What is ‘source of funds’ and why is it important?
What does ‘source of funds’ mean?
‘Source of funds’ refers to the actual origin of the money being used to buy the property. This includes:
- The 10% deposit paid on the day of the auction
- The balance of the purchase price payable on completion
- Any costs, including legal fees and stamp duty
Acceptable sources of funds
Examples of legitimate, verifiable sources include:
- Savings from employment (supported by payslips, bank statements, or P60s)
- Sale of another property (with evidence of completion)
- Inheritance (copy of the will or solicitor’s confirmation)
- Dividends or investment income
- Release of equity or remortgage proceeds
- Loan from a regulated lender (with a copy of the mortgage offer)
- Gift from a family member (with a signed gift letter and ID for the donor)
We will usually ask for bank statements showing the movement of funds and any documents that explain how they were built up over time.
As part of our legal and regulatory obligations, we must confirm not just who you are, but also where your money is coming from. This process is known as verifying the source of funds, and it is required under UK anti-money laundering (AML) laws.
If you are buying a property — particularly at auction where large deposits and quick completions are involved — you should be prepared to demonstrate and document the origin of your money before we can proceed.
Why it matters — especially for auction buyers
- We are legally prohibited from continuing with the transaction
- Your file may be reported as suspicious activity, even if unintentionally
- You may be delayed or unable to complete on time, risking loss of your 10% deposit
This is particularly critical in auction transactions, where deadlines are fixed and inflexible.
Why are we asking so many questions?
We understand that our questions can sometimes feel intrusive or repetitive. You may be asked for the same information more than once, or for detailed explanations of financial transactions that seem obvious to you.
Please understand:
- We are not being difficult — we are legally obliged to ask these questions under anti-money laundering rules.
- Solicitors who fail to investigate source of funds can face fines, sanctions, or regulatory action.
Every client — whether a first-time buyer or seasoned investor — must go through this process.
Confidential but mandatory
We treat all personal financial information with the utmost confidentiality. Nothing is shared beyond our legal team and regulators if required. However, we must complete these checks in full before we can act on your behalf or hold client money.
Summary
Verifying the source of funds is a legal requirement for every property transaction — especially auction purchases, where timing is critical. It’s not about suspicion or judgement — it’s about compliance. At Versus Law, we’ll guide you through this process clearly and respectfully, and we thank you in advance for your cooperation.