Buying and selling property can be a complicated endeavour, and it’s essential to understand all the details before getting started. Knowing the ins and outs will help protect you, and your money, and ensure that all legal and technical requirements are met.
One important requirement is a “proof of funds.” But what does that mean when buying a house or getting a mortgage?
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Proof of Funds UK
You’ll need to provide evidence of your financial capability to purchase a house.
This is for a few very important reasons:
The Estate Agent Works for the Seller
When it comes to answering the question ‘What does an estate agent do?’, one of the most important points is that they work for the seller. They will make sure the property is marketed correctly and they will find the buyer who is willing to pay the right price.
To do this, the estate agent will need to assess whether you have the financial capability to complete the transaction. A proof of funds letter is often used for this – this could be a statement from your bank or a statement that details investments or shares such as ISAs, bonds, etc.
This is very important when dealing with cash offers. ‘Cash buyer only’ means that the seller only wants to work with buyers who have all the necessary funds available immediately.
This means they don’t have to wait for another transaction to be completed before they can purchase the property. This speeds up the process significantly, but it’s still essential to have a proof of funds letter.
If you can’t provide this information, it makes you a less attractive candidate, or you might even be excluded from the process.
Required Money Laundering Checks When Selling a House UK
When putting in an offer to buy a house, prepare to provide proof of your bank details, statements, investments, or other sources of income and financing. This is due to the Fifth Money Laundering
Directive, passed by the EU in 2018, which seeks to prevent money laundering and financing for terrorist groups. Estate agents must conduct anti-money laundering checks when buying a house, or face the possibility of fines or imprisonment.
Proof of funds can include a mortgage agreement in principle, bank statements that reflect your deposit and cash amounts, gifted deposit proof of funds, or proof of selling a property.
The estate agent may also request additional information about the source of funds, such as bank statements going back months or even years, a letter from the person who gifted you the money, or receipts related to the sale of shares, gambling winnings, or other larger amounts.
You will need to provide proof of funding to the estate agent throughout the transaction, not just when you make an offer.
This includes when you complete the purchase and at other points during the transaction. Be prepared to provide the same proof of funds to other parties involved in the transaction.
Proof of Funds Mortgage
You’ll need to show evidence of funds for mortgage applications. This helps the lender understand that you have the means to pay the deposit and, realistically, monthly payments. Can estate agents disclose offers in the UK?
They must let the seller know about all offers that have been made, but they must not reveal the exact amount(s).
Having proof of deposit mortgage or an agreement in principle gives you more assurance when you start house hunting. It lets you present yourself as a good buyer and gives you a budget to work with.
Proof of Funds Solicitor
Be prepared to show evidence to your lawyer. This is simply to confirm that you can pay for the purchase and ensure that the money isn’t from an illegal source.
In the UK, when does a solicitor request proof of funds? They might ask for it early in the process, but you don’t have to provide it until you make an offer for the house.
The checks can take a while to finish, so the solicitor should make sure the process is as efficient and speedy as possible. If you don’t provide the evidence promptly, it could slow the process down substantially.
To be safe, make sure you get all your documents ready so you can give them to the solicitor when it’s the right time.
The seller’s lawyer will also need evidence of financing or funding. Usually, your solicitor will provide this on your behalf. If you’re buying a house in cash, do you still need a solicitor?
The law doesn’t state that you must use a solicitor; you are allowed to handle the legal part yourself. If you do, it’s your responsibility to make sure the seller’s lawyer can access the evidence they need.
Holding Deposit for House Purchase UK
When it comes to selling a house in the UK, it is important to make sure that you have all your financial ducks in a row. If the deposit is held by an agent on behalf of the seller, then the seller’s legal representative can release the funds to them at any time.
A common question from sellers is, ‘when will I receive the funds from the sale of my house in the UK?’. Once the mortgage funds have been released, the money will be transferred from the buyer’s solicitor to the seller’s, or from the buyer to the seller’s solicitor if this is the case.
What Does Cash Buyers Only Mean UK?
As mentioned, this means that the buyer already has the money they need to complete the purchase. Some sellers are only interested in buyers who can pay in cash.
So, they do not need to show proof of a mortgage deposit but instead must demonstrate that they have the funds and where the money comes from.
What does this look like when using Strike estate agents in London or Purplebricks? Generally, these services charge a flat fee upfront and may offer additional services, which can seem like a good deal. However, the success rate for these platforms is not high, and their failure rate is quite significant.
When going through the buying or selling process, it is important to be educated and aware of the potential risks.
Any thoughts about selling your home?
Are you looking to sell your house? We buy houses in any condition. Get in touch if you are thinking of selling.
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
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