Comfort letter?

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#1
NYCCPA  
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RE Broker is requesting a statement that "Client's Net Worth exceeds $X." Is this such a letter I can provide that doesn't conflict with professional standards?
 

#2
HowardS  
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Tell the RE agent to do his/her own due diligence.
Retired, no salvage value.
 

#3
CathysTaxes  
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How are you supposed to determine client's net worth? Determining this after death is a very detailed process.
Cathy
CathysTaxes
 

#4
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Why does a real estate broker want a net worth statement from a CPA? Is it something like an ultraluxury brokerage and they don't want any time wasters? Or do you mean mortgage broker?
 

#5
Joan TB  
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If this is for some sort of investment, then an individual can "self certify" as an "accredited investor".
 

#6
NYCCPA  
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Thank you all for your replies.

Let's assume that a set of financials are kept for the client, listing all of their assets and any related liabilities. A set of books are kept for their personal dealings as well as various business ventures. This is how their net worth would be determined.

It is for a RE broker representing an ultraluxury apt building.

Client has an eight figure net worth. Not providing the letter isn't something I'd necessarily lose them over, but not risking my license for anyone.
 

#7
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Obviously, you would need the client's permission to provide any information, which should eliminate your concerns re ethics, etc.

Ask your client what to do. If your client wants to provide a financial statement (e.g., one given to the bank), the most you could do would be to say you have no reason to believe it is wrong. If not, that ends your problem. The bottom line is that your client should respond to the request, not you.

My wife is a realtor. She gets proof of funds, but never asks for net worth.
Steve
 

#8
JR1  
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I'm willing to do most comfort letters since they ask things that I know. This...? No way ever.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
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#9
Guya  
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Two questions:
1. Is this service included in your engagement letter?
2. Is this service covered by your firm's insurance?
PS – Greeting from London, England. Grey and rainy ...
 

#10
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I do quite a few personal financial statements - strictly within the realms of a compilation, which has all the disclosures needed to confirm that you didn't confirm a thing. I've never been asked for a "net worth letter" but this might suffice.
 

#11
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When I have clients looking to get into good buildings in NYC, that don't meet the income criteria, I typically just recommend that they send their bank account or brokerage statements as "proof of funds/ability to pay rent".
If your client doesn't have assets in a brokerage account, this would make it a little more tricky.

I don't do personal financial statements, personally, nor letters of net worth.
This net worth letter you describe would seem to greatly depend on business valuations for the various entities. (I don't offer business valuations either.)

These luxury buildings in NYC are getting more and more invasive in what they want to see from potential occupants.
 

#12
MilesR  
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I wouldn't because it might give the impression that you did at least some kind of attestation work to verify their assets and value. I recently had something similar (you can find my post recently on here). The broker wanted a letter saying their income was booming and whatnot. I instead sent a canned letter saying I prepared the tax returns based on info from the client, did not verify at all, etc. etc.. The client said this is not what they needed. I said that's all I can give. Broker magically approved the loan and didn't need my letter anymore.
 

#13
Gjkycpa  
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I am a CPA and financial advisor. This year had a client who wanted me to sign off on his accredited investor status so he could purchase shares in an IPO. I do not handle his investments, just his tax return. I ask him for more documentation which he declined. He has several rental properties, but all have mortgages so his net worth would be limited. I told him I could not do it. I have never heard back from him, and he did not bring in his tax info. As Joan said I told him to "self certify", which he said would not work for an IPO. Conversely, I am working with 2 clients who I do tax work and investments for and we are looking at some PIG/PAL investments (which require the AI status). I am comfortable with that set of facts, since I know more.
 

#14
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Unfortunately, you (and everyone else of us in a similar situation) are kind of in a lose-lose situation. If you do it for them, you put yourself in liability risk. If you refuse, these people will probably badmouth you to your client so the client will not return for your service next year. Through the years, I have lost a few very good clients in this way.
 

#15
zl28  
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My lesson from my experience was as soon as I start to hear about hte mortgage process for a self employed person, i need to verbalize to the client that there is a decent likelihood going to be some unethical behavior from the mortgage broker. That they are going to ask something from me, whether a letter, or what seems like a simple email, or to put my pin on some letter or whatever. They need to understand that the CPA profession either prohibits this or makes me do extensive work to issue an opinion.

That anything on my letterhead is a bid deal.

And then explain why do they do this - they want privity - they want me in the midst so that if you should default, i can be liable.

So i basically can't do these forms and i've always found even when i won't do it, the clinet has always gotten the mortgage.

Be careful for the words when mortage broker says "i've never had this problem before"

That's how you know they are lying.

That this is a huge issue for CPA's and mortgage brokers going on a long time.

I'm telling you this b/c you are a good client and i dont' want you mad with me

---tell the client what to expect--

obviously i have to make my communication briefer

but i almost lost a good client for this
 

#16
zl28  
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My lesson from my experience was as soon as I start to hear about hthe mortgage process for a self employed person, i need to verbalize to the client that there is a decent likelihood going to be some unethical behavior from the mortgage broker.
That they are going to ask something from me, whether a letter, or what seems like a simple email, or to put my ptin on some letter or whatever. They need to understand that the CPA profession either prohibits this or makes me do extensive work to issue an opinion.

That anything on my letterhead is a big deal.

And then explain to client why do they do this - they want privity - they want me in the midst so that if you should default, i can be liable.

So i basically can't provide what they request and i've always found when i don't provide the request, the mortgage broker tries and tries to get something from me, and in the end they do some alternative procedure of nothing, and the client gets the mortgage. In essence, they do not need anything from me; they can do their own due diligence.

they can get a transcript from the IRS, they can inspect your credits, they can get a financial analsyt to lookat your info.

Be careful for the words when mortgage broker says "i've never had this problem before"

That's how you know they are lying.

That this is a huge issue for CPA's and mortgage brokers going on a long time.

I'm telling you this b/c you are a good client and i dont' want you mad with me

---tell the client what to expect--

obviously i have to make my communication briefer

but i almost lost a good client from this for this year

ps too bad cpa's don't sue....if they lose a client ....due to the lie of the mortgage broker...we should subpoena their emails...where they say over and over "i've never had this problem before wtih a cpa"
 

#17
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We always tell the client we cannot provide any comfort letters due to our professional liability insurance.

We are happy to prepare a personal financial statement for a nice fee though.
 


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