29 years ago, I learned one of the most important things about commercial real estate I could have ever learned. What I learned was, if a buyer won’t show you the money, they don’t have the money. Ha. Such a simple yet fundamental truth. Let me explain.
In the world of selling hotels we run across a lot of big talkers. Many of these people talk a good game but don’t have the cabbage to back it up. When a real buyer makes an offer on a hotel and the seller asked for the buyer to show his proof of funds, there is no hesitation. Serious investors with money have no issue with showing the money to a seller to be approved to buy their hotel. This can be done via a letter from the buyer’s banker that states the cash/equity on hand or any number of similar ways to prove the available funds.
Over the years I have had many buyers balk at this and it tells me very clearly that they do not have the money. It could be as simple as they need to go raise the money but more often than not, they just simply don’t have the money. Why a buyer would go through this process if they didn’t have the money is beyond me.
I have this one buyer named Bob who always calls me and makes multiple offers on hotels, and the best I can tell, doing so just makes him feel big and he tells all his friends that he has multiple offers out on hotels. Just several weeks ago we had this group make an offer and when pressed where the money is coming from, they got all squishy about some eastern rim Asian investor that doesn’t want to disclose their resources, yada yada yada. Basically, it was all a hoax.
In our business we always ask upfront for the proof of funds before we present the offer to our client and it has been proved true 100% of the time, that if the buyer won’t show you the money, they don’t have the money. KT