Searching for, finding, negotiating the price and sorting the finances to buy your next home can be hard enough! Especially in a competitive market in the middle of a pandemic! But when you do find your “dream home” (or a perfect buy-to-let) don’t let the criminals cause you to lose-out, or cause any delay in the process of you securing it.
Before the agent can even send out sales memos to start the ball rolling with solicitors, the law says that we must carry-out the necessary Money Laundering checks – identity and financial checks to make sure that you are not a criminal or are involved in criminal activity.
Of course, you are not! You’re just trying to buy a house!
But apparently the UK property market has for many years been seen by criminals as the perfect way to legitimise their “dirty money” Whether it be buying property themselves – or, contributing to someone else’s.
The problem is, that when it comes to the rest of us just trying to buy a house, those “necessary” checks can not only delay the process but also, on occasion, they can mean that a buyer can lose-out on their purchase completely to another buyer who has their correct up to date ID and proof and source of funds more readily available.
Obtaining and verifying such documents and information can often take several days (sometimes much longer) causing unnecessary delays and angst between buyer and seller even before the legal process can be started. So much so, that some agents cut corners, rush-out the sales memos and then try and “mop-up” afterwards, only to find that the buyer cannot provide adequate proof, or the “cash” buyer actually requires a mortgage that hasn’t been approved!
So, what’s the answer? Well, if you’re serious about buying, have all of the necessary documents and information in place at the time you make an offer – you are going to have produce it anyway, so why not have it immediately to hand at this stage?
<h3><strong>What documents and information are required?</strong></h3>
<strong>Proof of Identity</strong>
To make sure you are who you say you are, you will be asked to provide <strong>proof of your current address and valid photo ID in your name</strong>. You’ll be asked for a copy of at least two of the following documents:
<strong>Proof of name/photo ID</strong>
<ul>
<li>Current passport and/or current UK driving licence</li>
<li>Residence permit – for non-British/EU passport holders</li>
</ul>
<strong>Proof of address</strong>
<ul>
<li>Current Council Tax bill issued by your local authority</li>
<li>Recent Bank statement</li>
<li>Recent Utility bill (not mobile ‘phone)</li>
</ul>
<strong>Proof of funds</strong>
To check that you have legally acquired the money you are using to buy the property, you will be asked to supply proof of funds documentation.
When you make an offer, you may find that you are asked for proof of funds initially by the estate agent because they want to make sure you are a genuine buyer. However, <strong>you don’t have to provide proof of funds at this stage, if you don’t want to</strong>.
The estate agent will ask for <strong>proof of funds after your offer has been accepted. At this stage, </strong>they are not only checking that you have the money to actually pay for the property but also carrying out their required money laundering checks. You<strong> must provide proof of funds to cover the full purchase price and costs</strong>.
It’s worth noting at this stage that you will also be asked for this information and documentation by your solicitor (or conveyancer) and your mortgage provider, once things get underway with your property purchase.
Examples of proof of funds:
<ul>
<li>An agreement in principle/mortgage in principle</li>
<li>Bank statements of your deposit amount (for mortgage buyers)</li>
<li>Bank statements of your cash amount (for cash buyers)</li>
<li>Evidence of you selling a property (if using the funds to buy the new property)</li>
<li>Evidence if the money has been gifted</li>
</ul>
Your estate agent can (and often will) ask you to provide more details of where your money has come from. This is normal practice as all estate agents must conform to the current Money Laundering Regulations.
<strong><u>Further proof</u></strong>
Depending on where you obtained the money for your deposit or the property’s full purchase price (if you are a cash buyer), you may be asked for further proof to show that the money has come from where you have claimed.
For example:
<ul>
<li>A letter from whoever gifted your money (e.g. family may have given money towards your deposit, won the lottery, left money in a will)</li>
<li>Further bank statements from the past months/years (to show how your money has accumulated over time)</li>
<li>Evidence or receipts for gambling winnings, sale of shares, or other large amounts of money in your bank account</li>
</ul>
Best practice is to <strong>keep evidence of where all of the funds that will make up the total purchase have come from. Th</strong>at way you can be prepared if anyone asks for it.
Seems like a lot of detail but it’s quite straightforward really – and if you have it to hand from the outset, it will speed the process to help get your sale underway from the moment your offer is accepted. If for any reason you cannot provide the necessary information and proof, in a timely fashion, it can cause unnecessary delays and may even cause you to lose-out on your purchase.
