MAKING AN OFFER

So, you have found a property that you wish to make an offer on. That's great news! 

Moving home is not something that people tend to do very often. It’s easy to get confused with some of the processes, terminology and jargon along the way. Below is some more information that you may find useful. It also explains what an agent will need should your offer be acceptable and why they need it.

An offer is not just about the amount offered, there is much more to it than that. The proceedability of a buyer and the composition of their offer are equally important. 

BUYING POSITION

Often referred to as ‘prodeedability’, your buying position relates to whether or not your purchase is dependent on the sale of another property (or assets). In the event of a related sale, we are required to verify the progress of the sale directly with the agent / solicitor dealing, as well as the balance of any existing mortgage or finance on the property or asset to be sold. 

Your buying position will be one of the following:

• No related sale of property or assets. You are ready to buy and your intended purchase is not subject to the sale of anything else. This could be a cash purchase, a refinance of assets or you are a first time buyer. 
• Related sale of property or assets. Your purchase is subject to the sale of something that is, or is about to be going through. If there is currently no buyer for this asset, you are unproceedable, or non-proceedable.

CAN I MAKE AN OFFER IF I AM UNPROCEEDABLE?

Yes, and no. As unhelpful as that answer sounds, anyone can make an offer on a property. However, if they are relying on proceeds of an unsold property in order to buy, then they are not currently in a position to buy. Anything can happen between that time and the time of securing a sale and most agents, including Archer & Co, would not recommend that their client accept a non-proceedable offer. 

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 FUNDING

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.

SOURCE OF FUNDs

In some cases, evidence of the source of cash funds may also be required. This may include:

• Savings. If you have saved the money yourself, you will need to provide bank statements going back over a period of time showing how you gradually built up the money.
• Gift. A letter from the person gifting you the money plus evidence of how it came into their possession.
• Inheritance. Evidence from the executors of the estate.
• Sale of a property. A copy of the completion statement from your solicitor. Alternatively, a copy of a statement showing the money being received from a solicitor.
• 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. 

AML CHECKS 

We are required under Money Laundering Regulation 2007 to obtain a valid ID and proof pf 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. 

WHY WE NEED SO MUCH INFORMATION

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'.

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