.

90% of Kirkpatrick & Co. transactions involve properties in excess of $1 million. Cash transactions have always been typical in that price range but are especially so in today’s competitive markets. Buyers working with a lender have access to a “pre-approval” letter, showing their ability to purchase a property. Other buyers might need to provide a “proof of funds” letter instead to view or make an acceptable offer on a farm. 

What Are Proof of Funds (POF)?

“Proof of funds (POF) refers to a document or documents that demonstrate a person or entity has the ability and funds available for a specific transaction. Proof of funds usually comes in the form of a bank, security, or custody statement. The purpose of the proof of funds document is to ensure that the funds needed to execute the transaction fully are accessible and legitimate.” Investopedia

Vetting POF for our sellers is an important consideration for our associates. Demonstrating ability is essential in a fast-paced, cash-fueled market. A real estate contract that cannot be executed because of lack of funds is highly problematic for sellers & other interested buyers. Buyers (and sometimes even agents) sometimes have a very emotional response when asked for a POF. Instead, POF can act as a beneficial tool for both buyers and sellers. The purpose of a POF letter is practical rather than personal.

Imagine you’re a seller with a barrage of interest for your property. How do you determine genuine interest? Do you have time to remain in escrow, bound to a contract that is not executable? How can you protect your valuable assets from disingenuous parties?

Buyers with a prepared POF letter have a distinct advantage in today’s market so we’d encourage speaking with your financial team before beginning your search. 

Need help navigating the market? Contact our team of industry experts right here in the Bluegrass.

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