Why do we have to provide proof of funds when bidding on a home?

Why is it necessary to provide proof of funds to the selling agent when bidding on a property? We are uncomfortable with disclosing our proof of funds. Our broker suggested blanking out the figures on our approval in principle (AIP) letter.

Selling agents act in the best interest of their client: the vendor.

Therefore, to be in a position to advise the client that the bidder or prospective purchaser has access to sufficient funds to purchase the property, the necessary proof of funds must be provided by the bidder to the selling agent.

Some bidders do blank out the figures on their AIP letter. They might as well send in a blank sheet of paper/email. The selling agent in these cases, cannot advise their client if the bidder has access to sufficient funds to purchase the property and should not register the bid.

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Let’s put the shoe on the other foot so to speak: say the selling agent is selling the bidder’s property. They would insist on knowing that their prospective purchaser has access to adequate funds before a bid is registered or ultimately accepted. It would be wrong for the selling agent to just take bids and automatically agree the highest price when there could be a shortfall in a particular bidder’s ability to access sufficient funds, while other genuine qualified bidders could be lost along the way. This practice would increase and inflate bidding prices without foundation.

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Furthermore, if the bid is more than 10 per cent higher than the loan approval, then the agent should also have proof of this difference from the bidder, for example a gift or savings.

With several bidders bidding on properties at present, there is greater choice for the vendor to choose the best offer. Without sufficient proof of funds, the selling agent will ultimately advise their client, the vendor, to accept another bid substantiated with correct proof of funds.

It is sufficient, however, for the bidder to show the selling agent their proof of funds in person in the office or at the property. Once the selling agent has sight of sufficient current proof of funds, that is adequate. Written proof of funds are subsequently destroyed by the selling agent to comply with GDPR guidelines.

Once this is explained to bidders, the proof of funds is usually forthcoming.

Roger Berkeley is a chartered residential surveyor, a registered valuer and fellow of the Society of Chartered Surveyors Ireland

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