What is a cash buyers only property?
If you’ve been keeping an eye on the property market recently, you may have noticed that some listings come with the caveat of “cash buyers only”. In this article, we’re going to take a look at why some home sellers prefer cash only, and whether property investors can benefit from a “cash buyers only” property.
A cash buyers only property is a home on the market where a seller will only accept offers from property investors that have all the money immediately available upfront. When the term “cash buyers only” is used, it means offers generally won’t be considered if the buyer needs to obtain a mortgage.
Even if the buyer doesn’t need a mortgage, the same will apply if the buyer is waiting on funds which could take a while to come through, for example a buyer waiting on money from an inheritance, the sale of a property or an employment bonus.
Ultimately, a cash-only property requires the buyer to be able to prove that they have the funds to make a purchase ready-and-waiting. In the property market, this is often referred to as “proof of funds”, and usually takes the form of a copy of a recent bank statement.
Cash in the form of a gift is usually acceptable, as long as the buyer can demonstrate that the money is directly available from their own account. As with any property purchase, you'll also need to demonstrate the money has not been received through criminal means (money laundering, for example). In some cases, restrictions may apply to money received from certain countries.
Why would the property be cash buyers only?
Because cash transactions are typically quicker, a seller may list a property as for cash buyers only if they have recently spotted the home of their dreams and would like to quickly raise funds to secure the purchase before another potential buyer gets there first, or are simply looking for a quick way to release equity they have tied up in a property, for example for a business investment.
Or perhaps they are at threat of repossession, and a cash buyer is the fastest way for them to avoid that risk. A cash sale avoids the frustrating situation where a sale is agreed in principle, only to find that the buyer has been refused a mortgage, because of the survey, valuation or any other reason.
If the property is a tenanted, buy-to-let property there is an extra incentive to list as cash buyers only, because buy-to-let mortgage applications are currently taking longer than ever before.
Another common reasons for cash buyers only sales are when a property needs extensive work done to renovate it to a liveable standard, as it is much harder to get mortgages on this kind of property. Certain properties with known structural issues are deemed unmortgageble, for example Boot houses in Barnes, London.
Cash buyers are often property investors with lots of experience in the housing market, and many of the hindrances associated with conventional buyers can be avoided.
Cash buyers only UK: what are the benefits of buying a house with cash?
A cash-only purchase can be mutually beneficial to both the seller and buyer. It eliminates the potential for a sale to fall through, by virtue of removing opportunities for issues to arise. By essentially cutting the middleman (the lender or bank) out of the equation, it means the sale is much more likely to go ahead.
Ultimately, this makes the process much quicker. Mortgage lenders typically take around a month or so to respond to applications, and this waiting period can be eliminated if the buyer has the funds upfront. Lenders also tend to require legal checks and surveys to be carried out on a property prior to agreeing to provide a mortgage. While it is sensible for a buyer to carry out these checks prior to a purchase, they can usually be undertaken much quicker without having to deal with the administration side of a lender.
If you can make a purchase as a cash buyer, you’re also more likely to appeal to the seller in comparison to an interested party who will require the help of a lender. This puts you in a better position to get the property you want and also provides you with greater negotiating power. With a cash-only offer, you’re more likely to have an offer accepted, even if it is lower than the initial asking price.
If you have the means to make an outright cash purchase, you’ll also save money that you would have otherwise spent on mortgage interest. You’ll also eliminate any fees associated with taking out a mortgage, such as a credit check, and remove any worry about not being able to make the mortgage payments.
Can you get a mortgage on a cash-only property?
The phrase “cash only” means that the conditions of the seller stipulate that the purchase of the property cannot be financed with a conventional mortgage. Those looking to buy a property listed as “cash only” without the necessary means to purchase outright have the option of obtaining a “hard money” loan, although these types of loan typically come with high-interest rates. In theory, it could be possible for a buyer to take out a cash loan before remortgaging the property by using it as collateral, although this could potentially be cost-prohibitive.
Are there any downsides to listing a property as cash only?
Those looking for a quick sale should be aware that very few buyers are in a position to outright purchase a property with cash upfront. This means the pool of potentially interested parties is narrowed significantly. This could result in a sale being less achievable, particularly if the property is situated in an area that lacks cash-only buyers.
To counter this, property owners looking for a quick sale will often list a property as “cash-only preferred”. This means that while a cash-only sale would be advantageous, the seller may also be open to accepting offers from those who require a mortgage. In these instances, if you have the capital available to make a purchase, you might be in a better position to negotiate on the price of the property.
Cash buyers only property: why surveys are important
Some sellers seek cash-only buyers because the property has issues that mortgage lenders aren’t willing to take a risk on. These can include:
- Structural problems: defects including bowed walls, roof damage, damp and/or subsidence could render the property uninhabitable. These buildings generally attract property investors looking for a renovation project.
- Other damage: if a property is in a state of disrepair due to flooding, fire or vandalism, mortgage lenders may be reluctant to finance a purchase.
- Property age: older properties generally cost more to maintain. If the property has been abandoned for some time, there may be underlying issues that have yet to be identified.
To gain an accurate understanding of the condition of the property, you should always be willing to undertake the necessary surveys prior to agreeing to a cash-only offer.
How to find cash buyers only property listings
Our Cash buyers only Sourcing tool uses an algorithm to scan the major property portals daily for properties listed as for cash buyers only.