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How to Buy a Home with Cash

Estimated reading time 6 minutes

Have you wondered how it works to buy a home with cash? There’s a lot that goes into being a cash buyer. Properties are not paid for with physical cash. Instead, the money usually comes from a bank account. But what else is required to be a cash buyer?

We’ll take a look at what it takes to be a cash buyer and more! Let’s get started!

What Does “Cash Buyers Only” Mean? 

When searching for properties, you may come across some listed as “cash buyers only.” But what does this really mean? It means the seller will only take offers from potential buyers who have the money available right away. Other buyers who need a mortgage or a loan are not considered. This even includes buyers waiting for inheritance funds or an employment bonus. They will also be rejected. In addition, the seller may also reject potential buyers whose money is tied up in a property.

A cash buyer must supply the seller with proof of funds,  proving they have the property's full value ready to pay. It’s possible to use a bank statement from the cash buyer’s account as proof of funds. Cash gifts may also be accepted, but only if the potential cash buyer can prove the money is coming from a bank account in the UK.

The reason for these requirements is the Anti-Money Laundering regulations. The buyer’s conveyancer is required by law to check the funds are coming from a legitimate source. There are also restrictions if the money comes from other countries.

Why are Some Properties Cash Only? 

There are several reasons why a seller may choose to go with cash buyers only. For one thing, some sellers believe a cash sale is faster. Another reason is that the property may be unmortgageable for some reason. If you’re interested in viewing a cash-only property, be sure to ask the estate agent why the property is being sold as cash only.

Then there are properties that may be labelled as “open to a cash offer.” This label is usually an indication there’s something wrong with the property that would keep lenders from providing a mortgage or a loan.

Other reasons a property might be cash buyers only may include:

  • The seller is a landlord selling a tenanted property.
  • The home is being sold at auction.
  • The sellers have been gazundered and are looking for a quicker sale.
  • The seller’s looking to quickly release equity.
  • And more

What’s the Difference Between Cash Buyers & Mortgage Buyers? 

There are several differences between cash buyers and mortgage buyers. The biggest difference is that the cash buyer does not have to apply for a mortgage or loan. When buying a cash-only property, they may pay less than the mortgage buyer because there are no interest payments to a lender. It may also indicate the conveyancing process for the cash buyer can be finished faster.

Then there are sellers who decline mortgage buyers who only obtain the purchase funds once the final mortgage offers have been made. On the other hand, a cash buyer must have proof of funds immediately.

What’s more, mortgage buyers must first pass the lender’s examination. They’ll also have to pay conveyancing fees during this process. So, cash buyers come out ahead here, too.

Even so, cash buyers and mortgage buyers still have to pay the following:

  • A deposit
  • The purchase price of the property
  • Stamp Duty
  • General conveyancing fees

What is the Process of Buying a House with Cash? 

When buying a house with cash, the process is very much like buying a traditional property. The main difference is that the buyer won’t have to apply for and arrange a mortgage or loan.

However, the cash buyer still has to let the conveyancer know how to handle the sale's legal aspects. They will also have to work with the seller’s solicitor. However, the cash buyer will have to provide a bank statement as proof of funds.

Cash buyers also still need to have the property assessed and determine why it’s a cash-only property. This means conveyancing searches are still necessary. The searches offer more information about the property being bought. The convincer will search for issues that may cause a problem with the sale. These may include flood risk, risk of subsidence, contaminated land, and more.

Cash buyers need to arrange a property survey the same as mortgage buyers. While mortgage lenders require a mortgage valuation before the application is approved, a cash buyer may choose a property survey. The survey is done to determine the condition and value of the home. A cash buyer should also compare surveying quotes to find a surveyor to inspect the building.

Property surveys are done to check for serious problems with the property. This is because some properties are marked as cash only because of major defects or damage. The property survey uncovers these issues. The property survey keeps the cash buyer from buying a property that may be expensive to repair. Or the buyer may go ahead with the purchase, depending on the type of issues found by the survey. But the cash buyer then has full knowledge of the defects and may even be able to negotiate a lower price for the property (or not buy it in the first place).

What are the Benefits of Being a Cash Buyer? 

There are several advantages to being a cash buyer, including:

  • Sale may be quicker
  • Less risk of sale falling through
  • No property chain to deal with
  • Less stress when buying a property for cash
  • More security for the buyer
  • Can save the buyer money

Are There Risks with Buying a House with Cash? 

Yes, there are a few things to consider when buying a house with cash, including:

  • Less flexibility
  • Lack of property checks
  • Loss of liquidity
  • Could be something wrong with the property

 

Summing It Up

Buying a cash-only property can come with many benefits and a few risks. For this reason, it’s essential to carry out property searches and have a property survey done. In addition, you must have proof of funds before you can even attempt to buy a cash-only property.

As a cash buyer, you may be able to save money and time when it comes to buying a property you want!