One major aspect  in Real Estate acquisition and leasing is the proof of funds letter; this is a document that proves that a home buyer has enough liquid cash to purchase a home. Due diligence on the part of the home sellers is the desire to see such paperwork, this assures concerned parties that a home buyer is ready to make an offer and committed to such purchase.

What Is Proof of Funds?

Proof of funds can simply be described as a document provided to ascertain that a person has sufficient money on hand to cover specific expenses. Proof of funds can come from several sources, which includes bank statements or a proof of funds letter. 

There are a few scenarios where the person may be asked to provide proof of funds, but this is mostly common in real estate transactions. For example, in real estate, a seller may ask the buyer to  provide proof of funds to show that they can cover the costs of purchasing a home.

Why is a Proof of Funds Letter required for property acquisition ?

The point of a POF letter is to show that you are making a legitimate offer as a buyer. In an instance where there are multiple persons making offers, having a Proof of Funds letter, may put you at an advantage over others. 

 Sellers prefer to see POF letters alongside the offers made by prospective buyers, this is to ensure legitimacy and to prevent situations where they miss out on serious/legitimate offers, while waiting on a high-ball offer from someone who can’t actually deliver.

Who needs a proof of funds letter?

Technically all prospective buyers need to provide a proof of funds letter. In an instance where an individual is getting a mortgage to finance their  home purchase, they’ll still require enough money for down payment, ideally 30% of the price of the house and closing costs.

Lenders on the other hand would delve deep into your finances to ensure you have the necessary cash on hand to close the deal, in this case, home sellers would also want to see that you have these funds set aside. This is  why the provision of  a POF letter, as well as pre-approval letter  from your lenders confirming that they’re willing to loan you the rest of the money you need for the purchase. 

Home buyers who don’t need to take out a mortgage because they’re buying the house in cash aren’t entirely off the hook either. They would  also be expected to provide a proof of funds for a cash offer—for a much larger amount.

What counts as proof of funds in real estate?

A proof of funds letter can be obtained from the institution where your money is being held, typically a bank. It can also come from another type of asset, such as an open credit line or money market account where funds can be accessed quickly. 

It’s important to highlight that having a lot of money in mutual funds and stocks can not count as proof of funds, since the  money can’t easily be withdrawn and such amount varies based on day to day market conditions. Per adventure it’s needed for down payment, it is advisable to schedule a plan to transfer the money sooner rather than later into an account that’ll count as proof of funds.

What a proof of funds letter should include:

Essentially, a proof of funds letter includes the account holder’s name and current balance of available funds—all on bank letterhead and signed by a bank official. However, in many cases, a recent bank statement from a checking or savings account where the money is being held can also serve as proof of funds, so it’s worth checking if that alone will suffice.

To protect your privacy, sensitive information  on the statement can be redacted efore providing the statement to a seller. The most important thing is that the account is yours and the money that is contained in it. 

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Real Estate Investment decisions in Nigeria largely depend on a variety of factors that may influence the standard of living and current financial pocket. The main reason that guides the decision to purchase a property involves having a permanent place to call “home”.

In seeking opportunities to help contributors get more value from their contribution ahead of their retirement, the Pension commission partnered with financial institutions such as Stanbic IBTC Bank to make funds available to verified contributors to buy homes while using part of their RSA balance as equity contribution.

Before PenCom states that the maximum amount to be withdrawn is 25% of the total mandatory RSA balance as of the date of application, it is important to note that this is irrespective of the value of equity contribution required by the mortgage lender.

In a situation where 25% of a contributor’s RSA balance is not sufficient for payment as equity contribution, the RSA holders may utilize the contingency portion of their voluntary contributions if it’s available. 

If such a  person had accessed part of the funds before either leaving paid employment, suddenly losing their job, or before retirement age, he will still get a lump sum at retirement. Such an individual can still get part of the funds for a mortgage after meeting specific conditions stated in the guidelines, but he must sign a consent form to access it.

This consent form states that you are indemnifying the PFA and that you understand the terms clearly.  So that at the point of the final retirement, if such benefits are lower compared to one’s colleagues, such a person would not complain.

Leveraging mortgage pension scheme to own a house: 

Application procedure

According to the guidelines, the applicant must obtain a property offer letter from the property owner or approved agent and approach a mortgage lender. He must fill out an application for a mortgage, which must be provided by the mortgage lender, and should attach the property offer letter. Also, the mortgage lender will review the application form and verify the genuineness of the property offer and will do due diligence to ensure that the property has a valuation report. Upon confirmation of the property offer letter, the applicant will approach his Pension Fund Administrator and request his RSA statement to access the 25% of his RSA balance for payment of equity contribution.

Also, in a joint application, each party must apply to their respective PFAs with copies of the verified property offer letter. The PFA must issue a duly endorsed RSA statement to the applicant, which the applicant must forward to his mortgage lender. Similarly, the PFA must update records on applications for equity contributions for residential mortgages upon issuing the RSA statement to the RSA holder.

Approved mortgage lender

The Central Bank of Nigeria’s list of primary mortgage lenders showed that 34 operators had operating licenses as of the end of June 2021.

However, PenCom, under its mortgage guidelines, had stated that the names of mortgage lenders that met the eligibility criteria of its guidelines would be published on the commission’s website on a bi-annual basis or when any new license was issued by the CBN.

PenCom stated that it would liaise with the CBN on an annual basis to determine the mortgage lenders meeting the stipulated minimum requirements of the guidelines and other conditions as might be specified by the CBN regularly.

It stated that the mortgage lender must be licensed by the CBN to provide residential mortgages and must have met the minimum capital requirement as prescribed by the CBN from time to time.

The mortgage lender must have a valid pension clearance certificate issued by PenCom in line with the PRA, 2014, which mandates it to have pension and group life insurance for its workers.

Exemptions

Those exempted from the initiative, according to the guidelines are RSA holders that have less than three years to retire; exempted persons under the PRA 2014, and RSA holders who do not have both employer and employee mandatory contributions for a cumulative minimum period of 60 months.

The equity contribution is also not for refinancing an existing mortgage, outright purchase of property, and purchase of land, and the property must be for residential purposes only. 

Other criteria

The RSA holder must have an offer letter for the property duly signed by the property owner and verified by the mortgage lender. The RSA of the applicant must have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months before the application for the RSA holder to access his RSA balance for equity contribution for a residential mortgage.

Also, married couples who are RSA holders can be eligible to make a joint application, subject to individually satisfying the eligibility requirements.

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This piece will explore the reasons you should buy a property in the rainy season as opposed to the dry seasons. 

One reason is the quality of housing materials. New buildings tend to look nice and beautiful under normal/dry weather condition and it is always advised to have a look at them after rainfall to see if they stick to the quality we once admired.Buildings can lose it’s potential in about 3 or 5 years which is a very long time if you consider buying a house quickly. Pay close attention to the electrical pillar, the doors, windows, and painting after rainfall before you invest your money in the wrong place.

A key element of a building that the rainy season will help you expose for what it really is worth is the quality of the roofing. Heavy rainfall provides the perfect opportunity to check if there are any leakages. Some roof tiles might have broken, or lose, you can only get to see this after a rainfall.

As aforementioned the rainy season is intense in Nigeria, so it is important to see how a community holds in the rainy season. So don’t stop your rainy season inspection at the house, also take the time to drive around the community.The rainy season is the best opportunity to expose the amenities in the neighbourhood During this tour you will be able to notice how the drainage in the area holds up, you will know the state by how badly the streets flood in the rainy season. Rain is also synonymous with heavy traffic so evaluating the road networks and how the traffic flows during these months is key. It is also worth viewing the property in the dry season in addition to getting the full picture.

Another key reason is the rainy season is seen as the best time to negotiate. This is because time is money and therefore sellers are more inclined to consider reasonable counter offers on their asking price when demand is muted. For this reason, many developers offer generous discounts during the rainy season in order to boost their sales, which obviously presents an attractive opportunity for buyers. Another reason it is seen as the best time to negotiate is because on this rainy season inspection a buyer is more likely to notice a defect in the house and then use that as a bargaining chip in negotiations, for example if the buyer notices a fault in the roof resulting to a leak, he or she could use this to knock something off the price.

Please contact us at Demaxon for any of your real estate enquiries.

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Due to heightened insecurity in Nigeria, the amount of refugees and internally displaced persons is constantly on the rise. According to the UN, the Nigerian refugee crisis will be going into its seventh year. Since violent attacks of the Islamist group Boko Haram started to spill over Nigeria’s north-eastern frontier in 2014, Cameroon, Chad and Niger have been drawn into what has become a devastating regional conflict.

These internally displaced people do not have houses or property as a result of said conflict and therefore look to their governments for solutions. This can go either way, but unfortunately in this part of the world, prolonged homelessness or living in slums in areas such as Makoko, Mushin, Iwaya, etc is the outcome. For those fortunate enough to be cared for by the government there are camps set up in states across the country, including, the capital, Abuja, Lagos and Borno. Governments around the world set up IDP camps. This is usually a safe shelter for displaced persons, where they are protected and taken care of before they eventually move back to their homes.

As well as setting up camps, the Nigerian government periodically provides houses to internally displaced persons. For example in September 2021 the Federal Government handed over 1000 houses to IDPs in Borno. The 1,000 houses consist of blocks of four units of two-bedrooms bungalows with veranda and courtyards in clusters arrangement. Each block sits on 400 square metres with a perimeter fence and ample space for other home activities. The following social and economic facilities are also provided in the estate: Solar-powered street lights, four industrial solar-powered boreholes, planting of over 3,000 economic trees as well as provision for school, market, police station and motor park.

In addition to government aid, humanitarian bodies such as the UN do a lot in the aiding of these IDPs. The UN works with other humanitarian agencies to ensure they are able to reach as many people in need globally and are guided by the policies outlined in the principle working document, UNHCR’s Strategic Directions 2017-2021. In order to coordinate assistance, such as shelter, health care, camp management or protections, the UN uses a cluster approach. A cluster is when a group of agencies work together to set up and deliver an area of assistance, such as shelter, health care, camp management or protection. UNHCR leads the Global Protection Cluster, co-leads the Global Shelter Cluster with International Federation of Red Cross and Red Crescent Societies (IFRC) and the Global Camp Coordination Camp Management Cluster (CCCM) with International Organisation for Migration (IOM).

It is key that these internally displaced people who are some of the most vulnerable in our society are well taken care of as the socioeconomic impacts of not paying attention to them can be grand. Internal displacement impacts the livelihoods, education, health, security, social life, environment and access to housing and infrastructure of displaced people, their hosts and the people they leave behind.

Internal displacement particularly affects the housing market, when people flee their homes. Shelter is priority number 1, Substandard shelter affects health, exposing people to weather extremes and natural hazards, and facilitating the spread of communicable diseases. It may also cause or aggravate mental ill health, whether because of overcrowding or isolation. So it is important to address this in a timely manner. IDPs have a few options apart from government intervention and aid from humanitarian bodies i.e, hosting; this is the practice of moving in with a family in their home, this is often favoured as in situations like this a sense of home community can be beneficial. Approximately eighty per cent of the people displaced by Boko Haram in the Lake Chad Basin live in host communities, as do 70 per cent of IDPs in DRC. Another option for IDPs with the means is to rent, however IDPs usually have their ability to earn a living hindered due to conflict and so paying rent is often not a sustainable solution, without being able to pay rent these people risk eviction.

There are recommendations on how to best deal with internally displaced persons, for example; promoting rental agreements with payments in instalments. Governments and community leaders should encourage land owners and renters to agree to shorter contracts and allow for payments in installations rather than a full year at once.

It is also important to reduce the stigma surrounding IDPs and leaders in host communities have a duty to remind their community that these displaced people were welcomed because they had to flee their countries and homes because of violence and not because they were the ones committing offences.

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Real estate like all other industries was not immune to this sustainability wave as the trend grew. In recent times we are finding that homeowners are even willing to pay more for a property if it is equipped with sustainable, environment-friendly features like greenery, sewage treatment and disposal plant , water treatment and supply plant, energy-efficient appliances, windows, and the like, as well as features that ensure better air quality. As younger generations enter the homebuying market, this socially conscious generation is looking out for increasingly green features and sustainability that is built-in.

Homeowners have turned to renewable energy for power supply as a cleaner and safer option. As mentioned before, the environmental benefits of using renewable energy is one of the main reasons homeowners have chosen to go green. For example, solar panels have taken off recently and are becoming more common in residential areas. Solar power systems derive clean, pure energy from the sun. The installation of solar panels in your home helps combat greenhouse gas emissions and reduces our collective dependence on fossil fuels. Traditional electricity is sourced from fossil fuels such as coal and natural gas. In the burning of fossil fuels to produce electricity, they emit harmful gasses that are the primary cause of air pollution and global climate change. Not only are fossil fuels harmful to the environment, but they are also a finite resource. Because of this, the price is constantly fluctuating and can increase in a short period of time. In addition, these gasses released are harmful to human beings as they produce air and water pollution. Using renewable energy also has impacts on a country’s economy as it allows for energy independence. In the current global economy, many countries are forced to rely on others to supply their energy needs. Renewable energy can empower nations to become independent, controlling their own pricing, and even boosting the local economy. Home buyers are interested in these features, and the feel good factor that arises from feeling like they’re doing something to save the planet and as a result they are paying more. Modern homes are also being built with these features in mind. In addition to solar panels there are plenty of ways that you can implement renewable energy sources in your own home such as smart thermostats; smart thermostats connect your heating system to the internet, which allows you to adjust your heating from your smartphone. This prevents wastage if you accidentally leave your heat on during the day, and allows you to heat or cool your home more efficiently. Another method will be the installation of wind  turbines. Wind turbines are not only located on gigantic farms anymore, it is possible to have one in your home and use them as a cheaper and renewable source of energy.

In addition to renewable energy sources, real estate’s green agenda has also turned to waste management. How waste is disposed of from a  property has implications on both the property value and the environment. Poorly disposed waste and waste management from a property can lead to air pollution, clog up drainage, release terrible odours and other uncomfortable effects. This has a negative impact on the value of a property so it is imperative home buyers enquire about this. Recycling is also on the up in recent times as more and more homes are separating their recyclables from other trash. Recycling is the process of turning waste into materials that can be used again so they do not damage the planet. Recycling’s impact on real estate can be looked at from the angle of homeowners recycling commercial waste, like plastics, paper, glass or from the angle of developers using recycled materials to build. A lot of usable building materials are made as a result of recycling. I.e, timbercrete: a lighter form of concrete made with sawdust. Ferrock: a longer-lasting form of concrete made with repurposed steel dust. Newspaperwood: paper waste repurposed to wood. Denim insulation: made of recycled blue jeans. Ecobricks: made of recycled plastic. Recycled cork: from bottle corks to flooring and wall panels. Recycling and reusing building materials is probably the number one most effective  way to be more environmentally responsible when developing and building. With so many incentives and varieties of material out there, switching to use more recycled/reused material is simply a matter of changing old habits. In some cases reusing old materials can help a developer keep his costs down which in turn affects prices. From the homeowners perspective, apartment buildings and properties that provide the option to recycle efficiently are more sought after to certain homebuyers.

An easy way to go green which might seem obvious, is to go green. Plants, trees, flowers and a perfectly manicured, aesthetically pleasing garden have always been able to have impacts on the value of a property. However, people might have done this traditionally for their beauty. Homeowners and real estate developers now plant trees and encourage gardening as a means of conserving the environment whilst decorating their space, two birds with one stone. Gardening helps the environment in multiple ways. Gardening is a way of improving the environment we live in via the addition of plants, flowers, fruits, and vegetables. By gardening, we improve the air and the soil quality. We are growing our own food, beautifying our space, and instead of taking something away from the natural world. As the world has gone greener, more and more people are using space on their properties for gardening whilst it is becoming a bigger consideration when purchasing property.

Please do not hesitate to consult Demaxon Facilities Limited for any real estate needs you may  have. 

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