Proof of Funds

[yhoomajor]

When we did this (during submission of offer) few years back, we just submitted the latest brokerage statements (of last month). That was enough.

 

[ivinsfan]

When we did this (during submission of offer) few years back, we just submitted the latest brokerage statements (of last month). That was enough.

who did you submit it to? The buyer who then knows how much money you have? Your agent who tells the other agent your good. The idea of my latest brokerage statement floating around bugs me.

 

[yhoomajor]

who did you submit it to? The buyer who then knows how much money you have? Your agent who tells the other agent your good. The idea of my latest brokerage statement floating around bugs me.

Not "all" brokerage statements. Enough to cover the buying price. You can (or your broker) will redact the account number, address etc before submitting paperwork.

In cash purchase, buyer already knows (will know one way or other) that you have that much money to buy the house. Whether its in a bank, credit union, under your sofa, or a brokerage is immaterial.

 

[dknighd]

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.

I think this is starting to be more common. It might be the seller asking for this information, or it might be your agent. I'm pretty sure neither realtor wants to waste time showing you a home you can not afford.


Both of my kids recently purchased houses. They pretty much had to get a mortgage pre-approval letter before they were considered serious buyers. They both purchased houses for less than they were qualified for (a smart move in my book). It did not seem to affect their negotiating power. It might have even helped, since the seller knew they were qualified. I'm pretty sure no seller (or realtor) wants to waste time and have the sale fall through at the last minute because the potential buyer can not actually afford what they offered.


Perhaps you can provide a single letter that shows you can afford any home you might want to look at and actually purchase. Perhaps provide a buffer. I think if we ever want to sell our house we will only allow people to visit than can actually afford the house. A friend of ours got burned recently. They accepted an offer, then the buyer had to back out because they could not actually afford it. Months wasted!

 

[dknighd]

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.

Could be true!


Edit: One problem today is houses are getting appraised for less than the selling price. That was unlikely a year ago, but might be more common today.

 

[jazz4cash]

I don’t understand. Is proof of funds for cash buyers in lieu of a statement from a lender? Are there realtors for both buyer and seller? If so it seems they should negotiate a compromise. I understand seller’s POV but shouldn’t a realtor limit showings to only qualified prospects. The variation of service provided by realtors can be huge.

 

[brucethebroker]

1. In most states, real estate law requires ALL offers to be submitted to the seller. No exceptions-not even "the seller told me not to submit without proof". (Make your offer and demand a WRITTEN rejection by the seller if they do not like your offer.)
2. Put "proof of funds to be submitted within 24 hours of acceptance of offer" on your offer. The sellers can always "counter" the proof of funds if they make a counter offer. Of course, it may not get that far.
3. Take a bank/brokerage balance statement and black out all account info, leaving only the balance. Then,
have your broker offer to show the listing broker your funds, BUT NOT GIVE HIM/HER THE COPY or take a photocopy. The listing broker can then verbally confirm your funds to his clients, the sellers.

If the sellers balk at any of these suggestions, tell them you have been hacked numerous times and are just being cautious. We have used this verbiage on numerous occasions in the last few years in similar situations and not had a problem. And of course, for most of us, it is very true.

If you think about it, proof of funds is not that different from a seller wanting mortgage pre-approval in advance. You don't have to expose your entire net worth, just enough to close that sale. Most of us would like the same courtesy if we were offering our own home for sale.

Good luck and happy hunting. BtB

 

[MarieIG]

I don’t understand. Is proof of funds for cash buyers in lieu of a statement from a lender? Are there realtors for both buyer and seller? If so it seems they should negotiate a compromise. I understand seller’s POV but shouldn’t a realtor limit showings to only qualified prospects. The variation of service provided by realtors can be huge.

Some sellers want at least a pre-approval for a mortgage before accepting an offer, especially if they have several offers. Contracts wherein the buy must obtain a mortgage are typically contingent upon the buyer actually obtaining the mortgage and a seller would prefer to increase the odds of the seller actually obtaining the mortgage for the property in question.

Proof of funds is typically required, pre-contract or within a certain number of days, with a cash buyer.

Buyers may have their own agents.

Regarding limiting showings to qualified buyers - how would you accomplish that? Require each and every person touring the property to have pre-approval or proof of funds? That is certainly a possibility, but at least with cash buyers, it may also keep away an otherwise qualified buyer.

When my house was for sale, there was one open house, and otherwise, the potential buyers, through their agents, scheduled showings through my agent. (I was copied on all the texts scheduling the appointments.) The agents for the potential buyers were required to accompany their clients on the tours. IIRC, there were almost 100 in about 10 days.

I instructed my agent to tell the agents for potential buyers that the home sale was "as is." My agent took all the offers, and (with my consent) presented me with the eight highest. I accepted one which was over list and waving the appraisal. There was a mortgage contingency but this buyer was putting half of the purchase price down and had been pre-approved for more.

Finer details were negotiated by the real estate attorneys, which are commonly used in our area.

 

[xlf11]

Vanguard can do the similar proof of balance letter as well on the website: go to "statement" then click on more drop down menu and select "create account valuation report" with several options including "balance exceeding $xxx,000" etc.

 

[cathy63]

... Regarding limiting showings to qualified buyers - how would you accomplish that? Require each and every person touring the property to have pre-approval or proof of funds? That is certainly a possibility, but at least with cash buyers, it may also keep away an otherwise qualified buyer...

That is what they do for high end homes. Here's one that's a few blocks from us. https://www.zillow.com/homedetails/1127-F-Ave-Coronado-CA-92118/17072988_zpid/ When we were selling a condo I asked our agent about it out of curiosity. He had toured it with the other agents in town, but there are no open houses and no lockbox. If you want to see it, your agent has to call the listing agent and make arrangements. We are definitely not qualified and also not looking to move, so I haven't been inside.

I got the impression that the listing agent would just trust the word of the buyer's agent that his client was qualified, but this is a small community of agents who all know each other and do deals together frequently.

 

[MarieIG]

That is what they do for high end homes. Here's one that's a few blocks from us. https://www.zillow.com/homedetails/1127-F-Ave-Coronado-CA-92118/17072988_zpid/ When we were selling a condo I asked our agent about it out of curiosity. He had toured it with the other agents in town, but there are no open houses and no lockbox. If you want to see it, your agent has to call the listing agent and make arrangements. We are definitely not qualified and also not looking to move, so I haven't been inside.

I got the impression that the listing agent would just trust the word of the buyer's agent that his client was qualified, but this is a small community of agents who all know each other and do deals together frequently.

Yes, although maybe they would waive the proof of funds requirement for Elon, Bill or Jeff. Definitely, there would be a limited poor of qualified people looking to purchase a $32,000,000 dollar home, the seller wouldn't want unqualified curiosity seekers trapsing around the premises; and the buyer's agent would want to waste his/her time.

And yes, it was my impression that my agent is familiar with the buyers' agents in the neighborhood.

 

[folivier]

Here's my opinion from someone who has just listed their house and looking for a condo. I leave it up to my listing agent to determine if a person is qualified to view our house. However if a person wants to make an offer I will ask for either a mortgage pre-approval letter or if they are making a cash offer I'll ask for proof of funds.
But what does that get me? If mortgage rates rise above the buyer's ability and they can no longer qualify then I've lost time on my listing. I've seen quite a few pending listings that come back on the market.
If the buyer has sufficient funds now then how do I know they will be there at closing? If they're invested in the market and the market drops then what? I'd like to ask these funds be put in escrow if we accept their cash offer but they probably won't accept that.

 

[meleana]

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?

I remember a few years ago when we just started to look around for a retirement home a realtor would not allow us to see a condo without proof of funds. We would be cash buyers. I asked her how does she know we’d even want to buy the condo?

We never went back.

 

[Teacher Terry]

Locally you have to be pre approved for a mortgage before a realtor will show you a property. It’s been that way for years. So making a cash buyer provide some proof makes sense to me. In 2012 we bought a foreclosure from a bank and the offer had to provide proof of cash because that’s all they were accepting.

 

[MarieIG]

I remember a few years ago when we just started to look around for a retirement home a realtor would not allow us to see a condo without proof of funds. We would be cash buyers. I asked her how does she know we’d even want to buy the condo?

We never went back.

I don't blame you.

 

[Jafowac]

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.

It’s called fraud. Just saying….

 

[freedomatlast]

I remember a few years ago when we just started to look around for a retirement home a realtor would not allow us to see a condo without proof of funds. We would be cash buyers. I asked her how does she know we’d even want to buy the condo?

We never went back.

My reaction would be exactly the same as yours.

 

[freedomatlast]

It’s called fraud. Just saying….

No fraud involved if the amount of funds available meet or exceed the amount specified in the letter.

 

[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.

It’s called fraud. Just saying….

No fraud involved if the amount of funds available meet or exceed the amount specified in the letter.

freedomatlast is correct and Jafowac is wrong.

Black's Law Dictionary indicates:

Fraud consists of some deceitful practice or willful device, resorted to with intent to deprive another of his right, or in some manner to do him an injury.

As long as the potential buyer actually has the amount of funds stated on the falsified funds letter there is no deceit because the seller is relying on the fact that the letter states that the buyer has a certain amount of funds and the buyer actually has that amount of funds. The seller isn't deprived of any right and the seller isn't injured or incurs any damages.

Is it underhanded? Yes, but arguably a tit-for-tat in reponse to the seller's dumb-a$$ demand that buyer's have a proof of funds letter to even see the property.

But it's NOT fraud because there are no financial damages to the seller as a result of the falsified letter.

 

[Gumby]

Why would you look at houses if you don't already have or cannot borrow the money to buy one? It seems unnecessarily paranoid on the part of sellers to have such a requirement. As a potential buyer, if I see the seller is going to be a jerk about this, I assume they'll be a jerk about other things and would probably just walk rather than deal with them.

 

[ERD50]

Why would you look at houses if you don't already have or cannot borrow the money to buy one? It seems unnecessarily paranoid on the part of sellers to have such a requirement. As a potential buyer, if I see the seller is going to be a jerk about this, I assume they'll be a jerk about other things and would probably just walk rather than deal with them.

I dunno - there are people who just want to tour a home to get decorating ideas, or maybe they are interested in the neighborhood, but don't want to buy that specific house. I can see where the seller doesn't want anyone but interested buyers traipsing through their home, and inconveniencing them (realtors typically want you out of the house, and you need to tidy up before the showing).

If you are going through a realtor, I would think you could provide proof to the realtor, and the buyer should accept that at least? So you don't need to show anything to each seller?

-ERD50

 

[freedomatlast]

As a potential buyer, if I see the seller is going to be a jerk about this, I assume they'll be a jerk about other things and would probably just walk rather than deal with them.

Same here.

 

[dknighd]

My son recently offered to buy a house he could afford. He had a pre approved amount he could borrow. The house he choose cost less than what he was pre approved to buy.


Now the bank wants to verify other things. I'm sure it will work out fine. Apparently the banks definition of pre approved differs from our definition!

 

[jim584672]

I bought my place and they wanted proof of funds. We didn't agree on price, I told them when we agree on price I will prove. They agreed to that.

 

[freedomatlast]

The last house we bought in 2020, at the time we wrote the third amended contract, they requested proof of funds. Fair enough.