Should a Cash Buyer Have to Show Proof of Funds With Their Offer?

By
Real Estate Agent with Long and Foster REALTORS®, Gainesville, VA VA License # 0225089470

Should a Cash Buyer Have to Show Proof of Funds With Their Offer?

When you have a listing in an active adult community, for residents aged fifty-five or better, you are bound to see cash offers.  What I continue to be surprised by is that the cash offers are more often than not, unaccompanied by proof of funds.  What the......I mean, come on!  If a buyer with a loan rolled up on a listing and said they were qualified to buy with a 5% conventional loan, ninety-nine percent of listing agents out there would not consider it a legitimate offer unless a pre-approval letter had been received.  And even at that, some pre-approval letters will have strong listing agents, like myself, calling lenders to see exactly how much they know about their buyer.  How long have they been at their current job?  Have income and assets been verified?  

It is our duty as listing agents to protect our sellers, and that means pouring over the details provided, and digging for details not provided.  Yet, in the past couple weeks, I have encountered buyer agents who feel it is perfectly legitimate to send a cash offer with zero proof of funds.  Apparently, it is an invasion of privacy to ask for such things, at least according to one of the agents.  Account numbers can be redacted, for heaven's sake.

Perhaps the real issue is that these buyers do not wish to show their hand.  If they are offering a substantial amount less than list price, but their statements would show the ability to pay full list price, perhaps they think their negotiating position would be lost.  Well, there are two solutions to that issue.  1) Contact your bank and have a letter drawn up to reflect that you have the amount you offered in cash in your accounts or 2) Use the word NO when negotiating if you truly don't want to pay more.

Not including proof of funds with a cash offer leads cautious listing agents to ask questions.  Do you actually have the cash or are you expecting to get a home equity line of credit on another property?  The latter is not cash unless you have already pulled that cash out of the line of credit and it is in the bank.  Home equity lines are credit cards and may not necessarily be there when you need them. In 2008, when property values were falling rapidly, lenders shut down active lines of credit in my area.  I will never forget that.  One minute folks had lines of credit and then BAM, they were gone.  Think that can't happen again?  Or what if you haven't yet been approved for a home equity line of credit?  It isn't always a slam dunk to get one.

When I ask your agent for proof of funds, it isn't to insult you.  It is to protect the best interests of my seller.  And if you were selling a property, you would probably want me in your corner too, or someone like me.  

Bottom line is this, if you are a cash buyer, just saying so doesn't make you one.  You must be prepared to show proof of funds.  And as discussed above, you can do so without showing your entire liquid assets.  Sellers need to be sure they are pulling their properties off the market and going into business with a buyer who can consummate the deal.

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Fred Griffin 09/13/2018 10:37 AM
Topic:
Home Buying
Location:
Virginia Prince William County Haymarket
Groups:
Diary of a Realtor
Bananatude
Bartender, Make it a Double
Real Estate Questions & Answers
Old Farts Club
Tags:
proof of funds and cash offers
what do i need to show if i am making a cash offer

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Rainmaker
453,528
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experience Agent in Kansas City Metro area

I agree. The most professional way to do this I think is have a written letter from the bank verifying funds. I've had agents send me bank statements--don't need account info!!

Sep 13, 2018 12:46 PM #31
Rainmaker
171,023
Kevin Vitali
EXIT Realty- Massachusetts Short Sales & Residential Sales - Tewksbury, MA
Helping Massachusetts Home Buyers and Home Sellers

Its actually funny how often someone sys their offer is cash but there is more to the story behind it.  I recently had one where it was cash but they would not have the funds for 3 weeks since it was coming in form overseas with nothing other than the word of the buyer....

Or what about the "cash buyer" who is drawing on an old line of credit?  Is that line f credit even valid anymore?

 

Sep 13, 2018 12:49 PM #32
Rainmaker
325,755
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

Points well made.   The saying is "show me the money," not "tell me you have the money."

Sep 13, 2018 01:12 PM #33
Rainmaker
1,398,476
Mike Cooper
Cornerstone Business Group Inc - Winchester, VA
Your Winchester, VA Real Estate Sales Pro

Chris Ann, that seems like a no brainer. My buyers wouldn't even consider an offer if there was no proof of funds. 

Sep 13, 2018 01:33 PM #34
Ambassador
2,719,612
Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

No proof of funds doesn't fly here. Agents need to fully explain why proof of funds is necessary. I had a doozie the other week and I called it a nothing burger offer.

Sep 13, 2018 02:52 PM #35
Rainer
173,092
Ann Wilkins
Golden Gate Sotheby's International Realty - Oakland, CA
Oakland, Berkeley, Piedmont CA

It is customary in our area to show proof of funds for all cash offers.  Now and then, some agents will request proof of funds for closing costs and down payment even when we have a underwritten loan approval. 

 

Sep 13, 2018 04:48 PM #37
Rainmaker
878,605
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

During the Great Recession I saw those condos sold 40 cents on the dollar, they were almost cash. The real low balls most buyers had 4-8 million dollars but they want to haggle for discount like 25-26 cents on a dollar. I told them I would not be able to help them. Next week same people popped up with just as low offers. Sorry I will not even advise them the low offers 1/2 of highest were trashed. 

Sep 13, 2018 06:35 PM #38
Rainmaker
199,546
Janice Hope Zaltman Realtor,LEED AP
United Realty Group - Boca Raton, FL

Excellent post Chris and I completely agree. Even worse, here, many international buyers keep their funds in their country and if it is not here in the United States, they may have problems getting the money for closing. No matter what type of loan, showing proof of funds and financials is paramount.

Sep 13, 2018 06:56 PM #39
Rainmaker
145,392
James (Jim) Lawson, DBA
DomainRealty.com LLC - Bonita Springs, FL
Broker Associate, RSPS, BPOR, HI & PE

Sellers want or should want qualified buyers to avoid wasting time and possibly causing turmoil. 

About 50% of offers are currently cash in my market. Used to be more than 60%. Cash offers without proof of funds that are accepted are a rarity in my experience.

Your points are well taken Chris and should be followed.  

Sep 13, 2018 10:01 PM #40
Rainer
4,825
Howard Steinhardt Certified Residential Specialist, and Jody Steinhardt "Award Winning Real Estate Agents"
Realty Home Advisors - Boca Raton, FL
"The Steinhardt Advantage"

Absolutely!

Sep 13, 2018 10:05 PM #41
Rainmaker
2,310,931
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Proof of funds is a wide open statement. What is the "proof" standard? In courtrooms, they do not accept copied documents but insist on originals. Why? They can be forged and manipulated. I have seen too many phony CASH bank statements. If someone is wielding cash as a bargaining tool, back it up...

Sep 14, 2018 06:41 AM #42
Rainmaker
363,756
Steven Beam
RE/MAX Alliance - Parker Colorado Real Estate. - Parker, CO
Parker Colorado Real Estate

No proof = no acceptance. Nuff said. 

Sep 14, 2018 08:03 AM #43
Rainmaker
10,485
Nicole Nark
Nicole Nark - iRealty Arkansas - Little Rock, AR
Real estate agent serving Central Arkansas

I absolutely think so! We have had deals fall through even within the brokerage because the Buyers agent believes their buyer and doesnt verify until its too late. Save yopurself the headache and get proof! 

Sep 14, 2018 08:16 AM #44
Ambassador
753,194
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Oh, this is a good one, Chris Ann and some of the answers either have you laughing or crying. There is no excuse for an agent to be working with a cash buyer and feeling that it's an invasion of privacy if the listing agent asks for proof.

 

We can expect some buyers to be ignorant (not in an insulting way) of the process, but agents?  Come on.

Sep 14, 2018 08:19 AM #45
Rainmaker
498,454
Jon Quist
REALTY EXECUTIVES TUCSON ELITE - Tucson, AZ
Tucson's BUYERS ONLY Realtor since 1996

That can't be a real question. I am initially more cautious about the "all cash' buyer than I am about a pre-qual letter buyer. Until I see POF, they are not true buyers.

Sep 15, 2018 12:22 AM #46
Rainer
79,856
Anne Corbin
Fritz Realty LLC - Spotsylvania, VA
Serving Lake Anna & Central Virginia

When I have a cash offer, I get the buyer's bank to give me a letter confirming the funds for the exact amount of the cash offer.

Sep 15, 2018 03:19 PM #47
Rainmaker
175,791
Allyson Hoffman
RE/MAX Villager (Chicago North and North Suburbs Real Estate) - Northbrook, IL
Making Today's Dreams Tomorrow's Reality!

Amen! Agree completely!

Sep 15, 2018 06:25 PM #48
Rainer
144,057
Eva Erdmann
Lion International Inc. - Holiday, FL
interior decorator

If someone wants to sell they'll consider any offer, in the worst case they will not get the cash and they wan't sell, that's it.

Good Luck

Sep 16, 2018 05:52 AM #49
Rainer
144,057
Eva Erdmann
Lion International Inc. - Holiday, FL
interior decorator

that's right, no for someone who needs loan but I would consider offer without proof for all cash, that's what I was talking about but what do I know I'm just a interior decorator.

Have a great day

Sep 17, 2018 06:27 AM #50
Ambassador
753,194
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

I remember once a "buyer" told me she kept her cash at home and the only way she could prove it was to carry the cash with her.

Sep 17, 2018 12:24 PM #51
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