Buying a house is an exciting and nerve-wracking time. With so much going on it is easy to feel overwhelmed, especially when you are searching through the property market. If you have been property searching recently, you may have seen some properties listed as ‘cash buyers only’.
But what does it mean when a seller lists a property as ‘cash buyers only’?
In this blog post we will be looking at why a seller may list a property as cash buyers only, what a cash buyer is, and the pros and cons to selling through a cash buyer.
Looking for a quick answer? Check out our drop-down menu below!
- What Does Cash Buyers only mean?
- Why Would Someone Sell A House For Cash?
- Reasons Why A Seller May Need A Cash Buyer
- Do Sellers Prefer Cash Buyers?
- Why Would Someone Sell To A Cash Buyer Only?
- Is A Cash Buyer Better?
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What Does Cash Buyers Only Mean?
A cash buyer is someone who can afford to buy your property for cash. They are chain-free and are not reliant on selling their current property in order to buy yours. So, if a property is listed as being a ‘cash buyers only’ property, it means that the seller will only accept offers from buyers who have the funds readily available.
If you will need to apply for a mortgage or a loan in order to be able to purchase a property, then your offer will not be accepted on a property listed for cash buyers only. Similarly, if you have the cash to buy the property but it may take a while to come through, such as tied up in a property that you have not yet sold, then your offer will also not be accepted.
Often the seller will require proof of funds from the potential buyer. This means that they must prove that they have the money for the full value of the property ready, usually done in the form of a recent bank statement.
The buyer’s conveyancer or solicitor will be required to check that the cash funds come from a legitimate source under Anti-Money Laundering (AML) regulations.
It is worth keeping in mind that a cash gift is acceptable as long as you can show that the money is coming straight from the buyer’s account.
Why Would Someone Sell A House For Cash?
The main reason that a seller would prefer a cash buyer is for efficiency. As a cash buyer is not in a property chain, they can help sellers to avoid the long-drawn-out process of mortgage applications as cash buyers can complete much faster than open market buyers and can lead to a faster house sale.
It can also help to avoid the heartbreak of a house sale falling through. As a result of the financial crash, mortgage lenders have been required by regulations to take a cautious approach to mortgage applications. Because a cash buyer has the funds readily available, they will not have to go through a lender and risk being refused a mortgage.
Reasons Why A Seller May Need A Cash Buyer
There are many reasons why a seller may accept a cash offer on a property. Below are some of the most common reasons:
- Divorce – If a couple is divorcing then they may prefer a cash sale in order to avoid the potential delays that mortgaged buyers may bring with them.
- Repossession – As a cash buyer can progress a sale a lot faster than a mortgaged buyer can, it means sellers can often avoid repossession by selling to them.
- Inherited – If a property has been inherited, will struggle to sell to the average buyer, and needs extensive work done to it then it may benefit from a cash sale.
- Tenanted Property – If the owner selling the property is a landlord then they may list the property as cash buyers only. This is because selling with tenants in situ can often be a difficult process.
- Selling At Auction – With a property auction, it is up to the buyer to complete the sale within the agreed time frame. As auction mortgages are incredibly slow, a cash buyer is sometimes the only way to keep the sale moving forward.
- Gazundering – – If the sellers have been gazundered and need the money quickly then a cash buyer may the perfect solution.
Are Property Auctions For Cash Buyers Only?
Property auctions can be used by anyone, whether they are a cash buyer or not. An auction works by agreeing on a minimum reserve price for your property that must be met in order for the property to sell, although once it has been met it will ultimately sell to the highest bidder.
However, it is worth bearing in mind that a property auction involves a lot of waiting and can be very time-consuming, so if you are looking for a quick sale it may not be the route for you.
Do Sellers Prefer Cash Buyers?
As a rule of thumb, the majority of sellers do prefer to sell their properties to cash buyers, as they are more of a certainty than a buyer who requires a loan or a mortgage to purchase. Below are some of the main reasons that a seller may prefer cash buyers:
- Speed – As previously mentioned, cash buyers can bring an aspect of speed that the average buyer cannot. As they do not need a mortgage, they are not slowed down by mortgage applications and will as a result speed up the conveyancing process.
- Mortgage Free – A mortgage offer is subject to a home buyer’s survey. Often these surveys can come back with results that value the property as lower than expected. This can lead to a reduction of mortgage that can lead to the sale falling through.
- Security – As a cash buyer is not part of a property chain, they have an advantage over the average seller. Statistics from the government suggest that on average 1 in 3 property chains break. Many sellers rely on the sale of their homes to be able to fund the purchase of their new property so a cash buyer is often viewed as a preferred choice as it is an almost guaranteed sale.
- Stress-Free – Selling on the open market can be incredibly stressful. From marketing the property to conducting viewings and negotiating offers, the whole process can take its toll on sellers. By selling to a cash buyer, you can avoid the pitfalls that come with the open market.
Why Would Someone Only Sell To Cash Buyers?
If you are a buyer searching property portals, you may see phrases such as ‘cash buyers only’, ‘cash purchase only’, ‘cash offers only’, and other variations of this. It is worth keeping in mind that this is different from being open to a cash offer. Whilst a seller who is open to a cash offer will still consider sellers with mortgages, a seller who is listed as cash buyer only will not.
A seller will instruct their estate agent to list a house as ‘cash buyers only’ if there is no other feasible option other than to have the property sold for cash.
There are many reasons why a property may be listed as cash buyers only. Below are some of the most common reasons:
If a property suffers from serious structural defects such as subsidence, heavy roof damage, damp or bowed walls then it would cost considerable expense to repair in order to make it habitable again. Because of this, a cash buyer can buy the property in cash and resolve any underlying issues themselves.
Properties with structural issues such as these are usually bought by people who are looking for a project or by developers. The condition of the property often does not usually matter as often buyers will demolish the property and start over again.
If a property has become damaged due to fire or flooding or been left in a state of disrepair for many years, a cash buyer is often the only way that a sale can progress forward.
Japanese knotweed is an invasive weed that can grow up to 10cm a day and is notoriously difficult and expensive to get rid of. Left untreated this weed can cause structural damage as it can spread through the solid ground (concrete included), and so mortgage lenders will often refuse to lend where there is evidence of this plant.
If an approved treatment method is being applied, then sometimes they will be willing to go on with the sale but more often than not, a cash buyer is the best way forward.
Serious cases of rising damp are often an expensive fix. Any buyers of the property would need to invest heavily in resolving the problem, using injections combined with re-plastering and further ventilation.
Because of this, cash buyers are often viewed as the best way forward.
Renovating property is often a lot more expensive than it seems. If a property is likely to need a lot of work done to it in order to make it habitable once again, a cash buyer is often seen as the only way forward.
As beautiful as older properties can be, they often take a lot more to maintain. Usually, they aren’t a cause for concern. However, if a property has not been looked after properly, then there is an increased likelihood that it would be better suited for a cash purchase.
The opposite side of the coin for age is that whilst a property may currently be in a good condition, it could have been built using materials that are likely to deteriorate or age badly. In houses like these, lenders will often refuse to lend.
For example, Airey houses (built in the 1940s) are often rejected by mortgage lenders for this very reason. Steel framed houses are also often rejected.
Because of this, it makes it a perfect candidate for cash buying.
If a property is particularly small, it can make getting a mortgage on it a nightmare, and they are instead often sold for cash instead.
Lenders will often turn down a mortgage application if the property is located in an undesirable or hazardous area.
Risks that are specific to the property such as title disputes, shared drainage, or boundary issues are often resolvable. But if the property is in an anti-social behaviour area or if it has a high crime rate then you can expect your mortgage application to get declined.
Other factors that can affect the chances of you getting your mortgage approved are geological and environmental ones such as:
- Flood Risks
- Landfills Or Waste Management Sites
- Subsidence Risks
- Previous Industrial Use
- Previous Waste Management Sites
- Current Or Past Presence Of Asbestos, Solvents, Arsenic Or Gases
- Landslip Risks
- Former Petrol Station Sites
Leasehold properties can often find themselves on a cash buyers-only list. If a leasehold property has less than 80 years left on the lease then it can be very difficult to sell on the open market. This is because after the 80-year mark, the price of extension starts to rise drastically and it is up to the owner to extend it.
Because of the expense of these types of property, there are only a handful of lenders who will be willing to finance them.
Whilst a cash buyer will often step in to extend the lease themselves, they will often expect a discount for taking on the risk of extending it.
Should the land surrounding the property, or the property itself, have associated legal complications then more often than not it will have its’ mortgage application turned down.
Mixed Use property
Mixed-use property is often advertised as cash buyers only as they will then seek a boutique lender who specialises in financing these types of buildings.
Why Would Someone Only Sell To Cash Buyers?
Whether or not a cash buyer is better depends entirely on your situation. Whilst there are benefits to selling through a cash buyer, as they have the money ready it means they are in a stronger negotiating position. As they will be trying to make as much money from the deal, they will more than likely want to negotiate a lower price.
If you are willing to deal with a lower price in exchange for a quick and hassle-free sale, then a cash buyer may be the selling option for you.
This covers everything you need to know about cash buyers only, if you have any further questions, queries or insight into the matter, please feel free to get in touch!