Proof Of Funds

 
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Old 01-17-2018, 08:23 AM   #1
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Proof Of Funds


Ok so this is the first (large) project Ive had where a client is supposedly paying for a large project cash.

That said, my contract has verbage that requests the proof:

"Within Ten ( 10 ) days after execution hereof Owner will
provide Contractor, in a form satisfactory to Contractor, with such documents (including but not limited to loan commitments or financial information) as are reasonably necessary to assure Contractor that Owner has taken such steps as are reasonable to secure a sufficient and unconditional source of funds necessary to pay the construction costs and Owner will thereafter be responsible and liable for the prompt payment of all costs and fees in connection with the construction and completion of Ownerís Residence as set forth herein."

My question is this, how can I reasonably and nicely ask my client for this info? Or should I?

Do I ask to see their personal bank account? At the moment I have no idea what to do!
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Old 01-17-2018, 10:49 AM   #2
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Re: Proof Of Funds


Quote:
Originally Posted by LPG View Post
Ok so this is the first (large) project Ive had where a client is supposedly paying for a large project cash.

That said, my contract has verbage that requests the proof:

"Within Ten ( 10 ) days after execution hereof Owner will
provide Contractor, in a form satisfactory to Contractor, with such documents (including but not limited to loan commitments or financial information) as are reasonably necessary to assure Contractor that Owner has taken such steps as are reasonable to secure a sufficient and unconditional source of funds necessary to pay the construction costs and Owner will thereafter be responsible and liable for the prompt payment of all costs and fees in connection with the construction and completion of Owner’s Residence as set forth herein."

My question is this, how can I reasonably and nicely ask my client for this info? Or should I?

Do I ask to see their personal bank account? At the moment I have no idea what to do!

Whenever I buy a lot, I transfer the exact amount into an unused savings account, print the page and transfer it right back out. It takes me less than 5 minutes. You can suggest they do that.

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Old 01-17-2018, 10:56 AM   #3
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Re: Proof Of Funds


How does having the money at the moment prove payment will be received? You need to see a attorney that specializes.
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Old 01-17-2018, 10:58 AM   #4
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Re: Proof Of Funds


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How does having the money at the moment prove payment will be received? You need to see a attorney that specializes.
It doesnít, I think itís stupid but I play their stupid game. In my case itís moronic realtors demanding the proof.
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Old 01-17-2018, 11:03 AM   #5
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It doesnít, I think itís stupid but I play their stupid game. In my case itís moronic realtors demanding the proof.
That explains it.
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Old 01-17-2018, 01:42 PM   #6
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Re: Proof Of Funds


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Originally Posted by RangoWA View Post
How does having the money at the moment prove payment will be received? You need to see a attorney that specializes.
Not sure if youre writing to me or poster above you, but typically if a loan is obtained, you can at least verify that the loan was actually obtained.

You buy a car, they run a credit report and whatever else they do. We sell a half million dollar remodel and somehow are supposed to assume they have the funds... Read that somewhere(maybe michael stone) and it struck a chord with me.
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Old 01-17-2018, 01:48 PM   #7
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Re: Proof Of Funds


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Originally Posted by RangoWA View Post
How does having the money at the moment prove payment will be received? You need to see a attorney that specializes.
Come on Rango, he doesn't need an attorney. We got this. I stayed at a Holiday Inn Express last night.
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Old 01-17-2018, 03:19 PM   #8
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Re: Proof Of Funds


Quote:
Originally Posted by LPG View Post
Ok so this is the first (large) project Ive had where a client is supposedly paying for a large project cash.

That said, my contract has verbage that requests the proof:

"WithinTen(10)days after execution hereof Owner will
provide Contractor, in a form satisfactory to Contractor, with such documents (including but not limited to loan commitments or financial information) as are reasonably necessary to assure Contractor that Owner has taken such steps as are reasonable to secure a sufficient and unconditional source of funds necessary to pay the construction costs and Owner will thereafter be responsible and liable for the prompt payment of all costs and fees in connection with the construction and completion of Ownerís Residence as set forth herein."

My question is this, how can I reasonably and nicely ask my client for this info? Or should I?

Do I ask to see their personal bank account? At the moment I have no idea what to do!
Your contract says what ever is acceptable YOU. So you have them sign it and then tell them the specific documents you want to see.

Otherwise they are in breach.

What is your breach of contract provision?

I hate asking for money, but they're asking you to put tens of thousands if not hundreds of dollars on the line as well as assuming major liabilities (injury, non payment, warranty etc). Don't puss around, you gotta let them know who's running the show day one.

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Old 01-19-2018, 06:55 AM   #9
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Re: Proof Of Funds


Quote:
Originally Posted by Big Johnson View Post
Whenever I buy a lot, I transfer the exact amount into an unused savings account, print the page and transfer it right back out. It takes me less than 5 minutes. You can suggest they do that.
Yea, rather be safe than sorry
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Old 01-19-2018, 08:13 AM   #10
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Re: Proof Of Funds


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Originally Posted by sparehair View Post
Your contract says what ever is acceptable YOU. So you have them sign it and then tell them the specific documents you want to see.

Otherwise they are in breach.

What is your breach of contract provision?

I hate asking for money, but they're asking you to put tens of thousands if not hundreds of dollars on the line as well as assuming major liabilities (injury, non payment, warranty etc). Don't puss around, you gotta let them know who's running the show day one.

Sent from my SM-N950U using Tapatalk

Well, yes the contract states that, and usually proof of a loan is what is in question, but this case would mean me asking to see her bank account. To me it just doesn't seem like a reasonable request.
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Old 01-19-2018, 09:51 AM   #11
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Re: Proof Of Funds


I'll offer this again: I do not know what "large" means to the OP, however, one of the functions of a title company is its ability to act as a disbursement agent.

Funds are held in escrow. You submit billing based on payment schedule, work done is confirmed, funds are disbursed.
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Old 01-19-2018, 10:15 AM   #12
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Re: Proof Of Funds


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Originally Posted by smalltownguy View Post
i'll offer this again: I do not know what "large" means to the op, however, one of the functions of a title company is its ability to act as a disbursement agent.

Funds are held in escrow. You submit billing based on payment schedule, work done is confirmed, funds are disbursed.
this !!!
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Old 01-19-2018, 07:11 PM   #13
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Re: Proof Of Funds


I don’t have a similar clause in my agreement, but if I did… I’d go directly to the homeowner and discuss the clause. I’d end that conversation with:

“How would you like to handle this? What are you comfortable in showing me that makes me comfortable?”

Document whatever he shows you and press on. Inability to pay would then be fraud. But then just signing the contract without the ability to pay is also fraud.

I personally think the clause is a bit silly. They can show you bank statements, wads of Benjamin’s, whatever today and come back from Vegas tomorrow with nothing.

Just my .02.
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Old 01-19-2018, 07:16 PM   #14
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Re: Proof Of Funds


If you stay ahead on your deposit/draws, what does it matter?
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Old 01-20-2018, 07:33 AM   #15
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Re: Proof Of Funds


Title companies do not want to manage the ongoing disbursement of funds between homeowners and contractors, what a potential nightmare for them. Title companies issue title insurance real estate transactions (buying, selling, loans).

I do a fair amount of new homes with cash buyers, I frankly do not worry about it. I usually know something about the client, their background, a lot can be determined online these days. I will have an upfront discussion about the draw process and what the contracts says about it, funding, where their $ comes from, will they write checks or wire into my account. I get a down payment and start construction, then advances based on work completed. If I detected a problem I would shorten the interval of advances. Never had a problem, done deals up to $5 million. Currently doing a couple of cash deals, new home $3 million and remodel $2 million.
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Old 01-20-2018, 07:57 AM   #16
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Re: Proof Of Funds


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Title companies do not want to manage the ongoing disbursement of funds between homeowners and contractors, what a potential nightmare for them. Title companies issue title insurance real estate transactions (buying, selling, loans).
.....
Dude, you are just flat wrong. smh

First hit:

https://www.atgf.com/tools-publicati...scrow-services

Construction Escrow Services | Attorneys' Title Guaranty Fund, Inc.
https://www.atgf.com/tools-publicati...scrow-services
Aug 29, 2017 - Construction Escrow Services are used when a lender is financing a construction project and deposits escrow funds with a title company. The title company oversees the disbursement of all construction payouts, which are made to the general contractor, subcontractors, and material suppliers as work is ...


Read up:

https://www.google.com/search?ei=wUh....0.cNL3ZoVwkrM
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Old 01-20-2018, 08:04 AM   #17
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Re: Proof Of Funds


Quote:
Originally Posted by SmallTownGuy View Post
Dude, you are just flat wrong. smh

First hit:

https://www.atgf.com/tools-publicati...scrow-services

Construction Escrow Services | Attorneys' Title Guaranty Fund, Inc.
https://www.atgf.com/tools-publicati...scrow-services
Aug 29, 2017 - Construction Escrow Services are used when a lender is financing a construction project and deposits escrow funds with a title company. The title company oversees the disbursement of all construction payouts, which are made to the general contractor, subcontractors, and material suppliers as work is ...


Read up:

https://www.google.com/search?ei=wUh....0.cNL3ZoVwkrM
Your link is when a lender is involved and they want update on title, not a cash buyer as is being discussed. When a lender is making a loan on construction, they disburse draws, not title company.
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Old 01-20-2018, 08:09 AM   #18
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Re: Proof Of Funds


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I do a fair amount of new homes with cash buyers, I frankly do not worry about it. I usually know something about the client, their background, a lot can be determined online these days.
How? A lot can be found on the internet but a lot of the internet is filled with garbage. It's even easier than going to a public restroom and scribbling on the walls.

I'm not saying there's no value to it but just because it's on there doesn't make it true.
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Old 01-20-2018, 08:13 AM   #19
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Re: Proof Of Funds


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How? A lot can be found on the internet but a lot of the internet is filled with garbage. It's even easier than going to a public restroom and scribbling on the walls.

I'm not saying there's no value to it but just because it's on there doesn't make it true.
Of course you never really know how much money a client might have, and of course what they have on day 1 of construction may not be what they have on day 50. I'm just telling you how I do it, never had a problem in 44 years, if you or anyone else wants to do it differently, feel free.
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Old 01-20-2018, 08:25 AM   #20
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Re: Proof Of Funds


In 2004/2005 we did a $1.2mil project. The client was great for the first $1mil. Then filed for bankruptcy with me holding $191k of bad debt. What they have today is not a representation of what they will have tomorrow or at project completion.

Unless the funds are in escrow, the exercise seems to be a waste of time.

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