Do estate agents need proof of funds?

When you make an offer on a house the estate agent will ask to see proof of funds. Here’s why they are asking and what you may be asked to provide.

Do estate agents need proof of funds

Yes. When you’re buying a house, the estate agent will ask for proof of funds for a number of reasons:

• To make sure you can afford to buy the house. When you make an offer on a house, the estate agent will want to be sure that you can afford to complete the purchase.
• To comply with Anti-Money Laundering regulations. Estate agents have a legal obligation to do checks on everyone buying a property to make sure the money is coming from a legitimate source.

How can I provide proof of funds?

Your proof of funds for a house purchase could come in various forms such as:

• Evidence of a recent property sale or that you are selling a property.
• A Mortgage Agreement in Principle, showing how much a lender will lend you on a mortgage.
• Bank statements showing you have your deposit, or the full value of the property if you’re a cash buyer. If you have saved the money over time, you’ll need to provide bank statements going back over that period showing how you built up the money.
• Gift. A letter from the person gifting you a deposit plus evidence of how the money came into their possession.
• Inheritance. Evidence from the executors of the estate.
• Investments. Receipts or records showing shares have been sold
• Pension. A copy of your pension statement and a copy of your bank statement showing the money coming in from a pension firm.
• Gambling winnings. Won the lottery? Lucky you! If you plan to buy a house, you’ll need to show a receipt proving your winnings.
• Compensation. A copy of the letter you received from a solicitor or court confirming your compensation settlement.

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You’ll also need to show proof of ID

It’s also an estate agent’s legal duty to ensure that you are who you say you are, so they’ll ask you for proof of your current address and your identity. So you’ll be asked for some of the following forms of proof of identification.

• Proof of name: Such as a current passport, residence permit, current UK or EEA photocard driving license or residency permit.
• Proof of address: Such as a recent council tax bill, utility bill, recent mortgage statement or bank statement.

When do I need to show proof funds to an estate agent?

You don’t have to show proof of funds until you make an offer on a property. Some estate agents may ask to see it earlier. There’s nothing wrong with doing this, but if you don’t want to you don’t have to. Showing evidence you have the funds in place means you are a serious buyer.

Who else requires proof of funds?

When you buy a property, your mortgage lender and solicitor/ conveyancer will also ask for proof of where your money has come from. So be prepared to show your proof of funds several times.

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Do I need to see the estate agent’s in-house mortgage broker?

No, you do not need to see the estate agent’s in house mortgage broker. We hear of instances of estate agents referring buyers to their mortgage broker under the pretence that they will need to validate the source of funds for a house purchase under Anti-Money Laundering regulations. This is simply a sales tactic to get you speaking to the mortgage broker and using their in-house provider – for which the estate agent will get a referral fee.

Note that it is also illegal for the estate agent to say you have to use their mortgage broker in order to get first sight of houses new to market or in order to make an offer.

Read more about why you should avoid estate agents’ in-house services and what you should do or get in touch with us at hello@hoa.org.uk if you think you are missing out because you won’t use the estate agent’s mortgage broker or solicitor. It’s important that with such significant financial decisions like getting a mortgage, you are able to shop around to find the best deal.

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Mortgage Agreement in Principle

• The most common way of demonstrating you have funds in place and are a serious buyer is with a mortgage agreement in principle, also known as a mortgage in principle, agreement in principle or decision in principle. A mortgage agreement in principle is an indication that a lender could lend you a specified amount, based on details you’ve provided about your income, spending and debts. 
• You should be able to get a mortgage in principle for free. With fee-free mortgage brokers L&C, you can get a personalised Decision in Principle in just a matter of minutes. And unlike some other lenders, getting a Decision in Principle from L&C won’t impact your credit score. There’s no obligation to proceed with the deal they find you, but it gives you a good indication of how much you can borrow.

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Careful with foreign transfers

If you are receiving money from abroad to help you buy a house, this causes a problem with Money Laundering Regulations. It is possible that your solicitor will decline funds if the money is coming from a high-risk third country or someone who is connected to a high-risk third country.

Under the current rules in the UK, high-risk third countries include Algeria, Angola, Kenya, Namibia, Nigeria and Vietnam. For a full list, visit the Law Society’s website.

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