'Cash Buyers Only' – What is a Cash Buyer?
A cash buyer can afford to buy a house without selling their property or getting a mortgage. Estate agents view them as more desirable as the process can be completed faster, and there is no risk that the client won't get a mortgage.
According to the ONS English Housing Survey 2017 to 2018, cash buyers make up 34% of the housing market in the UK. Sellers often prefer cash buyers over buyers getting a mortgage in the hope that there will be fewer challenges and a quicker completion; some properties are marketed as 'Cash Buyers Only'.
What does cash buyers only mean?
Some sellers instruct their estate agents only to market the property to cash buyers. This could be because the seller knows a mortgage lender won't lend on the property due to a defect.
Cash buyers can take on this risk as they may choose to fix the defect after they purchase.
Specialist Cash Buying Conveyancing Solicitors
As a cash buyer, you're in a powerful position and have a cash buyer advantage when buying a home.
However, our expert property solicitors can help you ensure you make the most of this and, most importantly, avoid any pitfalls which might arise from unnecessarily cutting corners.
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What is a Cash Buyer?
A cash buyer doesn't have to use a mortgage or loan to fund the purchase of a property. The purchaser will use their funds or those gifted to them to make a cash purchase.
It doesn't mean you pay for your house or flat with piles of cash. In fact, with increasingly stringent money laundering and other related laws, no solicitor would allow you to use cash to fund your purchase and would report the transaction to the National Crime Agency for investigation. Cash buyers pay for properties using funds in their bank accounts in the UK.
There are transactions where money is used outside the UK to fund a house purchase. In such cases, some solicitors cannot accept money from many countries. Read more on this here: When receiving money from outside the UK, which countries are safe?
How do you prove where the cash came from?
Please read How to Prove Source of Funds. This popular article sheds light on what sources of funds solicitors find acceptable and those they don't, including, for example, which jurisdictions are viewed as acceptable for sourcing funds from and those that are viewed with suspicion.
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Cash Buyer vs Mortgage Buyer
Cash-only buyers of property have at least two clear advantages over mortgage buyers:
- They spend less money overall on the actual purchase price of the property because they don't have to make interest payments to a mortgage or other loan lender.
- Their conveyancing process can move quicker because they don't have to go through a mortgage application process or involve a lender, which always adds more time.
The second point is especially beneficial for property sellers. They can expect to receive their sale proceeds more quickly, as a mortgage buyer's purchase funds are only guaranteed once they receive their final mortgage offer, which must provide them with enough money to proceed.
Various points in the mortgage process might lead to a lender declining to lend to a mortgage buyer. This is a key reason why an estimated one in three conveyancing matters fail to be completed.
Pros and Cons of a Cash Buyer
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Can you save money on conveyancing as a Cash Buyer?
Cash buyers can save money on:
- Property Searches.
- Mortgage valuation.
There is a risk that by not completing all parts of the process, you'll miss information that could affect the property's value in the future.
Cash buyer no survey
A RICS Home Survey isn't a mandatory part of the conveyancing process for someone getting a mortgage or buying cash.
Any buyer, whether via mortgage or cash, you're not legally required to get a RICS home buyers survey, however in the case of a mortgage buyer, the bank always require a mortgage valuation is carried out.
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What are the risks to a cash buyer?
While being a cash buyer has some advantages, some risks can cost you. Here are just some of the ones to watch out for:
- Skipping property searches. You can save money by not ordering the local authority, water and drainage, or environmental search. You risk not knowing what works have been signed off at Building Control or rights of way.
- Ignore enquiries. For speed cash, buyers often look to ask as few questions as possible. However, this can leave them unaware of defects or issues with the title. For example, there might be a public right of way through the property that many buyers would not want.
- No Valuation Survey. A mortgage lender's valuer will offer a mortgage buyer reassurance the property is being purchased for the right price. Occasionally, a surveyor will undervalue a property because they don't feel it is worth what you're paying. When you buy using cash, this risk can be avoided by instructing your own RICS home survey. Read more - What can you do when the bank undervalued your property?
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Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
