It is now a legal requirement for all estate agents to undertake several checks once an offer is agreed with a prospective buyer. These checks include satisfying rules set out by The Property Ombudsman, Anti Money Laundering regulations set out by HMRC and (as of January 2020) the EU Fifth Money Laundering Directive.Estate agents are also required to complete a Risk Assessment for each buyer where unwillingness to provide information on funding (including its source), automatically triggers the buyer to be a 'high risk'.

Offer Composition

When purchasing a property, an offer is made up of three potential components. We need to understand the offer composition in order to provide our client with as much information as possible.

CASH. This refers to readily available cash at the bank. This can (and often does) include‘gifted funds’.

FINANCE. This is any monies that are being borrowed to fund the purchase, like a mortgage,remortgage or loan.

EQUITY. This is when a buyer is using proceeds from the sale of a property (or any other asset), towards the purchase. Agents often refer to this as a ‘related sale’.

Chains

Where a buyer is using equity from the sale of a property, their buyer may have a buyer, and that buyer may also have a buyer, and so on. This ‘lower chain’ will need to be verified before an offer can be accepted. Agents call this ‘chain checking’. If our client is also buying a property then this is referred to as ‘the upper chain’ or 'onward chain'. The entire chain usually needs to move on the same day so if one link in the chain fails (e.g. a buyer pulls out), then the entire chain collapses, leaving all those in the upper chain unable to proceed and the lower chain stalled as somebody no longer has a house to move to. As common as they are, shorter chains are much more attractive to sellers as the fewer links in the chain, the less the risk of the chain collapsing.

Proof of funds

Should your offer be agreeable, we will require evidence of each component before it can be accepted. This is referred to as ‘proof of funds’ or ‘funding checks’ and it is a legal requirement for all Estate Agents to gather these for every single buyer.It may be that you are using cash, raising a mortgage proceeds from a sale, or using cash. In any event, we are required to obtain 'proof of funds' and in many cases, information on the 'source of funds'. Acceptable funding evidence includes one (or a mix) of:

Bank statement. A recent statement (within 30 days) showing the purchase price or deposit amount.

Mortgage AIP. A recent, valid Agreement in Principle from a lender or Financial Advisor.

Letter from bank manager. A letter or email from your bank manager vouching for funds available for the purchase price or deposit amount.

Letter from financial advisor. A letter or email from your financial advisor / wealth manager to confirm approval of your funding method.

Mortgage statement. If you are purchasing from the proceeds of a sale, we are required to verify the balance of any outstanding finance on the property being sold.

AML checks

We are required under Money Laundering Regulation 2007 to obtain a valid ID and proof of address for each of the purchasers. We will require one document, dated within the last three months, from each of the following sections for each buyer:

Photo ID

• Driving License
• Passport
• Firearms license

Proof of Address

• Utility Bill (not mobile phone bill)
• UK Driving License (if not used for photo ID as well)
• Mortgage Statement
• Bank / building society statement
• State pension benefits book
• Home or motor insurance certificate
• Current local authority tax bill / tenancy agreement

 

 

Solicitors

You will need to appoint a solicitor to handle the transaction for you. We can often recommend someone so if you do not have one, please let us know. we ask that you appoint a solicitor within three working days of having your offer accepted.

Survey

If you are having a survey then we ask that you book this in within two working days of having your offer accepted.

More information

More information can be found at the following websites:
https: //hoa.org.uk/advice/guides-for-homeowners/i-am-buying/do-estate-agents-need-proof-of-funds/ 
https: //www.propertymark.co.uk/advice-and-guides/buying-a-home/estate-agent-checks.aspx