In the world of property, there is a list as long as a piece of string of all the jargon that gets thrown about. Some of it sounds straightforward, but some of it sounds extremely confusing.
One phrase you may not have heard of is substantiation, and it is one of the most important. Put simply, it is the process that verifies who you are and that when buying a property, you have the funds to do so.
We know that selling a house or buying a property can be stressful, so we thought it best to clear up how substantiation works and what it means. That way, next time you hear it, you won’t worry about being hit with another piece of estate agent wording that confuses you.
What is offer substantiation?
Offer substantiation is a legal requirement that all estate agents must comply with. As mentioned above, it simply checks that you are who you are and that the funds are there. It will check that no illegal activity regarding identity or finance has taken place. It will result in you being able to complete your property transaction. In this digital world, one thing to be aware of is that the processes are the same whether dealing with a high street vendor or an online estate agent.
What documents do I need if I am buying a house?
When buying a property, any estate agent needs to see documentation from the people going on the property deed. The documents will help the estate agent complete the first step.
Provide them with:
- Certified ID
- Certified proof of address
- Proof of funds (deposit)
- Proof of mortgage
For those unsure, having a document certified simply means that it has been signed and authenticated by a professional. Not all working people are listed as such, so it is important you find somebody within the following trades to certify your documents for you.
- Teacher
- Doctor or nurse
- Solicitor
- Mortgage broker
- Managing Director
Much like with passports, the post office can also certify your documents, usually for a fee.
What types of ID can I get certified?
There are many forms of ID out there these days and it is important that you provide the right kind for certification. Most types of ID come with a photo as standard, but if you are somebody that doesn’t currently have any form of photo ID, you will require two valid types of ID to get your certification complete.
The current acceptable forms of photo ID are:
- Full UK Passport
- Full Overseas Passport
- UK photo Drivers Licence
- EU photo Drivers Licence
- EEA Member ID
- Biometric Residence Permit
- UK firearms licence
- UK Military ID
To be accepted, the ID will need to be valid, issued by the relevant authority and signed if required.
If you only hold non-photographic ID, you will need to present two of the following. But be aware that the stipulations around them are different.
- Bank statement dated within last 3 months, complete document and not downloaded
- Benefits or pension letter dated within last 3 months, complete document only
- Valid National Insurance Card
- Council tax bill covering the current year
- An in-date NHS medical card or certificate
- Blue badge for disabled drivers that has been stamped by the council and showing both sides
- An original copy of a utility bill from last 3 months
- An original copy of a UK birth certificate
What proof of address is suitable for an estate agent?
Every buyer will need to provide a certified proof of address. Much like with the non-photo ID there are a variety of ways you can do this. However, some types of documents aren’t accepted. You will NOT be able to provide an estate agent with:
- Documents from HMRC
- Phone bills
- NHS medical cards
- Letters from an accountant or solicitor
To ensure you can get your certified proof of address accepted by the estate agent, you should make sure only the following documents are signed by the appropriate professionals:
- Bank statement dated within last 3 months, complete document and not downloaded
- Council tax bill covering the current year
- A mortgage statement dated within last 3 months, complete document and downloaded
- An in-date TV licence issued this year
- A valid signed driving licence
- Homeowners insurance policy, the complete document and not downloaded
- A utility bill dated within last 3 months, the complete document and not downloaded
- A tenancy agreement dated with the last 6months signed and executed
- A letter from NHS dated within 3 months on letterheaded paper confirming patient address
- Letter from bank or employer, dated within last 3 months on letterhead paper confirming address of customer/employee
- Housing benefit documents dated within last 3 months, original document only
Despite this wide-ranging list of documents that you can use, you will need to be aware that an estate agent won’t accept the same one for both proof of address and non-photographic ID. If you provide them with the same document for two purposes, your property plans may stall!
How do I provide proof of funds to the estate agent?
Once you have provided proof of who you are and where you live, all that is left to prove is that you have the money to facilitate your house purchase.
Depending on how you plan to pay for the property will determine how you need to prove the money is available and is legal.
There are five ways that you can pay for the property, and they are shown below:
- With a new mortgage
- With a mortgage transfer/port
- Cash from sale
- Cash
- Gifts
New mortgage or transferred mortgage
With a new mortgage comes the agreement known as an agreement in principle. If you aren’t sure what this means or how you go about securing one, you can check our agreement in principle guide.
You will need to provide the estate agent with a certificate or statement from the lender that illustrates how much they are agreeing to lend in principle. It will need to be dated within the last 3 months. Along with this, the LTV will also need to be confirmed. LTV means the loan to value ratio, in other words, how much of the property you are borrowing. You’ll need to show that between the deposit and mortgage, the full price of the property is covered.
Alternatively, if you have a mortgage that you are transferring, simply obtain proof from the lender that they are authorising the transfer.
In addition, to further solidify the proof of funds, you will need bank statements for the last month and show you have enough money to cover the deposit.
It is important to remember that when showing proof of your mortgage you will need to have the documentation show the date, the lender, your name(s) and the amount agreed.
Cash from sale
When selling your current property, you may be relying on those finances covering the costs of your new home. Provide proof of the agreed sale price for your current property via a memorandum of sale. Then complement it with a copy of the mortgage redemption statement. This will show how much equity is left within the property.
Cash
If you have the cash in your account to make the purchase outright, you will need to show that you can afford the property and confirm how you came into possession of the cash. It could come via an inheritance or an insurance claim, or from savings. Just make sure you have the relevant documents to show that all is legitimate.
Cash gifts
You may be falling slightly short of hitting your financial target for making a property purchase. This sometimes leads to the bank of Mum and Dad coming into play. If this is a situation you find yourself in, and the cash is gifted to you, you will need to show that the money has been obtained this way.
Have the person(s) gifting you to provide a gift letter, this should include both your name and theirs, the date the letter was written, and the amount being given. The funds must come direct from the gifting bank account and the letter can be emailed.
They will also need to provide some photo ID but unlike with the ID you provide, it will not need to be certified. Finally, they will need to prove the funds exist, whether in the form of bank statements, or any other legal means.
Whether you are in the market to buy a new house or are looking to sell your current one, the team at SOLD.CO.UK can help. We not only work faster to complete a sale than any other estate agent via traditional means, but we are leaders in online property auctions too. Get an instant valuation to see how your house prices up and then contact us to get turn your property plans into reality.
