Good Luck !
"Is it necessary to include our financial statements (i.e. savings, checking, stocks, 401k etc) with the offer to purchase home?"
Most likely, yes. Assuming you are using the CAR Purchase contract, Para 3G requires the Buyer (or Buyer's lender/loan broker) to contractually provide a verification of down payment and closing costs within 7 days - so why not do this upfront to better position your offer?
Now, with a few caveats:
- As provided below, you should mask personal confidential information such as address and account numbers.
- You only need provide up to what you are providing as a down payment; however, it's not a bad idea to show additional financial capacity. I would provide as much financial documentation you need to remove doubt in your offer. In this regard it helps to have your Agent call the Listing Agent to get a feel for how many and what type of offers you are competing against (this could have quite different make-up depending on price point).
There are two primary "influencers" Sellers and/or their Agents focus on: 1) price and 2) perceived transactional risk. Price is self-explanatory; however, one needs to dig a bit deeper to cover perceived transactional risk.
From the Seller's perspective risk can come from many areas. The Buyer's financial wherewithal is material in the process of choosing which offer to accept because there are potential deal-killers in every transaction when money is tight, for example:
A) An appraisal comes in under the offer price and Seller refuses to lower the price and/or Buyer has limited funds to make up the difference.
B) A Property/Pest/Roof or other inspection uncovers active damage where the Buyer's lender or Buyer themselves want addressed (one of a few primary reasons Sellers should consider pre-listing inspections to increase marketability).
C) An upward interest rate shift removes the ability for your Loan Broker/Banker to provide you that Closing Costs Credit you were relying upon to make the offer.
Buyers need to appreciate Sellers are not really interested in having their property fall out of escrow because they (and their Agent) did not perform an appropriate level of due diligence for selecting an offer that has not been fully vetted upfront.
Bottom line: Communicating strong financial capacity gives the Seller an added reason to select your offer (and don't forget the comprehensiveness and professionalism of the offer package provides a clue to how the transaction will go with the particular Agent representing you, which is yet another "perceived risk" influencer).
"If the preapproval comes from a well known bank like Wells Fargo or Chase, wouldn't that be sufficient?"
In my opinion, ABSOLUTELY NOT! Please read the following two posts:
â€œPre-Qualified vs. Pre-Approved vs. True Pre-Approvalâ€
"Retail Banks vs. Mortgage Broker/Bankers"
Personally, I only work with Mortgage Broker/Bankers.
Good luck with your offer!
Your gut feeling is correct. Credible banking institutions are protecting you as their client and they very aware of how to protect your best interest when dealing with third parties. Your current RE transaction deal sounds a little shady in my opinion. Good luck to you!
Anyone handing over information not relevant to the purchase is a fool and believing an agent that you must provide is even worse. The only information needed is perhaps a pre-approval and proof of funds for the downpayment etc. Anything else is something being made up real estate agents. Who thinks sellers decided all by themselves to start asking for financial information that has absolutely no bearing on the buyers willingness or ability to purchase the home? They make this stuff up. It comes down to this, some agents set up all the hoops to see who will jump through. It puts the buyer on the defensive and as a result, a disadvantage. Don't fall for it.
Having a healthy 401k has absolutely nothing to do with anything in home buying. Come on people, does a seller care about anything after you buy the house? Heck no. What, now the seller is concerned you're going to be able to pay the mortgage?
Stop listening to agents who make up these crazy requirements from thin air.
There isn't a seller or real estate agent on earth qualified to determine if your escrow will close based upon this other than customary presented information, that is the job of the bank/lender. The seller isn't lending you anything, they are selling. This is hogwash and I know agents will now chime in. After all, they, not the sellers made this stuff up.
Preapprovals are no longer 'good enough' as the market is so competitive.
Sellers want to know how committed you are to purchasing their home.
Every possible 'loop hole' for exiting a contract must be filled to get that contract completed and closed.
Provide the documentation that shows that you have sufficient cash to close the transaction. If you require $150k to close the transaction, provide the overview page only (sufficient). Shade out the personal account number information. If your stocks and 401k, etc are not being liquidated, then there is no need to provide that information.
It is entirely up to you what you are willing to provide the seller. You are not REQUIRED to submit a pre-approval, but as you know, it proves to be very beneficial when a seller is considering the validity of your purchase offer.
The bigger the bank the more likely they have made NO effort to verify your submitted data. They typically wait until the final weeks of the process before starting their process. That does not serve the seller well. So, instead of having you move to a trusted lender for validation, a seller, in many situations, would be wise to understand that a bank that is "Too Big To Fail" and "Too Big To Care."
This sets the stage for what professionals encounter on a weekly basis. The Wells Fargo and Chase appraisal ambush. It is very likely you found a lovely home in a well established community of custom built homes with very little sales activity. Homes built in 1924 adjacent to home constructed in 2004. Pools, golf course, and even a few on the lake. Such eclectic communities have a fabric about them that makes living there a joy and nurtures community bonding. You may have patiently waited for years for a home to become available in this community.
The seller knows what's coming, the sellers agent knows what's coming.
Fair market value is what a willing seller and willing and able buyer agree upon. The banks you identify, don't care. Their appraisal and underwriting process has entirely different objectives and they are NOT to establish the fair market value of the home.
In anticipation of said ambush from Wells Fargo or Chase, the seller needs to confirm you are able to perform up to your agreed upon commitment. The seller is not negotiating with Wells Fargo but with YOU. The seller may understand you INTEND to use this ambush as an opportunity to reopen negotiations. If you are unable to execute the sale as a willing seller and able buyer agreed upon, the seller may want to patiently wait for a more qualified buyer.
There is much we do not know about your situation. But, as always, there are choices available to both the buyer and seller.
It's your choice. How badly do you want the house?
Best of success,,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
I've read some of the response below from others who feel this is acceptable, myself I'd tell the Seller, 'I'll show you mine if you show me yours"
Sellers and their agents need to get a grip and understand two things: 1- There are no guarantees in life or in real estate. 2- You cannot force a buyer to buy anything. If a buyer wants out of a deal their out, and verifying their finances isn't going to stop them from terminating the deal.
The truth is Sellers and their agents don't know the difference between a pre-approval letter and a pre-qual letter If you have a true pre-approval letter it should say in effect that the lender has pulled a full tri-merged credit report, verified your employment and income and that you are approved to purchase the property subject only to a satisfactory appraisal and final approval by underwriting.
If your lender hasn't done these things, (which would require you to have submitted your past two years of tax returns for verification as well as your last 2-3 months of bank account statements at a minimum, then they can't write such a letter and you should tell them what you want and give them what they need to produce it.
This can result in a loss to the seller, both monetary and in time. So, as a result it has become normal for sellers to require proof of funds at the time the offer is made in addition to the earnest money deposit.
Not everyone may agree, but I think everyone can understand the validity of the seller's request.
On the flip-side, were you a prospective buyer of a home, would you want to come in 2nd best to an offer where the buyer does not yet have all his funds to close escrow?
Best of luck to you.
I would not advise showing all your income. You may want to make your offer stronger on the terms.. like time frames..going in w/o inspections and/or appraisal etc..
Broker Associate, CHS, SFR
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If the listing agent is asking for proof of funds, there is no harm in sending it. Just white out the account numbers and send it or you could lose the house for not providing that information to someone else who gave everything that was requested by the seller's agent. You just need to show enough money for the down payment.