When you’re buying property, the term “cash buyer” might pop up. It sounds simple at first—someone with the cash ready to go, no mortgage involved. But there’s a bit more to it than that.

A cash buyer is someone who can purchase a property outright with their own funds—without the need for a loan or mortgage. Both Estate agents and Conveyancing Solicitors love these buyers because the process tends to move quicker, without the need to wait for a lender’s approval, both on funding and also other, ‘technical aspects’ of a property transaction. For sellers, the appeal is obvious: fewer delays and fewer chances of a deal falling through. In fact, some properties are even listed for “cash buyers only.” But why?

Why Do Sellers Prefer Cash Buyers?

Cash buyers come with the advantage of certainty. They’re not waiting on a lender, and they don’t have to sell another property first. This means there’s less of a chance of the deal falling apart at the last minute. Sellers, especially those looking to offload a property quickly, will favour this kind of buyer.

Does It Really Make a Difference?

The key difference for a cash buyer is that they don’t have to jump through the hoops of securing a mortgage. There could however be a more sinister motive behind a seller offering a property to cash buyers only.

Where a mortgage lender is involved, ultimately, the lender’s primary motive behind offering finance for a property transaction (other than making a return on lending), is to ensure that the title to the property is sound. The reason for this is, in the event the buyer (borrower in this case) defaults on the mortgage payment, the lender has to be able to sell the property as quickly as possible to recover their funds. What they do not want is to find out at that stage that the property in fact cannot be sold that easily (and at open market valuations) due to title defects. The technical term used to describe these properties which are not treated as suitable security by mortgage lenders, is ‘unmortgageable property’.

The reason why a property is unmortgageable can take many forms, Some of these defects can be fixed easily, others takes more effort and attract additional legal costs and in turn, time. For instance, the property may be tenanted and the tenant has stopped paying rent, lease defects or short leases where the property is leasehold, seller not being able to afford any outstanding ground rent or service charge payments due, rights or access or other ongoing disputes etc.

Typically, most mortgage lenders do not consider the above acceptable conditions for them to proceed. Where a property is suffering under such conditions, a common work around for a seller to sell the property is by offering it only to cash buyers.

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So what are the upsides to a cash buyer?

It is important to remember that, simply by being a cash buyer, we do not recommend you skip all aspects of checks usually involved during a standard property conveyance. Cash buyers should still carry out surveys, property searches, and do their due diligence to avoid any nasty surprises.

That said, and as highlighted above, being a cash buyer affords you a lot of flexibility as to what you want to do or how you plan to progress matters. You might decide (having identified the issue, preventing the property being sold to a buyer using mortgage finance in the first place) to make a significantly lower offer on a property to comparably, other similar properties in the area to mitigate the risk you are taking on. It is however worth noting that such risks doesn’t always pay off and there is a significantly high probability of you ending up with the same issue of the current seller, when it comes to you selling the property. Ultimately however, this is your decision to make as you are not reliant on what a mortgage lender thinks.

Some other Pros and Cons of Being a Cash Buyer

The benefits of being a cash buyer are clear:

• Speed: The process moves faster because you’re not waiting on lenders or dealing with property chains. You do not need to carry out property searches which typically takes around 2 weeks to be returned if you didn’t want them.
• More Attractive to Sellers: Sellers prefer cash buyers since, as far as the seller can see initially, the transaction is more likely to go through without delays.
• No Mortgage Hassles: You’re free from the lengthy and often complicated mortgage approval process.
• Overall cheaper conveyancing fees: if you decide against carrying out property searches, you will save a few hundred pounds at the very least on legal costs. This is not an option when using a mortgage but our advise to you remains the same; please carry out property searches as they reveal information in connection with the property that is very difficult to come by through any other, public sources!

But it’s not all sunshine and rainbows:

• Lower Offers: Cash buyers tend to offer less since they’re providing certainty and speed in return. Although the later argument isn’t always the case (we see this all the time being conveyancers), if nothing else, this is a good negotiation tactic.
• Skipping Important Checks: It’s tempting to rush through the process without doing surveys or property searches, but this can lead to problems down the line, like discovering legal issues or property defects after the purchase. Ultimately, once the property has been bought, it is very difficult to change your mind and the decision will ultimately be made by the Courts. If you are required to rely on the Courts, more often than not, legal costs alone far out weigh any ‘profit’ you have made by making a below market value offer.
• Scams: There’s always a slight risk of something looking too good to be true, to actually be. Whilst you may think at the time of buying the property with plans to rectify any issues at a later date and in your own time, we have witnessed countless instances of buyers remorse.

Conclusion

At the end of the day, whether you’re a buyer or a seller, it all boils down to what suits your needs best. Cash buyers bring speed and certainty, but they should never overlook doing their homework. And while sellers love cash offers, it’s important as a buyer not to sacrifice too much on price just for a transaction which only looks great on paper.