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.