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I recently notified a broker that I was interested in making an offer on a 4-unit fully occupied property in New York City. The broker gave me the monthly rent for each unit and an estimate of the annual rental income and expenses. He also said that the seller was prepared to finance the deal. The broker asked for a proof of funds letter. I asked for the 12-month trailing rent roll and the actual income and expenses sheet for the property. He said in New York, sellers/brokers don’t provide those documents until there is proof of funds or proof that the buyer has done one or more deals in New York City. Unfortunately, my private lenders wouldn’t provide the proof of funds unless they see the actual documents to be sure the deal is worth their time. I’m just starting off. Is it true that these two documents are not released to the buyer in New York until the buyer has submitted the proof of funds letter? If so, how can one get around this problem, as I’m expecting some other deals from another source and I don’t want to run into this same problem again? Thank you.
If you were buying directly from the owner of the property, they would be glad to provide the information your private lender needs. If the seller won’t provide this information, they don’t sound like very motivated sellers (which is the only kind of seller you should be working with).
A motivated seller will jump through hoops to provide you the information you need to do the deal and close quickly.
The private lenders should provide a proof of funds letter stating the funding is dependent on getting satisfactory information about rents and expenses. If they won’t do that, find a different private lender.
I know a lot of people who invest in New York and I’ve never heard of anything like this before. It may be the way THIS real estate agent does business….but it is not the way business is normally done in New York.
As much as investors like to make fun of Brokers and complain about the process, one must remember a couple of things.
A Listing Broker (in most cases,) has a fiduciary responsibility to the seller. In some cases, they could be a Dual Agent. So vetting a buyer is part of the process. The information you are asking for is not public knowledge and doesn’t have to be disclosed.
For properties of that size, the information will come from the Schedule E of the Seller’s Tax Return. Income is likely under-reported and expenses high, so it likely wouldn’t be of much use to you. If it is owner financing through a Broker in this market in the city, I would look hard at the reason’s why. There is very little inventory and interest rates are low, so almost anything fairly priced would be moving without owner financing.
Investors also need to understand that the Broker is not paid to provide information and answer every question that may come up just because there is an interested buyer. They also need to make sure they are speaking with someone who is qualified and not wasting their time. If there is owner financing on the table, and one does not have the money, then the Broker is being smart. There are so many tire kickers and people who just got out of a seminar that are quite happy to waste the Broker’s time.
Also in NY (City) especially, 99.9% of the contracts are going to go through attorneys the deal. (Another hoop and another layer of people with time – though they might get paid for an unqualified deal.
I am a Broker here also, so maybe I am seeing from the Broker’s side. If you cannot get a POF letter in the first place, maybe your Private Lenders don’t have the money or are unwilling to lend in the first place. Or conversely, maybe it is just over-priced and they can’t justify the higher price without owner financing.
Rene
It’s also a real estate agents responsibility to present ALL offers. This should include letting the seller know that there is a buyer ready to make an offer if they can get evidence of the rents and expenses. But sadly, some real estate agents never present offers and never communicate with the sellers what a potential buyer’s request is. So the seller never knows.
In the case above, there is no mention of owner financing. The buyer is getting private financing but the lender has a requirement to see the rents and expenses. Most lenders would want to see this for proof that the property is producing the income the seller or broker claims that it is.
If the seller knew this was needed for the buyer to get financing, they would surely provide the information. It’s a reasonable request. Unfortunately, it sounds like the real estate agent is not presenting this offer to the seller so the seller will never know that they lost a sale because of the agent.
This is one of the many reasons I prefer to do all real estate transactions directly with the owner of the property. No middle man/woman involved.
@RenePerrin & @JackieLange – Thank you both for taking the time to weigh in on this issue. I believe the broker was afraid that after collecting all the information, I could by-pass him and go directly to the owner.
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