Home Buying in Pleasanton>Question Details

NervousB, Home Buyer in San Francisco, CA

Is it necessary to include our financial statements (i.e. savings, checking, stocks, 401k etc) with the offer to purchase home?

Asked by NervousB, San Francisco, CA Tue Nov 27, 2012

If the preapproval comes from a well known bank like Wells Fargo or Chase, wouldn't that be sufficient? We just think it's sensitive information to just hand over during the negotiation phase.

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Steve Ornellas’ answer
Hi NervousB,

"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:

“Pre-Qualified vs. Pre-Approved vs. True Pre-Approval”
http://www.Steven-Anthony.com/GettingStarted

"Retail Banks vs. Mortgage Broker/Bankers"
http://tinyurl.com/6qln6nd

Personally, I only work with Mortgage Broker/Bankers.

Good luck with your offer!

-Steve
1 vote Thank Flag Link Wed Nov 28, 2012
Thank you!
Flag Thu Nov 29, 2012
BEST ANSWER
Unfortunately...this has become the norm and many agents won't even present your offer without this information although not legally required it has become the standard so if you want your offer considered you may want to give them the information they request just remove the account numbers off of the documents that you provide. You could also ask that your lender do a VOD (Verification of Deposit) and instead of providing all your account information they could state in their APPROVAL Letter that they have verified all the necessary funds to close your purchase.
Good Luck !
0 votes Thank Flag Link Tue Nov 27, 2012
Wow...is this a joke? I would not advise turning over any financial or personal data to any third party in any situation. Unfortunately, I've witnessed through my experience in the banking industry a boat load of fraudulent situations related to the general public freely giving third parties social security numbers, account numbers, policy numbers so forth and so on.

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!
0 votes Thank Flag Link Thu Nov 29, 2012
We are biing told it is par for the course in Philadelphia - and we are not playing that course.
Flag Mon Feb 10, 2014
NO!. First of all, the seller agent has absolutely no authority to not present an offer. Real estate agents continue to think the home buying process is about them, it is not, it is about 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.
0 votes Thank Flag Link Thu Nov 29, 2012
Nervous B: not much more to add from SteveO's answer which is most comprehensive and complete.
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.
0 votes Thank Flag Link Thu Nov 29, 2012
Who knows who that seller is? For all you know they could be criminals, the agents will tell you that if they even know? All you need to show is a pre-qual if asked for and proof of downpayment but not every financial account you have. This is pure nonsense and any agent saying someone needs to provide more than proof of a pre-qual and downpayment should be avoided at all costs. Other information about your finances not even within the realm of responsibility to hand over to someone you don't know. Redacted account numbers? Are these agents on crack? Redacting account numbers help nothing. There is no reason for any seller to know your entire net worth, none whatsoever and anyone saying so is making it up.

If your downpayment, required by the bank plus enough to close escrow is in a savings account, show that, nothing else. Not your 401K, your checking account, it is not needed. One last thing. Agents are "REQUIRED" to present offers to the seller. If they don't-legal trouble for them
Flag Thu Nov 29, 2012
That information is provided to your lender. They have issued the preapproval based on the documents you have given them. There is no good reason you need to give that information to a seller. Even if it was a cash deal, the proof of funds letter should be sufficient.
0 votes Thank Flag Link Wed Nov 28, 2012
yes, I agree.......Nervous B
0 votes Thank Flag Link Wed Nov 28, 2012
Nervous,
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.
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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
727.420.4041
http://RealEstateMadeEZ.us
0 votes Thank Flag Link Wed Nov 28, 2012
There is no reason to hand it over nor is it the Seller business. A pre-approval letter from a lender is all that is necessary. The only reason to hand over any financial information along with an offer is when you're offering cash in which case it's reasonable for the Seller to ask for evidence that you have the necessary funds available.

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.
0 votes Thank Flag Link Wed Nov 28, 2012
Financial information is rather sensitive to the person involved so it is common for people to shy away from divulging this information. When a buyer makes an offer it is stated in the offer the amount they intend for a deposit and down payment. Stating an amount for deposit and down payment is different than having that amount available at the time of the offer. A buyer may well intend to have the money there by the time it is required, but sometimes that doesn’t happen.

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?
0 votes Thank Flag Link Wed Nov 28, 2012
I understand all the mix thoughts. Thank you all!
0 votes Thank Flag Link Tue Nov 27, 2012
You only need to give these to your loan officer and he or she will verify that you have sufficient funds to close the deal.
0 votes Thank Flag Link Tue Nov 27, 2012
You should only show an account that the money you are using form a down payment is coming from. It is so the seller can see that you can close the deal. It makes your offer a stronger one. They do not need to see all your accounts. You need to black out account numbers and address. Also only the front page of the statement is required. When you are up against other offers this information will be looked at because the seller wants to go with someone who can close the deal and on time.
0 votes Thank Flag Link Tue Nov 27, 2012
An old solution that is making a comeback is to get a letter from an officer at your local bank branch stating that you have at least $X in your account and that this balance has been seasoned at least X number of days in that account. I don't recommend showing anyone except your lender any bank statements.
0 votes Thank Flag Link Tue Nov 27, 2012
You should show the seller you do have the money to buy their home, it makes your offer look strong. You will want to white out your account information, and any other personal information you do not want the seller to see. Now a days most listing agents are asking for the buyers to show proof of funds.
0 votes Thank Flag Link Tue Nov 27, 2012
You should cross out the account number and your home address, always. You only need to provide prove of fund for the down payment, not all your asset.
0 votes Thank Flag Link Tue Nov 27, 2012
The only thing generally required other than your pre-approval is called 'proof of funds.' Listing agents want to see that you actually have the downpayment money some place. You can cross out/white out account numbers and other sensitive information. You do want the name of the institution to show, as well as the amount in the account.

Best of luck to you.
'
0 votes Thank Flag Link Tue Nov 27, 2012
You just need to show enough money to cover your down-payment and closing cost plus a little more.. but not all of your money..

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..


Shivani Yadav
Broker Associate, CHS, SFR
License # 01852900
Direct: 925.847.2265 Fax: 925.416.0175
Mobile: 925.264.9987, 408.480.2854
Email: shivani.yadav@cbnorcal.com, shivani.yadav@gmail.com
Website: http://www.HomesByShivani.com
0 votes Thank Flag Link Tue Nov 27, 2012
You should not provide your financial information with the offer. If you are paying all cash for the home, you can provide a statement showing the seller that you have the funds, but make sure all of your personal account numbers etc.. are removed with white out or heavy black markers.
0 votes Thank Flag Link Tue Nov 27, 2012
Thank you for your responses. Our agent believes it'll make a strong offer to include those items with the preapproval since we are offering on the low end (at 7% below asking - is that low if the house has been there for almost 2 months and it's winter season). We are covering closing costs already plus we are ok with rent back until March 2013. Appreciate your thoughts on this!
0 votes Thank Flag Link Tue Nov 27, 2012
Thank you so much!
Flag Tue Nov 27, 2012
DO you know if you are competing with other offer?? if its been on the market for so long..it might be over-priced to begin with..OR the condition might not be optimum... regardless what issue there might be..you need to show just enough to cover your closing and down-payment plus a little extra..

Hope this helps..

Shivani
408.480.2854
Flag Tue Nov 27, 2012
A lot of agents do ask for proof of funds especially in multiple offer situations. I have found that people say they are putting 20-25% down but they are actually going for an FHA loan with only 3.5% down.

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.

Meena Gujral
Achievers Realty
925-425-9491
http://www.helpusellachievers.com
0 votes Thank Flag Link Tue Nov 27, 2012
Abslolutely not. Who suggests this?

http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker – Sr. Loan Officer CA only
REO & Short Sale Specialist
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
0 votes Thank Flag Link Tue Nov 27, 2012
No, you do not need to include the financial statements. As a matter of fact, I strongly urge you never to share that information with anyone except your lender. The exception is if you are making a cash offer, then you would submit proof that you have the cash and black out the account numbers.
0 votes Thank Flag Link Tue Nov 27, 2012
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