One major short sale concern of the bank is investing the time in arranging a short sale then having the buyer not close on the short sale. Due to this chance you may expect the bank to request a “Proof of Funds Letter” or a “Mortgage Commitment Letter” as a needed part of the short sale package.
This request is often a major hindrance for real estate investors that are flipping the deal with what is known as a double closing or simultaneous closing. What to do?
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Here are several possible (remedies|solutions} for the needed proof of funds letter:
-Bank Statement. If you’ve got the funds available send the bank a bank record as your “proof of funds letter”.
-Obtain a Proof of Funds Letter. This letter can be obtained from your bank, mortgage broker, private money lender, hard funds provider, or anybody which has the power to provide transaction funding.
-Mortgage Commitment Letter. I’m not a fan of the Mortgage Commitment Letter because a bank issues a loan commitment after it has authorized both the house and you. The home appraisal must meet the lender’s rules and the bank may require the property be in a better condition then the current state of the home. For this reason I feel a commitment letter is better suited for purchasing homes that do not involve a short sale.
-Home Equity Line Of Credit (HELOC). If you have available equity in a property a HELOC on the real estate can serve you well. First, there is no charges on most HELOC for unused lines of credit. Second, it meets the banks suggestions for proof of funds letter even if these are not the funds you intend on using for closing.
Basically, unless you’ve got a longtime relationship with the bank it’s likely you will have to provide evidence of funds in some manner. If you are new with a small amount in resources, find a good hard funds provider to work with and they can provide the proof of funds letter you want.