What is a cash buyer?

Cash buyers only!

Is it a good thing or a bad thing? We take a look from both sides, seller & buyer!

If you’ve bought, researched or sold a property before then you might have come across the term before “cash house buyer” or “cash buyers only”, but what exactly does that mean?

It might sound pretty self-explanatory, but there’s actually quite a bit to it and we’ve written this complete guide from both the buyer's and seller's point of view as to how to deal with cash, if surveys are required, the pros and cons and so much more!

Cash house buyer hub

Do you have a specific question about our service, if you should sell to a cash house buyer, the pros and cons or which are the best companies to choose?

Not to worry, we've gone into depth on each of these subjects with our cash house buyer content hub.

What does it mean to be a cash buyer?

If you’re a cash buyer of property it means that you can afford to buy it outright, with no requirement for a loan or traditional mortgage. It’s actually a more common method of buying a property than you may think, with just under a third of all sales typically being cash purchases.

Sometimes people misunderstand the meaning of cash buyers, thinking that because they are selling another property to purchase this one, that’s considered cash, but it’s not. A cash buyer must have the funds available without the sale of another property to purchase a home outright.

What does cash buyers only mean?

Sometimes on listing, or particularly when dealing with investment or property sourcing companies, you may see the term “cash buyer only”. It means that the seller of that particular property will only accept offers from people who are in a position to proceed quickly, buying immediately with available money.

If a prospective buyer requires a mortgage, loan funding or the money is tied up somewhere like another property, then they won’t be accepted.

The reason for this is typical that the owner of the property needs, or wants, to sell the property as quickly as possible. Mortgages and loans take time and add a significant step in the process of purchasing a home.

It’s worth noting that proof of funds is often required by the seller, in order to agree – which later in this article we touch on how do I show proof of funds when buying with cash.

How to buy a house with cash

Buying a house with cash is a much faster process than you may expect, and it actually doesn’t change the whole process of purchasing a house all that much. You’re essentially just removing a big segment of the process, which is the cutting out of the mortgage lender. The process in that respect works a little bit like this:

• Having your offer accepted on a property

• Instruct your solicitor

• Instruct and pay for surveys

• Your solicitor will then do the searches, queries and any necessary checks.

• Exchange contracts and pay the deposit

• Complete and finalise

Because you can cut out the mortgage aspect, you can run through this process relatively quickly and easily – the longest aspect of it is likely to be the solicitors.

Do cash buyers need a survey & searches on the house?

It’s an interesting question because when you are buying a home in a typical fashion you’re required to get searches on the property, and some lenders will require you to have some form of survey done as well.

But, as a cash buyer is it necessary? After all, it’s your money that you're risking. The genuine answer is no, but we would highly, highly recommend that you do so. The searches cost a few hundred pounds, which may sound like a lot, but in the scheme of things they are 100% worth doing.

These searches are done and instructed through your solicitor.

Is it better to buy a house with cash?

To sellers, a cash buyer is an attractive option – but whether or not it’s better to buy with cash, it really depends.

There are of course some great benefits from the buyer's position, with the main one being it puts you in a really strong position when it comes to negotiating for the property due to the speed at which you can purchase.

There are also additional benefits such as the purchase being less likely to follow through because there’s no mortgage, the chain isn’t as complex and there’s great security for the buyer.

On the flip side, however, if you’re an investor then it can mean tying up a lot of your money in a single property and potentially hampering your profit potential by not going with a buy to let mortgage option.

Take The Property Buying Company, for example, we’re what is considered a cash buyer, and due to our position and speed in which we can purchase, we offer below market value.

On the flip side, we do cover all the legal fees, and you won’t have to pay estate agency costs – not to mention the considerable amount the seller saves by cutting the duration of sale from months to just 7 days!

As a seller, why would you want a cash buyer?

The obvious benefits to the seller are that you can sell quickly, which allows you to avoid a usually stressful, tedious and drawn-out process.

This can be beneficial in certain circumstances like if the seller has inherited a property, going through a divorce, at risk of repossession, any situation that would be advantageous to sell your largest asset quickly.

It can also depend on the type of property, there are certain properties, such as ones that need renovation, which is particularly alluring for cash buyers.

As well as all that, if you’re a seller that has constantly been let down by your property chain, you may opt for a cash buyer as it offers a less complicated and more simplistic process which is important with the likes of Coronavirus and Brexit having an effect on the lender's decisions.

Is selling to a cash buyer safe?

This is a popular question, and of course, selling to a cash buyer is safe, they go through the same legal checks as anyone else – including an Anti-Money Laundering check, or AML, which will make sure that the cash funds come from a legitimate source.

We think that the question might revolve more around cash house buying companies, sellers wondering whether they are legitimate and safe as an alternative way to selling your property. We can assure you it is, for the most part, you need to choose a company that is trusted – and there are a few ways of doing this.

The main way is to check if the company is part of The Property Ombudsman, and The National Association of Property Buyers, as this offers a place for redress as a customer, but secondly and just as important, you should check the companies reviews to get honest opinions.

The pros & cons of cash buyers

There are several advantages and disadvantages of being or selling to a cash buyer, some of which we’ve already touched on throughout this article. If you’re considering buying a property with cash or selling to a cash buyer, then here’s a quick breakdown list of advantages and disadvantages for you to weigh up.

To summarise, both selling and buying with a cash buyer involved is typically better for all parties, mainly because of the speed of the transaction, but you just need to be aware of the risks and pitfalls of doing so.

What are the main differences between a cash buyer and mortgage buyer?

The main difference between the two when it comes down to it is debt, buying a property outright for cash obviously saves you significantly on any interest that would be added through obtaining and paying a mortgage.

As we’ve talked through, there’s a lot to consider when buying a home outright for cash. The main differences are the speed at which the transaction can take place, the decreased likelihood of the sale falling through and of course, the fact you have no debt and interest to pay.

You also get the freedom as to whether you want to do surveys and searches on the property, although we highly recommend that you do.

How do I show proof of funds when buying with cash?

When buying any property, an estate agent may ask for proof of funds before taking the property off the market.

This can be done to make sure that you are making a genuine offer for the property to avoid a disappointed seller and to check that you haven’t acquired the money by criminal means.

How do you go about providing the proof of funds? For cash buyers it’s relatively straightforward, all you have to produce is bank statements of your cash amount over the past few months or years to show how the money has been built up over time.

If the money has been obtained through other means, such as being left in a will or selling shares, you’ll need to provide evidence for that as well.