What is a cash buyer? In a nutshell, a cash buyer is a person who has enough money in the bank to buy a property outright without the need to secure a mortgage.
In this guide, we’ll explain the process of buying a home as a cash buyer and what the benefits, as well as the disadvantages, can be.
What is the process for buying a residential property as a cash buyer?
While the length of time to complete on a property when buying in cash can be drastically shorter, the actual process isn’t that different. When removing the need to secure a mortgage, the process is as follows:
• Find a property and make an offer
• Offer accepted
• Instruct a licensed conveyancer or solicitor
• Instruct a surveyor for a property survey/valuation
• Property searches, queries and checks
• Exchange contracts and pay deposit
• Completion and final monies
Do I still need a conveyancer?
Yes, you still need a licensed conveyancer or conveyancing solicitor to manage several aspects of your property transaction including:
• Liaising with the seller’s conveyancer
• To obtain all key information about the property e.g., the property information form (TA6), fittings and contents form, and electricity and gas certificates etc.
• Instruct property searches (if you choose to have these completed on your behalf) and review their findings as well as provide professional advice on specifics relating to the property (easements and other findings contained within the title deeds, for example).
• Raise enquiries
• To manage the transfer of monies
Do your research
When buying a property with a mortgage your lender will ensure they have all the necessary information about a property to understand if there are any risks associated with lending you the money against said property.
As a cash buyer, it’s worth considering undertaking the same risk assessments a lender would by instructing your conveyancer to do the relevant property searches required. You should also consider having the property surveyed by a surveyor to ensure there aren’t any hidden costly surprises that need to be fixed once you’ve completed on the property.
Advantages of being a cash buyer
When buying a property with a mortgage, the application and approval process can take several weeks, therefore one of the advantages of being a cash buyer is the possibility you could complete on a property transaction within weeks, rather than months.
As a seller, the worry with any buyer is that your transaction may fall through.
Cash buyers typically come chain-free as they don’t have a property to sell in order to make the purchase – so there is no risk of additional or external influence from related transactions causing the property transaction to fail.
In contrast, transactions are more likely to fail when selling to a buyer who is relying on a mortgage to fund the purchase. If their personal circumstances change, their ability to secure a mortgage may be jeopardised, and therefore their ability to complete the transaction could be put at risk.
A cash buyer may offer significantly less than the asking price as they are aware of the benefits they offer a seller, such as a quicker sale. If you’re a vendor that needs to release funds quickly this may appeal, on the other hand, if you’re looking to make a decent return on your investment accepting a lower offer may not be the best route.
Also worth remembering is that cash buyers have a broader choice of properties to choose from. Indeed some properties are advertised as ‘cash buyer only’. This could be for many reasons, but often if a property is earmarked as being unable to have a mortgage secured against it the only solution to secure a sale is to find a cash buyer.
These properties are typically renovation opportunities that require a large amount of investment to then resell at a later date.
Lastly, a big advantage as a cash buyer is the knowledge that you own your home outright. When taking out a mortgage on a property there is always the worry that a change in your circumstances could mean you no longer can afford your mortgage repayments. If you own your property outright and your circumstances change you know your property at least is secure.
If you find yourself in the fortunate position to buy a property without the need for a mortgage or sale of an existing property, it’s worth considering whether you may need this money further down the line or not.
With all your money tied up in bricks and mortar are you financially able to survive without access to the money?
It is still possible to take a mortgage out on a property that you have previously bought outright, however this is still subject to your borrowing capability and a mortgage lender’s ususal checks.
What’s more, if you’re investing in property as a cash buyer, is investing all your money into one asset providing you the best return on investment?
If the property is in an area where house prices are quickly rising or that the housing marketing is growing, then your return on investment is going to be worthwhile. However, if the market growth is slow then it may be worth investing your money into our avenues that could get you a better return.
Clearly considering the pros and cons of being a cash buyer is only an option to a selection of people, but it’s not as simple as it may first seem, and all that is left to suggest is that if you’re looking to buy a property as a cash buyer, always seek advice from an independent financial advisor before committing to any decisions.