Proof of Funds

[DustyMom]

After 5 years of full-time RVing, we are starting to look for a "sticks and bricks" home again. We intend to make a cash purchase. I expected to have to provide a Proof of Funds letter once an offer was accepted, but apparently sellers are starting to require one prior to allowing you to tour the house! There goes any bargaining power you had. It would be nice to be able to tailor the POF to each situation, but in order to do that, I think I would have to move $ in and out of bank account and personally visit the bank each time to get a letter in hand (otherwise they say 10-14 days, by mail only). The closest location is at least an hour away. Any tips for for how to avoid giving away too much info?

 

[MarieIG]

I have never done this so I'm just brainstorming.

Do you have a brokerage? You could set up two subaccounts, and transfer funds easily between the two - and your rep could e-mail you a letter stating that they confirm that as of 4/12/2023 Mr. & Mrs. Dusty Mom had funds in their joint brokerage account -------------7 in the sum of X.

 

[COcheesehead]

You can produce a balance letter on your own through most brokerages. Fidelity has a page specifically to generate one.

 

[MichaelB]

When we were buying we needed proof of funds to make an offer. Asking for that just to see the house seems onerous, especially in a slow market.

I’m not sure showing how much money you have available puts you at a disadvantage. Your ability to bargain depends on you having multiple properties that you would consider and the seller knowing you have those other options. Knowing you might buy a pricier property might motivate a seller to bargain a bit.

 

[dmpi]

Pretending you're poor isn't a viable negotiating strategy if your house hunting competitors are rich and willing to show it. Also just because you have money doesn't mean it's earmarked toward the home. You can still be a savvy negotiator.

 

[OldShooter]

My first move would be to tell the selling realtor that I wasn't going to do that and that I would look for another realtor who might be more successful in getting the sellers (if it is actually the sellers*) to back down on the request. The fact that you are not asking for a mortgage contingency ought to be enough to convince someone that you have the money.

*I could easily see a realtor coaxing sellers to ask for this. It reduces the realtor's risk of having a deal bubble, but it potentially reduces the selling price by excluding some of the buyers in the market, like Ms. DustyMom.

 

[Philliefan33]

Are you looking at homes that are at the very top (or way over the top) of the local market? If that’s the case, I can understand why the sellers might put up some barriers to keep out the lookie-loos. For example, home prices in our old neighborhood ranged from $650K - $900K. However there was one house on a large lot just outside our development that was listed for sale at $3.5 million. Someplace like that might want to keep the riffraff from touring just for fun

 

[DustyMom]

Responding to some of the thoughts/questions so far:

We started looking last fall and never ran into this. Starting up for the spring season and the very first house we requested to see, our buyer's agent said they wanted the proof of funds or mortgage pre-approval first. This house checked some of our boxes but not all of them, but you never really know until you are standing in it, right? Now it makes me not want to even bother. Their loss I guess. Our agent said she is seeing it more and more, but there is no particular pattern - not necessarily the highest priced houses, not necessarily the occupied houses.

I know we can still negotiate but I feel like having that knowledge, there is nothing to stop the seller from continuing to counter up until they find our maximum whereas without the knowledge they may have accepted a price sooner. Maybe it won't really make a difference. Just feels like it's giving them an advantage.

Don't see a way to print out my own balance letter and since I was on the phone with them for quite a while trying to figure out the best way to do what I wanted, I hope they would have suggested that if it were an option.

On a related note, I did learn something while searching this website for info on Proof of Funds. I found discussions on hurdles you may encounter trying to rent while retired. In the event the house-hunting doesn't work out before winter, we may need to rent a place while we continue and now I know that I should probably set up some monthly deposits into our checking account if I need to prove 3X income. Good to know now so that I am not scrambling when it matters. Thank you FIRE community!

 

[audreyh1]

Fidelity lets you order a letter from their site that says you have at least X in funds rather than a total amount.

 

[38Chevy454]

Assuming you have a realtor you trust, can you just show your realtor that you have the funds; but not give any copy? Your realtor can then state your financial capability to selling realtor. If selling realtor doesn't like it, move on and find a better house to go looking for.

When you actually get serious with a house purchase contract, you can provide the actual proof of financial capability.

 

[Freedom56]

We have provided proof of funds in the form of a bank statement for "all cash" transactions with the offer and it was also required 1 week prior to closing. Nowadays, since all cash transactions can close in 5 business days, and funds are transferred via wire, proof of funds is only required with the offer.

 

[pb4uski]

Buy a copy of Acrobat and "edit" the proof of funds letter and provide it to the seller. How would they ever know? Since the sellers are being dick-heads by requiring a letter to even see the house duping them on this dumb-a$$ requirement wouldn't bother me much.

 

[Retired Expat]

I have never done this so I'm just brainstorming.

Do you have a brokerage? You could set up two subaccounts, and transfer funds easily between the two - and your rep could e-mail you a letter stating that they confirm that as of 4/12/2023 Mr. & Mrs. Dusty Mom had funds in their joint brokerage account -------------7 in the sum of X.

My Brokerage doesn’t give out the balance of my account. They provide a letter that I have sufficient funds to purchase a house worth X. X being the number I tell them I hope to be spending. Why would they tell someone you have 5 million when you want to spend $500k?

 

[njhowie]

Buy a copy of Acrobat and "edit" the proof of funds letter and provide it to the seller. How would they ever know? Since the sellers are being dick-heads by requiring a letter to even see the house duping them on this dumb-a$$ requirement wouldn't bother me much.

As much as we both believe seller is being obnoxious, in the current market, if they have enough interest in their property, they can get away with whatever they like. However, what you suggest is not a good idea and I highly recommend not doing it. It is no different than falsifying any document which you did not originate or are authorized to generate.

 

[VanWinkle]

Buy a copy of Acrobat and "edit" the proof of funds letter and provide it to the seller. How would they ever know? Since the sellers are being dick-heads by requiring a letter to even see the house duping them on this dumb-a$$ requirement wouldn't bother me much.

That must have struck a nerve with you!!

 

[retire48in2018]

I understand the seller - a little bit.

In our small community, we have a nicer home that we have worked super hard on improving over a few years. So, now it will be on the upper end. Very few homes are really updated, and 99% (?) are very traditional homes with closed formal spaces. Our home is now contemporary, open floor plan, etc.

There are a lot of curious people who try to visit every home that comes onto market. It is a barrage of visits, with some wanting to come back multiple times with friends, etc. making it very difficult on homeowners. Many of these are agents’ relatives. It’s a “thing to do” here.

Given our home uniqueness, it would be even more of a “draw” for “things to do”.

We have bought and sold maybe 10 homes, and we have always really staged and made home just right for views - but that’s not a real living condition. It’s a lot of work.

Many higher end home sellers, as a result, will only do “pocket listings”. Or better term - not actively on market, but agents know buyers would be willing to show to serious buyers. Home is not on MLS, and only shown to those few known to be serious buyers, many times with only their own brokerage. I think I counted 25 of 26 homes above a certain $ amount that were sold as a pocket listings (eventually listed and sold same day on MLS, with little to no info or pictures).

Technically, we bought this home when it was not on market. Agent knew family over bought and home was in pre-foreclosure process. Agent convinced bank to let sellers “swap” homes with a much less costly home and permitted a short sale, and then approved them on the smaller home. Banker understood that bank (and all parties) are better off this way then going through full foreclosure with its very lengthy process in this state.

I don’t like the pocket listing solution. I don’t like lots of people coming all the time that are not serious buyers.

We will have some realtors next week visit and decide on realtor and marketing plan.

I guess what I am saying - perhaps the seller is wary of unserious buyers and thought this was their solution.

Don’t fret about the letter. Make it as high as possible - agents and sellers know that you are solid. It does not matter that they “know” you can afford more. There are lots of negotiation strategies that work with a known strong financial buyer

 

[pb4uski]

As much as we both believe seller is being obnoxious, in the current market, if they have enough interest in their property, they can get away with whatever they like. However, what you suggest is not a good idea and I highly recommend not doing it. It is no different than falsifying any document which you did not originate or are authorized to generate.

That must have struck a nerve with you!!

You can produce a balance letter on your own through most brokerages. Fidelity has a page specifically to generate one.

Yes, it certainly did strike a nerve with me. To be clear, I was not at all suggesting that the OP generate a balance letter with a balance that exceeded their real balance, but only as a workaround for the sellers a$$inine requirement.

While I've never done a balance letter, I notice that online with Schwab that I can download and print a balance letter if the account balance exceeds an amount that I can specify at any date in the last 24 months. So if my account balance is $1 million and for the house that I want to see the asking price is $620k I can print out an account balance letter dated today for $620k.

The result is a pdf that I can download and print that has the date that I specify and indicates that that my balance on said date exceeds the amount that I specify. See screenshot below.

 

[socca]

... I know we can still negotiate but I feel like having that knowledge, there is nothing to stop the seller from continuing to counter up until they find our maximum whereas without the knowledge they may have accepted a price sooner. Maybe it won't really make a difference. Just feels like it's giving them an advantage. ...

When I sold my dad's condo at the peak of the real estate sales madness last year the buyer provided a proof of funds statement along with the purchase offer. It never even occurred to me as seller to use this info in the negotiation. Here is what I could have said: "Dear buyer: thank you for making an offer substantially over the list price. I see that you have even more funds available. I want all of it. Therefore, the new list price is equal to your available funds."

In general, buyers have options and sellers have options. An overly greedy seller may torpedo a good deal.

 

[COcheesehead]

Yes, it certainly did strike a nerve with me. To be clear, I was not at all suggesting that the OP generate a balance letter with a balance that exceeded their real balance, but only as a workaround for the sellers a$$inine requirement.

While I've never done a balance letter, I notice that online with Schwab that I can download and print a balance letter if the account balance exceeds an amount that I can specify at any date in the last 24 months. So if my account balance is $1 million and for the house that I want to see the asking price is $620k I can print out an account balance letter dated today for $620k.

The result is a pdf that I can download and print that has the date that I specify and indicates that that my balance on said date exceeds the amount that I specify. See screenshot below.

The broker option is slick and easy. Fido has it as well. Sounds like the OPs bank is a little behind the times.

 

[pb4uski]

When I sold my dad's condo at the peak of the real estate sales madness last year the buyer provided a proof of funds statement along with the purchase offer. It never even occurred to me as seller to use this info in the negotiation. Here is what I could have said: "Dear buyer: thank you for making an offer substantially over the list price. I see that you have even more funds available. I want all of it. Therefore, the new list price is equal to your available funds."

In general, buyers have options and sellers have options. An overly greedy seller may torpedo a good deal.

I agree that the buyer can control the situation by just being discilined, but at the same time knowing what the buyer could pay gives the seller an unfair advantage.

 

[jfn111]

In the Twin Cities market we generally only supply the proof of funds when making an offer. I'm sure there are other markets that have different customs.
The actual proof of funds can take many forms. Screen prints off the computer of Bank or Brokerage accounts with account number redacted. Letters from personal bankers attesting that the buyer has sufficient funds to buy the house.
One of my investor clients provides a screen shot of his line of credit.
As an earlier poster noted you should be able to have your agent talk to the listing agent and say they have verified the funds and the client doesn't wish to share the documentation until they make an offer.

 

[MarieIG]

Responding to some of the thoughts/questions so far:

. . .

We started looking last fall and never ran into this. Starting up for the spring season and the very first house we requested to see, our buyer's agent said they wanted the proof of funds or mortgage pre-approval first. This house checked some of our boxes but not all of them, but you never really know until you are standing in it, right? Now it makes me not want to even bother. Their loss I guess. Our agent said she is seeing it more and more, but there is no particular pattern - not necessarily the highest priced houses, not necessarily the occupied houses.

. . .

I will admit, I would find that annoying. We put our house on the market in 2021 and did not require that. The agent scheduled showings over about 10 days, to encompass two weekends, and then submitted the offers to us.

We looked at a few homes last fall and that was not required. I can understand if the requirement was in conjunction with an offer.

 

[Aerides]

After 5 years of full-time RVing, we are starting to look for a "sticks and bricks" home again. We intend to make a cash purchase. I expected to have to provide a Proof of Funds letter once an offer was accepted, but apparently sellers are starting to require one prior to allowing you to tour the house! There goes any bargaining power you had. It would be nice to be able to tailor the POF to each situation, but in order to do that, I think I would have to move $ in and out of bank account and personally visit the bank each time to get a letter in hand (otherwise they say 10-14 days, by mail only). The closest location is at least an hour away. Any tips for for how to avoid giving away too much info?

Are you working with a buyers agent? That might be a way - it would put them in the middle as vouching for you.

I can understand from a seller's standpoint in this market, especially if they are still living in the home - perhaps they've had buyers flake on them or their agent is recommending it - perhaps seller agents are tired of dealing with buyers in your area who can't close?

 

[Sunset]

OP - Perhaps you should consider this requirement a way to limit the competition. After all some buyers won't have enough cash, nor pre-qualification, so they can't even look at the house.

Others will be turned off and refuse to show their stash amount.

So there will be less people interested in the house and you can low bid it.

 

[Lewis Clark]

We have provided proof of funds in the form of a bank statement for "all cash" transactions with the offer and it was also required 1 week prior to closing. Nowadays, since all cash transactions can close in 5 business days, and funds are transferred via wire, proof of funds is only required with the offer.

+1

This is what I did last year.