Pat Kennedy - Your Washington, DC Real Estate Connection

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"My bank balance is none of the seller's business!" Um, maybe it is!

It's not unusual for people to be somewhat protective when it comes to personal information.  Still, when it's time to make an offer on a Washington area house, you may have to give it up. 

It's the custom in this area to provide the sellers and their agent with a letter from the lender you plan to use saying that, after checking your credit, employment and assets, you will be able to obtain a mortgage and complete the transaction.  In addition, most agents will insist that you include a financial information disclosure with a lot of the details surrounding your earnings, readily available liquid assets, debts, and other things you might feel reluctant to provide.

The purpose of the financial disclosure is to give the sellers some assurance that you will, in fact, be able to complete the purchase of their house.  And how you fill out this disclosure should depend on the details of your particular situation.

In most cases, you want to be careful not to overstate your assets or to understate your liabilities. 

But do you have to disclose all of your assets?  The basic answer is no.  If you just won the Powerball and are making a low-ish ball offer, you may not want the sellers to know that you are able to pay the asking price and then some.  But if you are involved in a bidding war for your dream house, you may want to show your entire hand. 

While home buyers may be concerned about protecting your assets, when they are buying a house, they are asking the sellers to take one of their major assets off the market.  And if, for some reason, you can't pull everything together in time to reach the settlement table, it could spell disaster for the sellers.  And the basic purpose of the financial disclosures are to give them a comfort level. 

 

 If you are planning a move to or from the Washington, DC area, I can help!  I am licensed in the District of Columbia, Maryland and Virginia.  Email me at Housepat@mac.com, or call 202-549-5167

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Comment balloon 12 commentsPatricia Kennedy • November 29 2012 08:42PM

Comments

Wow Pat, I don't think we have any financial disclosures for our buyers to fill out. Goes to show you how each state is different from the other.  Truthfully, I don't know what to think about that.

Posted by Mona Gersky, GRI,IMSD-Taking the mystery out of real estate. (MoonDancer Realty, Dillsboro,NC) almost 8 years ago

Sellers themselves could make the demands on the very high end deals(and maybe most any deal?), no standard disclosure forms needed.

Been involved with such transactions in the past.

Posted by Pete Xavier, Outstanding Agent Referrals-Nationwide (Investments to Luxury) almost 8 years ago

It has become more common place for buyers to provide their bank statement to show a dollar amount. We are not asking for their account number, but many do at least send it to their Realtor.However we do encourage them to black this out before sending. Bottom line is they need this before moving forward with any offer. 

Posted by Winston Heverly, GRI, ABR, SFR, CDPE, CIAS, PA (Winston Realty, Inc.) almost 8 years ago

Pat, we don't have a financial disclosure form, but the buyer is expected to provide a copy of their bank statement  showing they have the funds to cover the down payment and closing costs. Without it, the offer would not not even be seriously considered.  

Posted by Suzi Sandore, North County San Diego Homes (RealtyONEGroup) almost 8 years ago

Yes, it's a balancing act for sure.  The seller wants to make sure the buyer can pay; the buyer doesn't want to show their hand.  It seems to me that there should be an alternative to show that you have the minimum needed (w/ some cushion) and not need to show above that.  That's just my opinion to try to solve this dilemma.

Posted by Debbie Gartner, The Flooring Girl & Blog Stylist -Dynamo Marketers (The Flooring Girl) almost 8 years ago

I think buyers should show up, cut open their bellies, and, flayed in front of sellers, ask to have them take anything they want!  Yep, that's it.

On my first home purchase, 1981, I signed three pieces of paper!  Settlement lasted 3 minutes.  Prior to that I think they wanted to know what my downpayment would be! 

No flaying!

Obviously my first line is facetious...

Posted by Jay Markanich, Home Inspector - servicing all Northern Virginia (Jay Markanich Real Estate Inspections, LLC) almost 8 years ago

We don't have one either but in light of how things are changing, I wouldn't be surprised if one is not adopted soon.

Posted by Paula McDonald, Ph.D., Granbury, TX 936-203-0279 (Beam & Branch Realty) almost 8 years ago

Mona, as a new agent, I was not comfortable with it.  And whenever possible, I try to make it with a very strong lenders letter and no disclosure form.  But sometimes the agent will insisit and then they'll get it.

Pete, interestingly enough, on the very high end deals, listing agents and sellers require nothing more than a strong lenders letter (if there is even going to be a mortgage) or a letter from their banker saying they have readily available liquid assets to complete the transaction. 

Winston and Suzi, that works, too.

Debbie, often in multiple contract situations, the sellers will go for the offer that has the strongest financial sheet, and in these cases I think it's best for the buyers to look as good as possible.

Jay, even when I was a newbie,  (1982) there was more to it than that.  Maybe it's because there are so many lawyers in Washington.

And Paula, wow!  Now that's the other extreme! 

Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) almost 8 years ago

Great topic, I have seen sellers, listing agents, buyers and buyer agents all have breakdowns over this. For cash sales on bank owned homes and now some non bank owned it is common for a proof of funds. It could simply be a letter from their bank saying they have adequate savings to be able to pay said amount. Some go over board and ask for everything not knowing what they are doing while other buyers have fits to disclose anything, usually i find the reason is they dont have the funds and are trying to use a private loan or such. I do my best to explain why and how it is used, and most then understand.

Posted by Scott Godzyk, One of the Manchester NH's area Leading Agents (Godzyk Real Estate Services) almost 8 years ago

Pat  Remember when we filled out a financial sheet and showed it to the serrler?  Can you imagine doing that nowadays?

Posted by Karen Kruschka, - "My Experience Isn't Expensive - It's PRICELESS" (RE/MAX Executives) almost 8 years ago

Interesting Pat!  We always have a preapproval letter but unless the buyer is paying cash, I haven't been asked for financial information.  So far around here, Sellers seem to be relying on the preapproval letter.

Posted by Christine Smith, Exclusive Buyer Agent & Attorney, Canton, MA (Buyers Brokers Only LLC - www.BuyersBrokersOnly.com) almost 8 years ago

Hi Pat - some folks are really way too private for their own good.  Granted, all we need in a real estate transaction is proof that the buyer can perform, but when I was practicing law I had some real fights with a few clients over this issue when they were litigating.  One client bought a business that was worth at least $1 million less than what had been represented, and there was some evidence that the books had been cooked by the seller. 

In order to prove up the amount of damages, I had to show the court my client's finances and the money he had lost, but my client refused to give that info to me.  He simply could not trust that his private information would not be made public, so he had to drop the winnable case and ended up filing for bankruptcy (didn't pay my bill either).  If you want the decision maker to rule in your favor - whether it is a judge or a property seller - you'd better give them the info they need to make the right decision!

Posted by Susan Neal, Fair Oaks CA & Sacramento Area Real Estate Broker (RE/MAX Gold, Fair Oaks) almost 8 years ago

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