Do cash buyers need to provide proof of their source of funds?

If you have the funds available to buy a home without needing to secure a mortgage, congratulations! You are in a fantastic position to make an offer and have your property purchase go swimmingly.

From the vendor’s perspective, you’re likely to be a highly attractive prospect. Your ready supply of cash means you come without all the baggage of needing to secure an offer from a mortgage lender – and the time this takes up.

While this is great news, there are certain checks, which your estate agent and conveyancing solicitor will need to make before your offer can be accepted and the sale proceed. With property fraud on the increase, you will need to prove your identity and that you are genuinely a cash buyer before you can buy a house.

You will also need to prove the source of the cash – a considerable amount of money. This is to comply with anti-money laundering regulations. In other words, to ensure that you aren’t buying a property with the proceeds of crime. Should such a sale go through, the seller, who unknowingly received funds from a criminal source, would risk having their money seized, leaving them without their property or the cash to buy another one.

Who needs to see my proof of funds?

You may need to show proof of funds several times before you buy a house; to the estate agent, your solicitor and the seller’s solicitor.

While you shouldn’t need to show proof of funds until you have made an offer, some estate agents may ask to see proof earlier, so they can be confident that you are a genuine cash buyer – and a serious one.

As a cash buyer, a bank statement showing that you have the money in your account to purchase the property should be enough at this stage.

Beware, if the estate agent suggests that their in-house mortgage broker needs to see your proof of funds under anti-money laundering regulations. There is no reason why, as a cash buyer, you should need to do this, but some agents may suggest it, hoping that you will take out a mortgage product for which they will receive a referral fee.

How do I prove the source of my funds?

Money Laundering Regulations 2017 mean that a solicitor cannot, by law, proceed with your cash purchase without having proof of where the money came from. To prove the source of your funds you will need to provide additional evidence, depending on where the funds came from. This could be:

Savings – banks statements showing proof of funds and demonstrating how the money has built up over time in the form of deposits from your salary or pension.

A pension lump sum – a copy of your pension statement, showing the amount.

A gift from a parent – your parent will need to provide a letter confirming that the money is a gifted deposit and that they do not expect to have any rights over the property.

Sale of property – a copy of the completion statement from your solicitor.

Inheritance – a copy of the letter from the executor stating how much you are being paid as a beneficiary.

In each of these cases you would also need to provide bank statements, which show the money was deposited in your account from the appropriate source.

If the source of your cash is outside the UK

Anti-money laundering regulations also come into play if you are receiving money from abroad to help you buy a house. It is possible that your solicitor will decline funds if the money is coming from what is regarded as a high-risk country.

Currently this means all countries with the exception of: Australia; Austria; Belgium; Canada; Cyprus; Denmark; Finland; France; Germany; Greece; Hong Kong; Iceland; Japan; Ireland; Italy; Luxembourg; Malta; The Netherlands; New Zealand; Norway; Portugal; Singapore; Spain; Sweden; Switzerland; UK and the USA.

In this case, it is important to take proper advice from a solicitor, experienced in dealing with such transactions.

If you are a cash buyer looking in a central London location, get in touch today, to find out more about the properties we have available and get advice on how to proceed.