Be on the Lookout for Fake Proof of Funds in Sacramento Real Estate

Sacramento sellers expect to see proof of funds with the offer for all-cash or large down payments.

Back in the old days of Sacramento real estate, nobody cared much about proof of funds. A lot of business was done on a handshake and, when I started in the business in 1974, via a one-page NCR contract. To put that time period into perspective, this was before most families even owned a microwave. But times change, and we quickly adapt to the times they are a-changin’.  I can’t believe I ever survived in a world without computers and cellphones, but I obviously did.

Nowadays, people want proof of everything. There are no good-ol’ boy deals. We don’t trust anyone. Nor should we, necessarily. There are too many crooks and scam artists, just more sophisticated, and electronic crimes are becoming more complicated and commonplace. It seems like every day I get an email from somebody asking me to click on a link that is clearly a trick. I’m always on the lookout for fake crap, and I hold a duty to my sellers when I receive a purchase contract to check it out for red flags, one of which is often the proof of funds.

I don’t want my sellers to be subject to bogus transactions. We have enough of those buyers as it is, which is a whole ‘nother blog. The problem seems to be in part that buyer’s agents don’t bother to review the proof of funds they get from their buyers. They often automatically assume it is legit.

When we receive a cash offer, proof of funds had better accompany the offer or otherwise the offer is deemed worthless. Ditto with a large down payment. I know of one set of buyers whose down payment was coming from a particular kind of loan, so when they decided to change loans and suddenly could not longer qualify, they had to pay to cancel escrow or otherwise go back to that loan. They opted to pay to get out of the sale.

Some proof of funds arrive without an account holder’s name on the paperwork. That is not considered proof of funds. That’s nothing more than wasted paper to put through a shredder. Proof of funds should be liquid or relatively liquid, not an untapable retirement account, for example. Buyers can download a bank statement to their computer as a PDF or take a photo of a bank statement with their cell and scan it to their agent. Documentation is available instantly, pretty much.

There is just no excuse not to include proof of funds with a purchase offer anymore. But please make sure the name on the account matches the name on the purchase offer. A letter from the bank needs to be on letterhead. This Sacramento Realtor calls the individual who signs it and not through the number on the letter. If you’re buying a home as an LLC, we can’t take your personal savings account or your mom’s, for crying out loud. If it’s a check, that check should be printed with the individual’s name, with a check number. Be dated today.

Last year I recall an agent who submitted proof of funds that turned out to be a cashed deposit check, already sitting in another escrow. Don’t ask me how I uncovered that little fact, but I did. Saved my seller a lot of headache, and I will never suggest a seller do business with that agent ever again. That was deliberate. He could lose his real estate license for that kind of crap.

So don’t hate a Sacramento listing agent when she asks for proof of funds. It’s a requirement for most sellers and simply good business practice.