You have an offer on your Arizona home. Unless the buyer included a document from a financial institution that shows the buyer has the required cash on hand, the offer is only worth the paper it is written on. Yes, you can take the buyer to court based on contract laws, but why go there if simply requiring Proof of Funds will avoid the hassle?

There are five reasons why you need a buyer’s Proof of Funds:

1. Assure Finances: Does the buyer have the funds to close the deal? In a cash transaction, look for a bank statement or letter from a financial institution that shows the full amount, plus a healthy cushion. In a financed deal, look for the down payment and a healthy cushion. If your buyer is using funds gifted from parents, be sure you see that bank statement as well, or better yet, require a statement from the buyer that shows the funds already gifted.
2. Minimize Delays: There are situations where the money exists, but is not yet accessible. Some investments take time to convert to ready cash. Be sure that the money is readily available before you accept the contract.
3. Reduce Listing Interruptions: When you accept a contract, you stop marketing the home. The MLS shows that the home is under contract, and therefore agents stop calling. If you accept a contract and then discover that the buyer is short on funds, your listing loses value because it comes back on the market with a “fell out of contract” stigma. Avoid this by getting the funds availability assurance up front.
4. Evaluate Offers: When comparing multiple offers, use the Proof of Funds as information to weigh. It is often better to sell your $500,000 home to someone who shows you a $999,000 bank statement, rather than to someone who shows you a $500,100 bank statement.
5. Guard Against Fraud: Reviewing your potential buyer’s financial statement is one hedge against fraud. It is like putting a sign in your front yard that announces a security system. Fraudsters are less likely to choose a property with higher standards of proof for contract acceptance.

In Arizona, the Arizona Association of Realtors Residential Purchase Contract has a built in clause that states the buyer is attaching the Proof of Funds to the offer. Be sure to hold the buyer to that obligation, and carefully review the Proof of Funds to be sure that the funds are sufficient and accessible.

This article, although written by an attorney, is provided for solely general informational purposes and does not constitute legal or other professional advice. Buyers and sellers should consult qualified professionals regarding their individual circumstances.