If you can afford to do so, it can make sense to buy a house without taking out a mortgage to minimise your debts. But is buying a house with cash the best option? Purchasing a house as a cash buyer means buying the property without the help of a loan or mortgage. To be a cash buyer, you‘ll need to have the cash available to purchase the property at the time of putting in your offer. You will need to have the money available to afford the new property without relying on selling your existing home.
Cash Buyers Only:
If a property is advertised as property cash buyer only, it means that the seller does not want anybody to put in an offer if they would need a mortgage to complete the sale. There are many reasons why a seller might be looking for a property cash buyer. Some sellers look for cash buyers for homes because they want to make sure that the sale is completed quickly.
In some cases, however, a property cash buyer might be required because the house is un-mortgageable. There are many different reasons why you may be unable to get a mortgage on a home, including structural damage or if the area that it is built in is very high risk for floods and other natural disasters.
If you come across a property that requests cash buyers only, be sure to ask the seller why they are only accepting cash payments. It is also a good idea to have a full structural survey carried out on the property to make sure that you are not hit with any nasty or costly surprises in the future. Depending on what the survey shows up, you may still want to go ahead with the sale if any issues found can be repaired relatively quickly.
What are the Benefits of Buying a Property With Cash?
A property cash buyer has many benefits for both parties. Buying or selling a house for cash comes with a number of advantages, including:
When buying with cash, the buyer does not have to worry about going through the mortgage process. Similarly, the seller has no reason to worry about any potential problems that the buyer might have when raising the funds.
Less Chance of Falling Through:
The entire process of applying for a mortgage can lead to several problems arising, from the lender rejecting the application to the process taking too long. Cutting lenders out of the picture with a cash buyer can improve the chance of the sale going ahead.
Appeals to Sellers:
If you are planning to offer cash for property, you will appeal to many sellers who might prefer to do things this way for a quicker and less stressful sale. Selling a property to a cash buyer is often a simpler, faster and safer process compared to selling to a buyer with a mortgage, meaning that you are in a great negotiating position and can often get a cheaper price when buying with cash.
Over time, buying a property with cash can save you lots of money since there is no need to pay any fees associated with the mortgage process, and you won’t need to make monthly mortgage payments plus interest in the future.
As a cash buyer, you will own the property outright from the beginning. As a result, even if your financial situation changes down the line, you will still own your home and there will be no need to worry about the risk of falling behind on mortgage payments or having your home repossessed by the bank.
It’s a Faster Process:
Securing a mortgage from the bank to buy a house often means that you will need to wait around a month after submitting your application to get an answer. On the other hand, buying with cash means that you can eliminate the waiting process and pay for the house immediately. In addition, many mortgage providers require extra time to be taken for surveys and valuations, which you can also avoid when paying cash.
No Downward Chain:
Since a property cash buyer is somebody who is able to afford to purchase the property regardless of whether their existing home sells, this eliminates the downward chain and the risk of the sale being affected by the other sale falling through.
What are the Downsides to Purchasing Property With Cash?
Although it can be a very advantageous option, buying a property with cash also has some disadvantages to consider:
Lack of Flexibility:
Even if you have the cash available, it is not always beneficial or recommended to have such a huge amount of your wealth tied up into one purchase, since this could limit your options in the future. It can also make it trickier when the time comes to sell, since you will need to make sure that you have enough money to purchase a new home or put down a deposit.
Loss of Liquidity:
Buying a house with cash involves spending a huge amount of money, and can often wipe out all or most of your savings in one go. It’s important to ensure that you huge budgeted properly and are able to afford the purchase along with your living costs.
Mortgage lenders will often require surveys and checks to be carried out on the house, which can help you determine if there are any issues. Since this is not required as a cash buyer, it is a good idea to budget for a survey before deciding to buy.
How to Safely Buy a House With Cash:
If you find somebody that is selling a house to a cash buyer and have enough to afford it without a mortgage, there are several things that you can do to ensure that the process is as safe as possible for you. Getting to know the property as well as a mortgage lender would if you had applied for a loan can help you eliminate some of the risks.
It is a good idea to carry out all the checks that you would expect a mortgage lender to conduct on the property. These include:
You should carry out a number of property searches including the Local Authority Search that checks for any plans, highway information or restrictions that might affect the property. Search the Land Registry Title Plan to find the boundaries of the land, and conduct a Regulated Drainage and Water Search to ensure that the property is connected to the main water supply and sewage.
Check when the property was last sold. If the seller has only been living in the property for a few months or less, it is worth asking why they are moving so quickly.
Check the Construction:
Check the construction materials used in the home. Concrete houses, including houses that have steel frames, are considered to be non-standard construction and many mortgage lenders do not grant mortgages on them due to a number of potential defects. If you are planning to purchase a property made out of concrete with cash, it is important to have a specialised survey carried out.
New Build Warranty Check:
If the property that you want to buy with cash is a new build, it’s important to check for a new build warranty. You should always read the small print carefully to check what is and is not covered. Most of the time, the warranty does not cover things such as normal wear and tear or weather damage, and certain criteria may need to be met to cover issues like damp.
Getting a Survey:
Having the property surveyed is an important part of the process if you are a property cash buyer. If you were applying for a mortgage, you would need to get a mortgage valuation survey to ensure that the property is worth the amount that you had applied to borrow to pay for it. As a cash buyer you will not need this, but it is certainly worth having one carried out to ensure that you are not paying more than you need to for the property. The fact that you have the cash available to buy can be a very strong negotiation tool when coupled with a professional valuation that prices that property at lower than the asking price.
In addition to a valuation survey, it is also worth getting a homebuyer’s survey or full structural survey carried out to find any potential issues with the property. A full structural survey is worth investing in if the house is being sold to cash buyers only due to being un-mortgageable. On the other hand, a homebuyer’s survey or snagging survey for new builds will usually suffice if the property is not un-mortgageable. You can find a surveyor to carry out the work at RICs.
If you have the cash available, purchasing a house outright can save money, minimise debt, and reduce risk. However, before you go ahead as a cash buyer, it’s important to know what you’re getting into.