How to Buy a House With Cash
If you have enough money saved up you can buy a property without a mortgage or loan. To be classified as a “cash buyer”, you must have the funds available when you make an offer and you must be able to afford the home without relying on the sale of your previous one.
Being a cash buyer doesn’t mean paying for the property with physical cash. This generally isn’t allowed due to money laundering rules. Instead, a cash buyer will purchase a property using the funds held in their bank account. This can also include gifted funds. According to data from HM Land Registry, cash sales account for approximately 30-40% of property transactions in the UK.
Compare My Move works alongside a number of reliable property experts to create accurate, insightful guides that will help you through each step of the house buying process. In this article, we will go through the definition of ‘cash buyers only’ and explain what it really means to buy a house with cash.
What Does Cash Buyers Only Mean?
If a property is marketed as ‘cash buyers only’, it means the seller will only accept offers from potential buyers who already have the money immediately available. Buyers who require a mortgage, loan or another way to obtain funding won’t be considered. Buyers with funds waiting to come through, such as an inheritance or employment bonus, may also be rejected.
If a property is labelled as cash buyers only, the seller may also ignore offers from potential buyers who have their money currently tied up in property. To purchase a ‘cash buyers only’ home, you would have to supply the seller with proof of funds to show that you have the full value of the property ready. A bank statement from your account will usually suffice as proof of funds. Cash gifts are also acceptable as long as you can prove the money is coming from your bank account in the UK.
It’s important to note that due to Anti-Money Laundering regulations, the buyer’s conveyancer will be required to check the funds from a legitimate source. There will also be restrictions when it comes to using money from other countries.
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Why are Some Properties Cash Buyers Only?
There are a number of reasons why a property may be labelled as cash buyers only. Some sellers think a cash purchase will be quicker. In other cases it’s because the property is unmortgageable for some reason. When viewing a property that is marketed as cash buyers only, you should ask the estate agent the reason why.
Some properties will be marketed as ‘open to a cash offer’ rather than ‘only accepting a cash offer’. Buyers should approach cash only sales with caution as it often means there is something wrong with the property that would deter mortgage lenders from lending on it.
Reasons why a property might be labelled as cash buyers only can include:
- The seller is looking to quickly release equity.
- The property is unmortgageable - this could be due to a variety of different reasons such as major structural damage or a high risk of flooding.
- The seller is a landlord selling a tenanted property.
- The home is being sold at auction.
- It is an inherited home and needs extensive work.
- The sellers have been gazundered and are looking for a quicker sale.
- Japanese Knotweed is present.
- The property is too small to get a mortgage on.
- There are legal complications associated with the home.
- There is a considerable amount of condensation and damp present.
- It’s a leasehold property with a short lease.
Cash Buyers vs Mortgage Buyers
There are a number of differences between being a cash buyer and buying with a mortgage. The most obvious difference is that cash buyers do not have to apply for a mortgage. This means that they will often spend less money than a mortgage buyer due to there being no interest payments to a lender. It can also mean that the conveyancing process for a cash buyer can be completed much more quickly.
Some sellers may decline mortgage buyers as the purchase funds are only guaranteed once a final mortgage offer has been received. A cash buyer should have proof of funds immediately.
A previous study from One77 Mortgages discovered that, on average, mortgage buyers pay 9% more than cash buyers in the UK. This is corroborated by the November 2020 UK House Price Index as cash buyers in England paid an average of £250,255, whilst mortgage buyers paid £274,999.
It’s not just property prices that can be cheaper for cash buyers. Buyers applying for a mortgage will have to be thoroughly scrutinised by their lender and will also be faced with added conveyancing fees during the process.
However, both types of buyers will still have to pay:
- A deposit
- The purchase price of the property
- Stamp Duty
- General conveyancing fees
What is the Process of Buying a House With Cash?
The process of buying a house with cash is very much similar to a traditional property purchase. The major difference is, however, that the buyer will not have to go through the process of applying for and arranging a mortgage.
As a cash buyer, you will still have to instruct a conveyancer to handle the legal aspects of the sale and you will still have to liaise with the seller’s solicitor. However, you won’t have to apply for a mortgage in principle or be put through a variety of checks by a lender. Instead, you will have to provide a bank statement as proof of funds.
To assess the property and ensure the reason for it being cash only isn’t too serious, cash buyers should still continue with the relevant conveyancing searches. Mortgage lenders will usually require the buyer’s conveyancer to conduct several searches such as a Local Authority Search and Regulated Drainage and Water Search. Cash buyers should get these searches done too.
These searches will provide you with more information about the property you’re buying. Your conveyancer will look into issues such as contaminated land, flood risk, and risk of subsidence to ensure there are no legal complications throughout the process.
Cash buyers should arrange a property survey just like mortgage buyers should. Mortgage lenders require a mortgage valuation before the application can be approved. However, many buyers will instead opt for a property survey to assess the condition of the home as well as its value. Cash buyers should also compare surveying quotes and find a surveyor to inspect the building.
Some properties will be marketed as ‘cash only’ due to extensive damage or defects. A property survey will uncover these defects and thoroughly explain any structural damage, damp concerns, risk of subsidence and more. Fixing some types of damage can be expensive and so the survey results could be vital for a cash buyer. If certain issues are flagged, the report will provide you with evidence should you wish to negotiate the price, or they may even convince you not to buy the property at all.
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Buying a House With Cash in Scotland
The process for buying a house in Scotland is different compared to England and Wales. Property buying is typically quicker and there is less chance of buyers being gazumped. This puts cash buyers in an even better position when searching for homes in Scotland as it could potentially speed up the process even more.
There will be noticeable differences to the conveyancing process when buying in Scotland, as the seller will have to arrange a home report and the transaction will rely on the conclusion of ‘missives’. The missives will include a variety of legal documents as well as the final contract.
A home report is required on all property sales in Scotland. It includes information about the condition of the home, its value and its latest energy report. This document is essential for cash buyers. Some properties are sold to cash buyers only as they are unmortgageable or badly damaged.
It typically takes around 8 weeks to buy a house in Scotland, whilst in England and Wales, it can take around 12 weeks. Buying a house with cash may shorten the process.
What are the Benefits of Being a Cash Buyer?
There can be advantages for both the buyer and seller when purchasing a property with cash. These include:
- A potentially quicker sale - If a buyer has to secure a loan or mortgage first, it can often delay the transaction. The lender will need to do an affordability assessment before confirming a mortgage offer – this process can take a couple of weeks. A cash buyer can provide proof of funds immediately, eliminating the need to wait. Mortgage lenders will also require specific surveys and legal checks to be carried out whilst a cash buyer may not want to wait for these.
- Less risk of the sale falling through - Sales often collapse because the buyer can’t get a mortgage. But this won’t be the case for cash buyers.
- No downward property chain - As a cash buyer doesn’t need to depend on the sale of their previous home, they reduce the length of the property chain. This means that there’s less risk of the transaction being delayed or collapsing due to other transactions within the chain. According to data by the HomeOwners Alliance, 1 in 5 collapsed property sales in the UK are the result of another sale falling through within the chain.
- It can be less stressful - Buying a house with cash can often make the process less stressful for both the buyer and seller. Whilst the buyer doesn’t have to worry about being approved for a mortgage, the seller has the reassurance that the funds will be available when requested.
- More security for the buyer - As a cash buyer, you will immediately own the property outright. No third party will be involved and there’s no risk of the lender repossessing your home because you are behind on mortgage payments.
- It can save the buyer money - Cash buyers won’t have to pay interest on any large loans, or any mortgage fees, meaning they will be paying less money for the home in the long run.
What are the Risks of Buying a House With Cash?
As with anything, there are risks that come with buying a house with cash. It’s important you do your research before deciding if this is the best option for you as there will be a number of disadvantages to consider, potentially for all parties involved.
The disadvantages of being a cash buyer include:
- Less flexibility - Even if you have the funds ready and waiting, it can mean a loss of flexibility when using such a large sum of money on one property. It could limit your options further down the line, making it difficult to save for a new deposit should you decide to sell.
- Lack of property checks -Mortgage buyers are required to conduct property surveys and conveyancing searches. While they cost money and take time, they’re worth doing. You still have the option of arranging them if you are a cash buyer but you will have to speak to your conveyancer and certain request ones.
- Loss of liquidity – If you have money in the bank, it might not always be a good idea to tie it up in property. You will need to make sure you have enough money for living costs and emergencies.
- There could be something wrong with the home - Properties marketed as ‘cash buyers only’ normally have something wrong with them. It could be structural problems, be made of unconventional building materials, be too small to get a mortgage, or a leasehold property with a short lease.
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Can You Save on Conveyancing Fees if You are a Cash Buyer?
Technically, cash buyers can save money on conveyancing fees when purchasing a property. This is because some checks carried out during conveyancing will be optional.
However, although cash buyers can save money by choosing not to arrange these searches, they should still consider organising them. If you don’t conduct certain property searches your conveyancer won’t be able to find vital information concerning the building and local area.
These searches could highlight specific issues that would help you during negotiations or when selling the property in the future. As a cash buyer, you will still be saving money by not having to apply for a mortgage.
How Can You Make Sure That Your Property Purchase is Safe?
To help eliminate some of the risks that come with buying a house with cash, you should carry out the same checks as a mortgage lender would. There are 2 main ways that you can do this:
Carry Out Property Searches
When applying for a mortgage, a mortgage lender will want to ensure the home is worth the money it’s lending before accepting the application. To do this, the buyer’s conveyancer will be required to complete a number of different property searches. Cash buyers will not be required to do this, but it’s still a good idea.
Your conveyancer will usually organise these searches as part of the legal process. But it’s still important that you read the reports thoroughly and ensure all the vital checks are carried out. Some of the searches a mortgage lender will expect to be carried out include a Local Authority Search, Regulated Drainage and Water Search, an Environmental Search and the Land Registry Title Plan. By asking your conveyancer to arrange these searches, you will discover further information about the property such as restrictions or highway information, the proximity of sewers, contaminated land, and the property boundaries.
You should also the estate agent or seller questions where possible. Find out how long the current owner has lived there, why they are selling and what the local area is like. If it’s a new-build property, you should find out if it’s still under a warranty.
Arrange a Property Survey
Another way to uncover more information about a building is to organise a property survey. A mortgage lender will request a valuation on the property before accepting the applicant. Whilst this would suffice for many mortgage buyers, many will instead organise a property survey which will often include a valuation within the report.
A cash buyer won’t require a property survey to purchase the home, but it’s a good idea to arrange on anyway. A property surveyor will assess the building and its structure. The report will uncover any major damage and will highlight signs of damp and subsidence. A homebuyers report is the most common survey type, while a building survey is more in-depth.
Not getting a survey done may save you money in the short term but it could cost you dear in the long run if the property has problems that are expensive to fix. If you know about any issues before you buy, you can use this information to negotiate a lower price.
How to Find Cash Buyer Only Properties
Property portals Rightmove and Zoopla usually state whether a property is for cash buyers only and have different tools you can use when searching for a new home.
Rightmove listings will often show you the last 3 sales on the same street as the property listed to help you compare prices. Another property portal worth looking at is On The Market. You could also ask local estate agents if they are selling any cash only properties.
Next Steps of Buying a House
This article is part of our house buying guide. Whether you’re buying a property with cash or applying for a mortgage, you'll still need to make an offer to get the process started. In our next article, we give tips for getting your offer accepted. To find out more read making an offer on a house.