Whether you’re reading this article as a seller who has a choice of selling your house to a cash buyer vs a mortgage buyer, or whether you are reading it to understanding the advantages of being a cash buyer, as a cash buyer, this article is relevant to you both.
There are advantages to cash buyers vs mortgage buyers, but it’s important to understand what these are from both sides of the fence.
Cash buyers are always better than mortgage buyers as there’s less risk to the seller. There’s a faster turn round, no sales-chain to breakdown and no mortgage to be denied. If you are the cash buyer it puts you in a stronger buying position, meaning you can negotiate lower offers.
A cash buyer is a person who does not require a mortgage to buy a property, which gives them an advantage over buyers who require a mortgage. The main advantage of a cash buyer is the speed at which they can buy a property, as they have ready access to money.
Whereas a buyer who requires a mortgage is reliant on the mortgage application process, which takes more time to organise. Plus mortgage companies can refuse to lend on certain properties and to certain buyers.
However, having said that, a mortgage buyer can also be regarded as a cash buyer too.
Are you a cash buyer If you need a mortgage?
A buyer who needs a mortgage can also be regarded as a cash buyer, but in this case the cash required for the property purchase is made up from two sources. These are the buyer’s own cash for the deposit, together with the balance being made up from a mortgage.
A mortgage cash buyer is better than a buyer who needs to sell their house. A mortgage cash buyer can move faster, as although a mortgage is required they are not dependent on selling another property to proceed. This means the buying process is less likely to go wrong.
Employing the tactic explained in this article could save you up to £71,475 when you buy your next house if it would originally cost £350,000, or if you propose to buy your next house for £250,000, the saving could be up to £51,852 instead. To find out more, plus to get hold of my free mortgage savings calculator tool, please take a look at my video course about how to sell your house in under 2 weeks for more money.
Do cash buyers have an advantage?
Being a cash buyer provides the following advantages:
It eliminates the risk of a having a mortgage denied, which is a huge benefit to a seller, as this provides certainty.
This removes any risk of the lender refusing to lend based on problems with the property.
Bank down-valuations are no longer a risk.
There are no credit related problems for the buyer.
The reasons why you would sell a house to a cash buyer include:
Cost savings: The buyer and seller can save thousands in closing costs, which include appraisal or survey fees, loan documentation fees, credit checks, legal fees for mortgage arrangements and security charges. Most savings are for the buyer, but these cost savings can be shared.
Certainty of a sale: A cash buyer can move more quickly, as there’s no mortgage to arrange, the cash buyer doesn’t have to carry out a survey and the legal process is easier and faster when there’s no mortgage company to please, which are all points during the sales process where a sale can go wrong.
Speed of the sale from accepting the offer to completing or closing the sale: As a cash buyer doesn’t require a mortgage, the sales process is much quicker. Plus if the cash buyer doesn’t require a survey, this saves time too.
A cash buyer is not dependent on the sale of another property: This means there’s no chance the sale can fall through due to a breakdown in the sales-chain.
Do cash buyers offer less?
Cash buyers usually offer less on properties because they are in a stronger buying position to proceed. Also, most cash buyers are property investors, which means they are not buying properties to live in, so they can be much more cheeky with how much they offer, as it’s not an emotional purchase.
Cash buyer and no chain how long to complete?
If there’s no chain and the cash buyer has cash readily available, it can take a little as a few days to complete the purchase of a property. But the speed at which a property sale completes is down to how fast the solicitors work, whether the buyer requires a survey and if they want searches done.
The time it takes to complete if a cash buyer requires the property searches to be done and they also require a survey will be more like 4-5 weeks to completion.
The time it takes for a mortgage cash buyer to complete will be slightly longer as a mortgage needs to be arranged. Plus mortgage companies will require property searches to be carried out and at least a basic survey and valuation is required.
Is a first time buyer a cash buyer?
A first time buy could be a cash buyer if they have cash readily available to make an outright purchase. But in general first time buyers don’t have all the cash needed to buy their first house, but instead require a mortgage, so first time buyers can therefore be regarded as mortgage cash buyers.
Final thoughts on cash buyers vs mortgage buyers
In reality in the trues sense of the term cash buyer means the buyer has no house to sell and they have the cash readily available for an outright purchase, without the need of a mortgage.
However, you shouldn’t discount a mortgage cash buyer, as they can move quickly too and are not dependent on the sale of another property.
I would therefore rate buyers in the following ranking order, with 1 being the best buyer to sell to, subject to the level of discount offered below asking price:
Cash buyer with the cash readily available for an outright purchase.
Cash buyer who sources the funds from an angel investor.
Mortgage buyer who is not dependent on the sale of a property.
Buyer who has a property to sell and doesn’t require a mortgage.
Buyer who has a house to sell and requires a mortgage.
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Article written by Russell Bowyer who has been investing in property since purchasing his first commercial property in the 1990's for his own Chartered Accountancy business. But his first property investment project was to turn an old dilapidated restaurant into a large 5-bed home, which he purchased for £117,500 and sold for £450,000 (to see an "after" photo of the house before it was sold see here: About). Russell owns a number of investment properties, which includes houses, flats and HMO's. More recently he has turned his creative side to investing in property using lease options. His largest lease option deal to date was to acquire 12 properties worth over £2 million for just £12, which means he paid just £1 to acquire each property!
