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What is Offer Substantiation?

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For the past several months, we have been exploring the vast array of terms used in the real estate industry. From deeds of easement to mortgage porting, we feel we have covered a few of them and made your foray into buying or selling property a little smoother to grasp.

However, there is still much more for us to discuss, so this month we will be looking at offer substantiation. Offer substantiation is simply the process of confirming your identity and that you have the necessary funds to purchase the property.

But is there more to it than that? Yes, and Property Saviour can help explain.

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What does offer substantiation mean?

Offering substantiation is a legal process that all estate agents must go through when an offer on a property is accepted. It originates from HMRC, so it’s not just a formality; it’s an important part of the process.

When offering substantiation is conducted, it will verify your identity and check that the funds are available. It will also ensure that there has been no identity theft or illegal activity associated with the money used to purchase the property.

To do this, the estate agent will need some documents from you to make sure everything matches up.

What documents does a property buyer need for offer substantiation?

When buying a home, you’ll need to prove not only your identity but also that you have the deposit and a mortgage agreement.

Everyone listed on the property deeds will have to provide these documents, and failure to do so can cause delays in purchasing your new home. It’s therefore best to prepare them in advance.

The estate agent will require:

  1. Proof of identity with a certified ID
  2. Certified proof of address
  3. Proof of the mortgage
  4. Proof of the deposit

Having a document certified means that it’s been seen and confirmed by a professional the estate agent lists.

This could be someone with a job title such as a teacher, nurse or doctor, solicitor, managing director, or mortgage broker. The Post Office can also certify documents, although it may incur a fee.

What is Offer Substantiation
Offering substantiation is a legal process that all estate agents must go through when an offer on a property is accepted.

What ID can be certified by a professional?

The estate agent will need to check your identity, and for this, you must provide one form of photo ID or two forms of certified ID.

Acceptable photo IDs include a full UK or overseas passport, a UK photocard driver’s licence, an EU driver’s photocard licence, a UK firearms licence, a UK military ID, an EEA State Member ID Card, or a Biometric Residence Permit.

All documents must be valid and issued by the relevant authority, and should they require a signature, it must be present. No alterations, crossed-out sections or missing parts are allowed, otherwise, the documents won’t be accepted.

Non-photographic ID

If you don’t have a photo ID, you’ll need to use two pieces of identification to prove your identity. An estate agent won’t be able to do the necessary checks if the ID is invalid, which could affect your chance of buying the property.

The ID must meet the following requirements:

  • A bank statement from the last three months, in original form only (not a downloaded copy).
  • A valid National Insurance card.
  • A current council tax bill.
  • An original UK birth certificate.
  • A benefits or pension letter from the last three months, in original form only (not a downloaded copy).
  • An in-date medical certificate or NHS medical card.
  • A blue disabled driver’s badge, stamped by the local authority.

Proving your address for offer substantiation

Everyone buying the property must provide their proof of identity, address, and funding. Even if you live with other people on the property, you need to submit your documents.

To prove your address, you need one of the following items, but it must be different from the non-photo ID used for identity verification. These are:

  • Bank statement from the last 3 months (original copy only, not downloaded)
  • Council tax bill for the current year
  • Valid and signed driver’s licence
  • In-date TV licence
  • Mortgage statement from the last 3 months (original copy only, not downloaded)
  • Utility bill from the last 3 months (original copy only, not downloaded)
  • Homeowners Insurance Policy (original copy only, not downloaded)
  • Housing benefit documents from the last 3 months (original copy only)
  • Letter from your bank or employer from the last 3 months (on letterheaded paper, confirming name and address)
  • Tenancy agreement dated within the last 6 months (signed and executed)
  • Letter from the NHS from the last 3 months (on letterheaded paper)

Although this list is comprehensive, some people still think other official documents can be used. However, these will be rejected by the estate agent and delay your property plans, so only use the approved list. The most common documents not accepted are:

  1. Letters from HMRC
  2. Phone bills
  3. Letters from a solicitor or accountant
  4. NHS medical cards
What does it mean to substantiate an offer
With proof of identity and proof of residence, the estate agent will need to see that you can afford the property.

How to provide proof of funds to the estate agent for offer substantiation

With proof of identity and proof of residence, the estate agent will need to see that you can afford the property.

Depending on the source of the funds required to purchase it, the proof of funds may differ. Generally, there are five common methods of funding a property purchase, each with its specific requirements for substantiation.

  • New or transferred mortgage: If you have been approved for a new mortgage, you must provide the estate agent with a statement showing that the lender will lend you the amount specified in the agreement in principle (AIP).

This statement must be dated within the past three months. Additionally, you will need to present evidence of your loan-to-value (LTV) ratio, which will demonstrate that your deposit and mortgage combined cover the full value of the property.

If you are transferring an existing mortgage, you will need to provide proof from the lender that they are willing to transfer the mortgage. Bank statements will also be necessary to prove that you have enough money for the deposit.

  • Cash: If you have cash from a house sale, an inheritance, an insurance claim, or a divorce settlement, for instance, you will need to provide evidence of the source of these funds.

This may include bank statements and any documents confirming the deposit of the funds. If you have sold your property using traditional methods, you must present the estate agent with a memorandum of sale and a copy of the mortgage redemption statement, both of which must be complete and unaltered.

  • Gifted funds: If you have been fortunate enough to receive the funds as a gift from a friend or family member, you will need to show evidence that the money is legitimate.

This should come in the form of a letter or email, confirming that the person is gifting you the money, stating your name and theirs, and specifying the amount being gifted.

It must also be dated. The gifter will need to provide proof of the funds and the source, as well as a photo ID.

In conclusion, the estate agent will require you to provide documents that prove you are who you say you are and that your money is from a legal source. If you are looking to move house and need to sell your property, you could consider a sell-house fast agent.

Property Saviour can help you with this, and guarantee a sale in just seven days, covering your legal fees too. Get a free cash offer today to find out how much you could be getting for your home.

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