What Does Cash Buyers Only Mean?
The term cash buyers only refers to when home sellers will only accept offers from potential buyers that have all of the money immediately available.
This means that an offer won’t be considered if the buyer needs to apply for a mortgage or obtain funding of any kind.
The same goes for funds that might take a while to come through. For instance, the seller is likely to reject the offer if the buyer is waiting for inheritance or an employment bonus to arrive.
Similarly, if money (albeit the full amount) is tied up in a property that is yet to sell, the offer will not be accepted.
In short, the buyer needs to prove that he/she has the money for the full value of the property ready to go. This is often known as proof of funds.
Normally, this is presented in the form of a recent bank statement.
Under Anti-Money Laundering (AML) regulations, the buyer’s conveyancer will need to check that the cash funds come from a legitimate source.
It’s essential to ensure the money has not come via criminal means. There are also some restrictions on money coming from certain countries.
Note that a cash gift is acceptable (as long as it’s demonstrable that the money is coming directly from the buyer’s account).
Is a Cash Buyer Better?
There are certainly benefits to accepting an offer from a cash buyer – the main one being speed.
However, having the money ready puts buyers in a stronger negotiating position. As they’re invariably tying in a lot of capital (quickly), most are going to want to negotiate a lower price for the property.
It therefore often depends on how quickly you need to sell and whether you are willing to accept a lower price for the benefit of speed.
Property Solvers, for example, has bought homes for cash since 2003 through our We Buy Any House service.
Our offers lie at approximately 75% of the market value. With this option, we’re able to complete on sales in as little as 7 days and our clients pay no estate agency or legal fees. In other words, for our many happy clients, quickness and efficiency are more important than price.
Why Would Someone Sell a House for Cash?
The term ‘cash buyers only’ isn’t always a red flag – particularly if the property needs renovation.
One of the other reasons why people prefer cash buyers is to avoid the dragged out mortgage processes and therefore get a faster house sale.
It’s hugely disappointing to be let down by a buyer who has, often through no fault of his/her own, been refused a mortgage.
It can even happen if a buyer has a mortgage in principle in place and there are no issues with the survey. Indeed, the mortgage is only secure when the offer comes through (usually just before exchange of contracts). It often makes the whole sales process quite tense.
Since the financial crash, regulations have required lenders to take a cautious approach with regards to mortgage applications.
Other Reasons to Accept a Cash Offer
- The owner is a landlord selling a tenanted property (buy-to-let mortgage finance applications are currently taking longer than ever);
- A couple is selling after divorce and would prefer a cash sale to avoid the delays that come with mortgaged buyers;
- The seller needs to stop repossession from happening and a cash buyer can proceed a lot quicker than a mortgaged buyer can;
- When selling at auction. Here, the onus of responsibility is on the buyer to complete within the set timeframe. Auction mortgages are notoriously slow and purchasing with cash may be the only feasible way of moving forward;
- The property has been inherited, needs extensive work and will struggle to sell to the average buyer (using a mortgage);
- The sellers have been gazundered and need the money fast;
- The owners are looking to sell quickly for other practical reasons such as fast relocation, needing money for a specific purpose or being let down by a buyer. A cash disposal is one of the best ways to get over this problem.
Although there are other conveyancing-related risks, working with a cash buyer generally means that the sale becomes a whole lot more efficient.
Related to this, cash buyers are also often experienced in property acquisitions. Many of the silly games that can often happen with conventional buyers are avoided.
Avoiding Property Chains
Selling to a ‘cash only buyer’ eliminates the risks that often come with multiple interconnected sales.
They won’t need to sell their own property in order to free up funds. As a result, there’s no need for them to wait for a mortgage to be approved.
This means that the sale can be closed quickly. The seller can get the money from the house a lot quicker than is normally the case.
That’s why you’ll often find that sellers insisting on cash bids are simply doing so because there is considerable time pressure on them.
Buyers, stumping up a lot of cash, also gets comfort in the fact that there’s no onward chain and the purchase is generally more secure.
What’s more, they save on mortgage arrangement and brokerage fees (not to mention the monthly payments).
Something to Note…
Very few people are in the position to offer cash upfront for a property.
This means, as a seller, by catering to cash buyers you’ll be narrowing the pool of potential people who would be interested.
You’re also making a sale less likely to achieve due to a lack of the right type of buyers out there.
This may result in your property sitting on the market for months, thus causing your sales plan to backfire.
Why Are Some Properties Cash Buyers Only?
As you check out the portals and estate agency listings, you may see phrases such as Cash Buyers Only, Cash Offers Only, Cash Purchase Only and such like.
It’s worth noting that there’s a fine line between being open to a cash offer and only accepting a cash offer. The emphasis being on the word ‘only’.
In other words, there is a reason no other feasible proposition other than the buyer paying with cash.
In these scenarios, as a buyer, it’s worth being extra careful. Although much relates to mortgageability issues discussed above, the situation is usually more serious.
Indeed, many properties end up being sold for cash as other buyers have unsuccessfully attempted to seek finance.
Here are some examples to be aware of why properties may get sold (often for a cheaper price) in this way:
If there are structural defects including subsidence, bowed walls, heavy roof damage, damp caused by serious leaks then buying the property and making it habitable would require considerable expense.
Owing to this, a cash buyer may acquire the dilapidated property for cash and then resolve the underlying issues. This would render the property mortgageable.
Properties with structural problems are more likely to attract developers and individuals looking for a project.
The condition of the property is likely to make little difference in cases of this kind. Some buyers may even go so far as to demolish the structure entirely and start again!
Damage to the Property
The property is in a state of disrepair, in that it has been damaged by fire or flooding.
Alternatively, it may have been left empty for a long time and been damaged by the progression of time or as a result of vandalism.
Here, a cash purchase is often the only way forward.
A fast-spreading weed that produces bamboo like spikey stems that can grow to over 2 metres.
Due to potentially being able to spread through solid ground (even concrete) and damage foundations, mortgage companies often refuse to lend where there is evidence of this weed.
However, if an approved treatment system is being applied to eliminate the weed the lender may be willing to move forward.
Failing that, selling for cash may be the only way to go.
Damp on the Property
Whilst often confused with condensation (reasonably easy to resolve), serious cases of rising damp can cost a small fortune to resolve.
Buyers would need invest in dealing with the issue, using injections often combined with replastering and further ventilation (depending on how serious the problem is).
Mortgage companies may propose some kind of retention whilst this is resolved (requesting an insurance backed guarantee). However, if the situation is bad, then a cash purchaser may be a better solution.
A Huge Amount of Work Required
Experienced property refurbishers know that renovating properties is a lot more costly than at first may seem.
If your property has a huge scope of works to undertake before being sellable, a cash purchaser is often the plausible way to progress.
Age of the House
Much will depend on when your house was built and the quality standards of the time. Older properties tend to cost more to maintain.
In most cases, there’s nothing to worry about.
However, if an older property has been badly looked after or abandoned there’s more likelihood of it being more suited to a cash purchase.
Type of Build / Materials Used
Another possibility is that, while the property is in good condition for the time being, it has been built using materials that are likely to age badly or deteriorate – another reason for lenders to refuse to agree to a mortgage.
Airey houses (built in the 1940s), for example, are often rejected by lenders for this reason. Similarly, steel frame houses frequently have a similar fate when it comes to mortgages.
Of course, while a building in poor condition or created from unsuitable materials may be a nightmare for some, other buyers are keen to snap up a property of this kind – cash upfront in many cases.
Flats (and some houses) that are too small to be mortgaged often get sold for cash.
These are more likely to be found in city centres where space is more constricted.
Location of the Property
The likelihood of mortgage companies turning down applications is higher if a property is in an undesirable or hazardous area.
Property-specific risks such as shared drainage, boundaries, title disputes and such like are usually resolvable.
If the property is in a crime or anti-social behaviour area, this may also cause issues.
Other geological and environmental problems, that would render a property unmortgageable, may cause bigger problems.
These may include:
- Broader subsidence risks (if a property is close to old / unsecured coal mines, for instance)
- Flood risks (check the long term flood risk here);
- Landslip risks;
- Historic landfills or waste management sites
- Previous industrial use / toxic waste disposal sites;
- Current or former presence of asbestos, arsenic, solvents or gases;
- Former petrol station sites.
Such complications often get revealed during the conveyancing searches or they may be obvious.
Short or Defective Leases
If a leasehold property has less than 80 years remaining, it becomes very difficult to sell on the open market.
This is because the lease extension cost starts to dramatically increase and the power to make decisions falls in the favour of the freeholder. What’s more ‘marriage’ fees are also payable.
There are only a handful of mortgage lenders that would finance these types of properties.
Cash buyers can often step in a buy the property with a short lease. However, expect a request for discount as they take on the burden / risk of extending the lease themselves.
Other Legal Issues with the Property
If the property and/or surrounding land has associated legal complications, mortgage companies may well turn the application down.
These may include negative easements, restrictive covenants, planning / building control limitations
A cash purchase may be more suitable if a property has split commercial and residential uses.
What often happens is that the cash buyer will move forward with the sale. They then seek a boutique lender that specialises in financing these types of building.
Rightmove Cash Buyers Only
Alongside Zoopla, Rightmove is a good place to look for properties for sale to cash buyers exclusively.
The listing itself should highlight that the property is for sale in this manner. If not, you should be informed upon making the enquiry so you’re fully aware of this condition of sale.
Indeed, most agents would want to clarify the situation from the start to minimise disappointment and complaints not to mention wasted resources.
There is no point pursuing the purchase of the property if you do not fit the correct criteria. It’s very rare to hear of cash only sellers changing their minds.
However, if your property sale is between exchange and completion you may have better luck with your offers. The transaction is more secure here and very unlikely to fall through.
It’s worth doing some research on the property’s valuation to make sure it’s being priced fairly.
On the Rightmove listing itself, if you scroll down and look for the right-hand panel, you’ll see a list of the last three sales on the street.
Click on the View more > button and you will see more information about the sold properties on your street (updated in line with HM Land Registry data).
You can also visit this link to get directly to Rightmove’s sold house prices page.
Note that you can also change the criteria to see sales trends within up to 15 miles, of different property types and tenures.
As mentioned above, cash buyers would typically wish to pay less. This value would be proportionate to the particular issue facing the property.
Cash Buyers Only House for Sale
Here at Property Solvers, for example, we occasionally list them on our properties for sale and property auctions pages. Our London sell house fast service also receives regular enquiries of this kind.
As mentioned above, in any marketing material stress that the property is for cash buyers alongside the reason why.
In other circumstances, want to avoid estate agency fees and the hassles that come with putting their cash sale properties up on the open market.
Here are some of the sites where they can list without charge and, therefore well worth checking out:
- Gumtree’s property pages
- The House Shop
- Residential People
- Net House Prices
- Property Heads
- Property Mutual
- House Ladder
- Homes 24 (regional property pages)
- Property Pidgeon
- Renovate Me
- Property Renovate (London Only)
- Trovit Renovations
- Wreck of the Week
Some sellers are also approached by cash buyers who see that the property is in severe disrepair. Here, it’s somewhat obvious that the house cannot be mortgaged.
Others buyers hear on the grapevine that a house is up for sale. Local pubs, community centres and places of worship are also possibilities.