If you are thinking of buying or selling a property, you are likely to have come across plenty of unfamiliar jargon. One question we are often asked is: ‘what is a cash buyer?’ Although perhaps a term you have heard before, you may not know exactly what it means and how this status can affect the house buying process.
However, we are here to help. We have answered some common FAQs about cash buyers and whether or not it is a good thing to be…
When people buy a house, they do not usually have all the money they need simply sitting in the bank. They need to borrow money from a mortgage lender and pay it back in instalments: they get a mortgage.
However, if you do have enough money to buy a house outright, with no need for a mortgage, you are a cash buyer. This is generally considered to be a very strong position when buying property.
There are numerous pros to being a cash house buyer, including:
The process of buying a house with cash is usually quicker than the alternative.
Securing a mortgage can be difficult and time-consuming. You will not have to face that hassle as a cash buyer.
You are not in a chain i.e. you do not need to wait for your current house to sell before buying the next. You also do not have to wait for other people in a chain to complete their transactions in order to move out.
The vendor may choose you over another potential buyer who needs a mortgage as they anticipate the process will be quicker, easier and more likely to go through.
You do not have the threat of repossession hanging over you should you fail to meet mortgage repayments.
As an attractive cash buyer, you may get away with a lower offer on the house. Also, you will save money by avoiding mortgage fees and interest.
There are very few cons to being a cash buyer. The main potential disadvantage is having all your money tied up in a single asset. If this leaves you with insufficient money down the line, you might regret investing everything outright. However, there is a potential option if this should happen…
The short answer here is ‘yes’. It is possible to take out a mortgage against a property you own outright, although this will depend on your borrowing capability and the lender’s terms.
Some vendors will advertise their property for ‘cash buyers only’ and won’t look at offers from people who would require a mortgage. This could be because they want a quick sale and cash transactions are usually quicker.
However, it may be that the property is unmortgageable. For example, it may be:
Make sure you ask why the seller is asking for cash only offers and definitely get a survey to discover any issues before you commit. It may be that you are able and willing to fix any problems and decide to go ahead with the purchase anyway.
As the process is so much simpler, a cash house buyer can be in their new home in just a few weeks. There are still variables to consider such as the time it takes to carry out searches and if the seller is in a chain, but it will generally be a much quicker transaction.
‘Searches’ are carried out by your solicitor when buying a house. They find out information about the property including any local development plans that may affect the property you want to buy.
If you are buying with a mortgage, then you must get searches completed as part of the contract. If you are a cash buyer then you are not obliged to get searches but it is a very good idea. Otherwise, you are making a large investment without all the available information in front of you.
If you are thinking of buying a property, with cash or with a mortgage, we are here to help. Your local Charter’s team of estate agents are on hand to answer all your questions and help you buy the home of your dreams. Please get in touch for more information or to arrange an appointment.
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