Should Photos of Dollar Bills Qualify as Proof of Funds?

You have a buyer that’s interested in working with you in order to find their new home, and they want to do a cash-only deal. Perhaps they are investors, flippers, or even first-time buyers. When you ask them for proof of funds so that you can get started on the process, they send you a picture showing stacks of cash. Technically, that would be proof, but, does it suffice?

The short answer is, no.

Most experienced real estate agents have seen something like this at least once in their career. But, if it’s the first time it’s happened to you or you want to be prepared when it does happen, here’s what you can do.

Make Sure Everyone Understands “Proof of Funds”

As an agent, you’re already very aware of what “proof of funds” means, but if you’re just getting into this line of work or you’re a buyer or seller curious for yourself, it’s important to note that proof of funds has nothing to do with financing a home. Proof of funds is strictly for a cash offer, and it requires a third party in order to be carried out and considered as proof.

Reasons Why People Do Cash Only Offers

Though getting a mortgage is the standard way for people to buy a home, it’s certainly not the only way to go about it. There are many reasons that people choose to do cash offers instead of going the traditional route of getting a mortgage. While it would be impossible to list every possible reason, a few are:

• An immigrant family wants to buy a home but they are unable to apply for a mortgage because of their residency status, not yet having a job, a language barrier, etc.
• Several families or friends are going into buying a home together. 
• Someone has had a bad experience and for whatever reason, they do not trust banks.
• A person just recently came into money somehow.
• The person has worked hard to save the cash so that they don’t need to get a mortgage with high-interest rates.
• The person is interested in saving money on buying a home, and cash-only offers usually come at a lower price.
• The person wants the process of buying a home to go a lot quicker and cash-only deals often do not require the majority of the paperwork that’s required when financing a home.

Don’t Ever Jump to Conclusions

It’s easy to make assumptions about a person when they tell you they can pay for a home – that would take most people 30 years to pay off –  in cash. And, if they send you a photo of their cash, it’s natural for an agent to come up with ideas about how this person got the money. You may wonder if they are in a shady line of work or they did something unethical to get this amount of money. 

Whatever the case may be, remember that it’s not your business how they got the money, but that they are simply able to prove to you that they have it. This is not the same as a buyer going through a lender and needing to show tax returns and income. Therefore, do not press or ask questions. That being said, if you have a legitimate reason that the money is for some reason illegal, that may be something to explore a little further. 

Be Clear About What You Require

Unfortunately, as much as you may try to avoid passing judgement, the fact of the matter is that a photo of cash does not equate to proof of funds. And, neither does a duffel bag full of cash. Here’s what also does not generally count as proof of funds:

• The buyer inviting you to their house to show you the physical funds. While this is clever, it won’t suffice and is also way outside your job requirements.
• A bank statement from the previous month. Who’s to say that the person did not withdraw the money since then?
• A statement of a savings account from the previous month for the same reason.
• A handwritten note from someone saying they are going to pay.

Proof of funds is required by agents to show the seller that the buyer has enough cash to pay for the home. As an agent, it is your job to make it clear to your clients what you will accept as proof of funds and what the seller will accept as proof of funds. So, here are some examples that you can suggest to your client:

• A printed out statement on a letterhead of the bank that indicates the amount of money is in the account as of the most recent date.
• If it’s a savings or investment account in which the money can be withdrawn from quickly, the same as above would usually suffice. However, if it’s an account that can take a while to withdraw the money, you will likely need to have withdrawn it beforehand.
• A cashier’s check (usually required on the day of the transaction).
• A check or money order (great for people who do not use banks).
• In some cases, cryptocurrency may be accepted or an online bank transfer.

Cash-only deals are becoming increasingly more common. As an agent, you’ll need to know how to process these deals just as you would for a buyer who has a mortgage. Because it’s cash, though, the scenario can be a bit more fragile, so the more structured your procedure is and requirements are of the client, the more likely they are to trust you and feel comfortable with the process. And, the same goes for the seller and their agent as well. 

Don’t turn a buyer away just because they send you a snapshot of their money. Don’t laugh, and don’t be intrusive. Simply outline your requirements, and let the buyer make their decision. Doing it any other way would be extremely unprofessional.