VERIFICATION OF FUNDS: HOW DO WE DOCUMENT IT? (REVISED)

February 12th, 2011 at 10:25 pm

As you know, the CAR Purchase Agreement provides that, within 7 days of contract acceptance, the buyer must provide the seller with verification that they have the funds necessary to close the transaction.? From the broker’s perspective, the question is how do we want to handle this part of the transaction, either from the buyer’s or seller’s side.? In some instances, we will need to collect and forward those documents to our sellers and then properly prepare them for our file.? In others, we will need to confirm and document that our seller has received those documents, then provide that confirmation to our file.? Most importantly, when we represent the seller, we must make sure they get the verification documents in every instance.? Ignoring that clause of the contract is unacceptable.? With that in mind, let’s talk specifics.

First, understand that we would prefer not to have the verification documents in our file.? Those documents contain a lot of confidential information that have the potential for causing identity theft issues.? Obviously, if we do not have the confidential information, we cannot be responsible for it being stolen.? As a result, in a deal where escrow has been opened before the verification documents are provided, we should instruct the buyer’s agent to gather the documents, redact (black out or white out ) account and social security numbers and then forward them to escrow.? Escrow can then send the documents to the seller.? In this case, we don’t receive the documents at all and the buyer is not contacting the seller directly.? As the listing agent in this scenario, we should confirm with or seller that they received the documents and send an e-mail to them documenting that confirmation.? Ask the seller to respond, agreeing with our confirmation, and print out the e-mail and response for our file.? This confirmation will establish that we did our job and ensured that the seller got the information they are entitled to.

Next, there are instances where, despite our wishes, the agent will have no choice but to receive verification documents.? For example, if the property is very popular, the seller may want those documents before they decide which buyer to choose.? Or, the REO lender may require that the listing agent provide these documents.? In that case it is fine to take the documents, but we must handle them properly.? Remember that once those documents are received, the DRE requires that we keep them in our file for 3 years.? So, in this instance we should also make sure that social security and account numbers are redacted before the documents are given to our sellers.? We should also be sure that they are not on the documents we keep in our file.

So, try not to take confidential information if possible.? But if you must receive that information, handle it carefully and properly.? Being careful will help ensure that identity theft is not a problem for our Company.? Thanks and as always, feel free to contact us if you have any questions.

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