Estate agent wants to see the Approval in Principle letter

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TheManWho

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I've never bought a property before. So I am wondering if anyone can help me out here in terms of how things work when dealing with an estate agent.

When you make an offer on a property to an estate agent, do you have to prove to them that you have the funds? I am wondering about the "approval in principle" letter you get from the bank.

If I have to show an estate agent this letter on making my offer, which is say 350k and my approval in principle from the bank is 400k then I'm just leaving myself wide open for the estate agent to push me for more, for a "phantom bidder" to emerge etc.

In summary, my question is do I have to ever show the estate agent my "approval in principle" letter and if so when do I have to show it, how late in the process can I hold off to showing it?
 
metricspaces said:
I've never bought a property before. So I am wondering if anyone can help me out here in terms of how things work when dealing with an estate agent.

When you make an offer on a property to an estate agent, do you have to prove to them that you have the funds? I am wondering about the "approval in principle" letter you get from the bank.

If I have to show an estate agent this letter on making my offer, which is say 350k and my approval in principle from the bank is 400k then I'm just leaving myself wide open for the estate agent to push me for more, for a "phantom bidder" to emerge etc.

In summary, my question is do I have to ever show the estate agent my "approval in principle" letter and if so when do I have to show it, how late in the process can I hold off to showing it?
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From my experience , No you don't have to show any proof of funds to bid on a property. A sale agreed isn't legally binding, good luck!
 
Yes you would have to show proof of funds.
The way I would handle it is, by saying to the EA, Proof will be shown on acceptance of the offer.

If I were selling, I would want the EA to weed out any one who had not got the funds in place and ready to move.
 
Have been through the process, we scanned the approval letter but blacked out any confidential details, figures etc before sending over to the EA. No issue with that from EA...
 
jimmeboy said:
Have been through the process, we scanned the approval letter but blacked out any confidential details, figures etc before sending over to the EA. No issue with that from EA...
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If I'm understanding you correctly, you blacked out from the letter how much the bank approved you for. If that is the case, then how would the letter be of any use to the EA? It wouldn't prove you have the funds to buy the property? Or maybe I'm missing something?
 
Yes, correct. All amounts were blacked out.

In my case, the EA was simply wanting assurance of mortgage approval. I guess some people make offers on the assumption that they will be approved by the bank...
 
But the redacted bit could say that you're approved for €120k and you could be bidding on a €1m house?!

Providing a redacted document shouldn't carry any weight.
 
I just got my solicitor to write a short letter stating I had sufficient funds based on the sanction he had reviewed to complete the purchase and all were happy with that.
 
Learner2015 said:
I just got my solicitor to write a short letter stating I had sufficient funds based on the sanction he had reviewed to complete the purchase and all were happy with that.
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Nice idea, thanks for that! I think I will go with this option. Along with one of the previous posters who said "Proof will be shown on acceptance of the offer". Once EA accepts my offer, I'll get solicitor to write a letter.

It makes no sense that I would ever show an EA how much I am approved for, even after an offer is accepted. EA can reject my offer at any point up until contract is signed. Showing EA I've more money to spend is just leaving me wide open to them using that information against me.
 
I have not previously heard of a regular vendor (aside from a bank or receiver) looking for proof of funds from a prospective purchaser.

This is a new and unwelcome development. It would be much better if the prospective purchaser were to tell the EA where to go rather than trying to accommodate this unorthodox request.

Tell the EA that you are a serious bidder and not interested in wasting his time or your own, but that you have no intention of revealing sensitive information.
 
Never let an EA know the maximum amount you can afford/ have approval for. Their job is securing the best price for their clients. If you show them you have approval to go above the current bid, you will very likely hear the price has gone up.
 
Some EAs requested this when we were buying, we also provided a redacted copy of the approval in principle from the bank.
Sure, it doesn't say you can carry through on the amount offered, but they're never going to know that for sure anyway. Approval in principle is not the same as a letter of offer..
It does indicate, I suppose, that you have already talked to a bank and that you are a serious bidder.
 
Learner2015 said:
I just got my solicitor to write a short letter stating I had sufficient funds based on the sanction he had reviewed to complete the purchase and all were happy with that.
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That sounds like an excellent solution, but what happens if you end up bidding on a few houses before you finally get one .. will the solicitor do up a new letter each time, to support each bid on each house and if so, do you get charged for the letters ?

I don't mind the principal of the estate agents wantingto ensure that people have approvals to support their bids, but there is no way in hell I would ever permit them to know how much my mortgage approval was for or what other sources of funds I had. It is absolutely none of their business and given they have an obvious conflict of interest, should not be given such information.
 
All I should of clarified that it was a receiver sale where the agent requested this and we pulled out in the end (but the letter was acceptable to the agent I should add).

Mr Earl, I only asked once and there was no charge but I did ask my solicitor if it fell through and I needed one for a different property would he charge for this and in fairness to him he said "I'm hardly going to charge you for changing the date and the addressee on a letter I have already written" so in my case there was no charge for the first one and there would of not been any subsequent charge if I needed more.

For the other property we successfully bid on (executor sale) proof of funds were not requested.
 
Learner2015 said:
All I should of clarified that it was a receiver sale where the agent requested this and we pulled out in the end (but the letter was acceptable to the agent I should add).
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Glad to hear that this was a receiver sale, and perhaps this looking for proof of funds is not more widespread. While it may be in an individual prospective purchasers interest to provide some measure of reassurance to the vendor that they are in a position to follow through on their offer, on the whole this is bad for buyers and a pernicious development.
 
Gordon Gekko said:
But the redacted bit could say that you're approved for €120k and you could be bidding on a €1m house?!

Providing a redacted document shouldn't carry any weight.
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When I first heard the idea of providing a redacted AIP, I thought the same. However, if someone goes to the effort of obtaining an AIP letter, it presumably says you've enough to cover the purchase. Maybe some percentage of the time, 20% for argument's sake, the prospective purchaser is still reaching, hoping to make up the amount before the purchase date, or else they're just plain bonkers. Otherwise, it really is fairly certain to be a genuine offer.

As far as I can make out, the agent's not looking for a cast-iron guarantee, just an indicator that you're reasonably serious. They probably don't care *that* much because a) it gives them an offer that might start some proper bidding or even add to a bidding war and b) if it falls through, they still look credible to their client, as they didn't just "take them at their word".
 
I'm surprised this isn't a more common practice. Weed out any messing or reduce the likelihood of delays. Especially if you're in a purchase-chain.
 
It is very common. If you don't provide it in some form redacted or not... a seller may have other offers that are more favourable. I posted my recent experience in weeding out different offers and no proof of funds was towards the bottom.

Until this year in my area many offers were made before purchasers even approached the bank... waste of time as they didn't end up getting the money approved at the value they bid.
 
A simple short phone call from your Solicitor to the Estate agent should be fine. The Solicitor just says my client has been approved by the bank to fund the purchase. We had to do this just before getting our offer accepted. Maybe they need to fax over a letter if the Solicitor is not known to the Estate Agent.
 
cremeegg said:
I have not previously heard of a regular vendor (aside from a bank or receiver) looking for proof of funds from a prospective purchaser.

This is a new and unwelcome development. It would be much better if the prospective purchaser were to tell the EA where to go rather than trying to accommodate this unorthodox request.

Tell the EA that you are a serious bidder and not interested in wasting his time or your own, but that you have no intention of revealing sensitive information.
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We had quite a few posters with this issue Cremeegg. I think it was because it was very difficult in the last while for people to get mortgage approval, so they don't want to waste time with you as you will not be seen as a serious buyer.
 
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