Should You Keep Secrets From Your Real Estate Agent?
Q. What sort of financial information does the law require that I give to my own agent? What does she need to know about why I am moving?
A. The law doesn’t require that you share your financial information or motives for moving with anyone, including your buyer agent.
But it’s realistic of her to ask for some proof that you aren’t just wasting her time. After all, she needs some inkling about why your current residence no longer suits you, what your price range is and how much you can afford so she can figure out what to show you.
In my lifetime, agents have gotten a bit more subtle about how they get this information. Twenty-five years ago, they would have simply asked you to fill out a form specifying your income, how much money you had saved up or invested, and how much you intended to spend. (Of course, since most agents worked exclusively for sellers then, this put buyers in an awkward situation and undercut their negotiating power.) Now, they are more likely to ask you for a pre-approval letter from a lender, who will ask you a series of questions on your finances and pull your credit report. You should attach this letter to any offer you make, since it will bolster your credibility with the seller.
Even cash sales can’t be done in a vacuum, since once you make an offer, you will have to produce a bank statement that shows that you have enough money to complete the transaction. This gets a little more complicated if most of your funds will come from equity in a current home that is on the market but hasn’t been sold yet. In that case, you will need to produce a statement showing the balance of your mortgage, and any home equity lines of credit or equity loans, as well as recent (within the last six months) comparable sales. The difference, your equity, must be sufficient to cover the purchase price and closing costs, after subtracting any applicable capital gains taxes. I suggest you factor in a cushion of at least $10,000 to cover moving and minor redecorating and fix-up costs as well.
But your question seems to cut deeper than just money, and I wonder why you are squeamish about sharing. Do you not trust your agent? If so, then you should find another pronto. Are you going through some sort of painful trauma, like a divorce? If so, then I urge you to share this fact with the agent, since buying property during this time will have legal ramifications that could affect your settlement.
Or is there something about your move or the source of your funds that you’d prefer that law enforcement or the Internal Revenue Service not find out about? If that’s the case, don’t entangle a blameless real-estate agent in your troubles and don’t ignore the problem. Consult an attorney.