Cash buyers are a unique group in the property industry.
Many assume they have advantages over ordinary buyers.
But what exactly are these advantages? And when do they apply?
Read on to find out.
Cash buyers’ advantages
Most of cash buyers’ advantages over ordinary buyers stem from two main points:
- Cash buyers do not need a mortgage
- Cash buyers are not part of a property chain.
The following advantages are largely downstream of these.
1. Faster purchase time
Cash buyers usually complete the purchase of a house much quicker than ordinary buyers.
They aren’t affected typical delays, such as:
- Inefficient estate agents and solicitors
- Lender criteria
- Property chain problems.
2. Flexibility on timing
Cash buying involves less pressure with regard to the timing of house sales.
So, they can bring forward or delay a sale according to the seller’s needs. This is a capability ordinary sellers don’t have.
3. Sidestep strict lender criteria
Cash buyers are unburdened by lenders’ restrictions.
So, they can purchase properties that regular buyers (i.e., ones with lenders) can’t. For example, uninhabitable or short-leasehold properties.
4. Increased chance of completion
With lenders and property chains out of the equation, cash buyers bring much more certainty to sales completion.
5. Lower costs involved with the purchase
Some experts argue that cash buyers have a financial advantage. This is because they have fewer costs involved with the purchase.
Firstly, they usually don’t have to hire an external solicitor. (They often have this professional already working in-house.)
And they don’t need to worry about fees from their estate agent or lender, too.
There may still be surveyor fees involved, if the cash buyer decides to bring one in. But this is optional, unlike in the case of ordinary buyers.
6. Seller preference
The five points above collectively give cash buyers both obvious and subtle advantages before and during sales.
For example, sellers may be more likely to choose cash buyers over ordinary buyers and to give them the benefit of the doubt during negotiations.
When do cash buyers not have an advantage?
You may find a couple of scenarios when cash buyers don’t have an advantage.
Homeowner wants to meet the new owner
On rare occasions, homeowners want to meet potential buyers.
This might be because they are from a relatively close-knit community, for example, and they want to vet buyers on behalf of their neighbours.
Or, there might be a covenant on the property that the seller wants to ensure is preserved. (This is more common on period properties.)
Proving source of funds
Cash buyers can occasionally face difficulties in providing source of funds.
This can slow down a transaction. Since there’s much more money being put down, checks are likely to be extra cautious to ensure the validity of the sale.
Typical buyers offer a higher price
Sellers on the open market may have an upper hand if they offer a higher price.
This is common when you’re competing against a cash-buying company, as these firms often offer below the market rate.
When the seller is focused on selling price, the cash buyer could miss out.
