Is It Suspicious to Buy a House with Cash?

For most people, buying a house means engaging in a mortgage company to finance the deal. What if, though, you have the money in full to buy a house with cash? You could be forgiven for thinking that this would mean the process was easier. In many ways it is. However, given the amount of money needed to buy a home outrightly, and that often the only people or companies that can do that are the super-rich and criminals, it does raise the question of whether it is suspicious or not to buy a property with cash in full. That is what we are going to discuss in the following post.

Is It Wrong to Buy a Home with Cash?

Let’s address the question of whether it is right or wrong to buy a home with cash first. No, there is nothing wrong with buying a property with cash. Particularly if you have the funds available to do it and are not going to cause yourself financial ruin by doing it. It is also hugely beneficial to all involved as it can speed up and simplify the entire process for both the seller and the buyer.

There is one aspect of buying a house with cash that you need to keep in mind, though. That aspect is the money laundering checks that need to be run when anyone is buying property.

What Are the Money Laundering Checks and Why Are They Required?

One of the most common ways criminals in the UK launder or clean the money they make from their illegal activities and ventures is by buying property. Due to the property market size and the fact that property assets are high value, it is relatively easy to clean large amounts of money that have been gained from criminal means in one single transaction and give it the appearance of being legitimate.

That is why, back in April of 2018, the EU put into force their Fifth Money Laundering Directive. This was devised to prevent terrorist financing and money laundering and is the reason why all estate agents need to carry out money laundering checks on everyone buying property. If they don’t run these checks, they could be fined, or worse, imprisoned.

What are the Money Laundering Checks?

There are two aspects to the money laundering checks that are normally conducted. The first is that estate agents can ask for proof of funds for two different reasons at two different stages in the property transaction. When an estate agent asks for proof of funds before you make an offer on a property, this is often devised to check whether you are really interested in the property. It’s worth noting that you don’t need to provide any proof of funds before making an offer.

However, if an estate agent requests proof of funds from you after you have made an offer, they are doing more than simply checking you have access to the money. They are also making sure you have not got the money through illegal activities. This is the part of the process when you need to supply proof of funds.

What Proof of Funds Can Be Used?

There are several different acceptable proof of funds you can provide, including:

  • Receipts for sold shares
  • Evidence the money has been left in a will for you
  • A letter from the person who gifted you the money, if that’s how you got it
  • Evidence of a property sale, if that’s where the money is derived
  • For cash buyers, bank statements with details of the cash amount and further bank statements from previous months and years to show how you accumulated the money over time
  • For mortgage buyers, bank statements proving you have the deposit amount
  • A mortgage in principle or agreement in principle

If the circumstances you find yourself in when buying property are even more unique than those outlined above, and you won the money through gambling or the lottery, you will often need to prove this. That’s why it’s important to keep hold of any evidence and receipts.

Proof of ID

In addition to proof of funds, you need to prove who you are, which is why estate agents conduct Due Diligence and ask for proof of your name and address.

You can do this by supplying any of the following:

For proof of name

  • Existing valid passport
  • Residence permit
  • Existing valid UK or EU photo driver’s licence
  • HMRC Tax notification
  • Benefit or state pension notification letter or book

For address:

  • Current tax bill
  • Tenancy agreement or rent card
  • Recent statement for the mortgage
  • Bank statements
  • Utility bill that’s not your mobile phone

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