Cash buyers make up a growing proportion of property buyers in the UK. But no matter if you are buying or selling, cash transactions can help to eliminate some of the stresses and barriers involved in moving home. However, as with all things, buying with cash or selling to a cash buyer comes with its own pros and cons.
What is a Cash Buyer?
As you probably guessed from the name, a cash buyer is someone who can buy the property exclusively with cash, they don’t need to borrow any money or get a mortgage. You also need to have the cash at the moment you put the offer in. So, if you want to downsize and use the proceeds from selling your home, you will have to sell before putting offers in on new property to classify as a cash buyer.
The Advantages
A lot of the advantages of cash buyers apply to both the buyer and the seller, however the buyer gets a few extra perks. Around a quarter of house sales in the UK fall through before completion. Having a cash buyer involved is a significant advantage in getting your property sale over the line.
No Risk of Mortgage Issues
Even if a buyer has got an agreement in principle for a mortgage or loan, the lender can still decide not to go ahead with the deal. This would put a stall on almost all sales, and you’d have to start the search for a new buyer (Or lender).
Obviously, a cash buyer has no need to arrange a mortgage – adding an extra layer of security to your sale going through and skipping what can be a lengthy process, which takes us on to the next point.
Cash Sales Progress Much Faster
It can take around one month to arrange a mortgage but selling to a cash buyer enables this waiting time to be cut out. The deal itself can go through in a couple of weeks which is great for people looking to access funds quickly or if they need to move at short notice for work or personal reasons.
Another key benefit here is that cash buyers form the end of a chain, the less people and property involved in the chain, the less chance your sale has of hitting a roadblock due to other people changing their minds or their situations changing.
Financial Security
If you can buy a property with cash, you are already in an envious position financially, but by doing away with the mortgage you own your property outright and don’t have to worry about it being repossessed if you ever did come into financial difficulty. It also means you don’t have to worry as much about those pesky interest rates.
Cash Offers are Often Less
This one is only an advantage for the buyer, but the tradeoff for a faster, potentially more secure sale, is that the seller often has to settle for a lower asking price. This is especially true for cash buyers looking to get a good deal on rental properties.
If you are wanting to get the best price possible for your home, and are happy to wait, a cash buyer may not be the best option for you.
The Disadvantages
Issues with the Property
When searching for property, if you see something advertised as “cash buyers only” it could be that the seller needs to free up funds quickly. However, it could also be because the seller believes that there are issues with the property that would make it impossible to get a mortgage for and are hoping to avoid the survey that is required by all mortgage lenders.
Loss of Liquidity
By buying a property with cash you will be tying up a considerable sum of money. While this could be a great financial move, you must make sure that you will not need the cash in the short term.
Cash Sales Still Fall Through
Another disadvantage to keep in mind for sellers. While cash deals are more likely to reach completion more quickly than those requiring a mortgage, it is still possible for the sale to fall through. This could be due to them finding issues on the survey, or simply changing their mind. So, it is still important to weigh up the pros and cons before accepting the offer.
Peter Austin
Peter is a writer and photographer with a great interest in property, design, and the economy.
