How to Buy a House With Cash
Buying a house with cash is when a buyer purchases a property without the aid of a mortgage or loan. To be 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.
Cash buyers are often thought to be someone who pays for the property with physical cash, this is not true. Many conveyancers would not allow this due to stringent money laundering and financial laws. Instead, a cash buyer will purchase a property using the funds held in their personal British 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 work 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 by potential buyers who have the 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 may think a cash purchase will be quicker whilst otherwise may believe it’s more reliable than applying for a mortgage. When viewing a property that is marketed this way, it would be worth asking the estate agent for further information.
Most properties will be marketed as ‘open to a cash offer’ rather than ‘only accepting a cash offer’, so you need to be certain which is accurate before proceeding. Buyers should approach cash only homes with caution because the reason for this decision can sometimes be very serious.
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. To avoid this factor, it would be wise to organise a property survey.
- 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 considerably small.
- There are legal complications associated with the home.
- There is a considerable amount of condensation and damp present.
Cash Buyers vs Mortgage Buyers
There are a number of differences between being a cash buyer for a property and being a mortgage buyer. The biggest and 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 lender may decline to lend to a buyer a number of times throughout the mortgage process, making them slightly less reliable in some sellers’ eyes. 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, however. 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. An example of this would be the conveyancing searches that all mortgage buyers are required to purchase before the sale is complete, adding to the overall cost of buying a house.
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 overly 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. Whilst cash buyers will not have a lender to suggest this, they should still have them arranged.
These searches will provide you with a range of information concerning the property, its history and the local area it resides in. Your conveyancer will look into factors such as contaminated land, flood risk, risk of substance and more to ensure there are no legal complications throughout the process.
Cash buyers should also 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 reliable 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 significant damage can be costly 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 invest in the property at all.
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Buying a House With Cash in Scotland
Whilst how you pay won’t have a huge impact on the differences, the general process of 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 make the process quicker again, making them more attractive to sellers.
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 what is called ‘missives’. The missives will include a variety of legal documents as well as the final contract.
The presence of a home report is required in all property sales in Scotland. It will inform potential buyers of the condition of the home, its value and also its latest energy report. This document is essential for cash buyers as you’ll want to ensure there is nothing majorly wrong with the property before committing to the sale. Some properties are sold to cash buyers only as they are unmortgageable or highly damaged. The home report will immediately inform you of this, should this be the case for the property you’re viewing.
It typically takes around 8 weeks to buy a house in Scotland, whilst in England and Wales, it can take around 12 weeks. Keep in mind that buying a house with cash may shorten the process again, meaning it shouldn’t take a cash buyer too long to get through a property purchase in Scotland unless they encounter delays.
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. They will typically hear from the lender a month after sending their application and will then be put through a number of checks before being accepted. A cash buyer should 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. However, it is recommended that these are arranged regardless.
- Less risk of the sale falling through - A buyer can be declined by their mortgage lender, potentially halting the sale. Some sellers will also grow impatient and thus reject the offer, searching for a new potential buyer.
- 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 should be involved and so there’s no worry of the house being repossessed further down the line. You will not have to be concerned about monthly mortgage repayments, even if money becomes tight in the future.
- It can save the buyer money - Cash buyers won’t have to pay interest on any large loans, meaning they will be paying less money for the home in the long-run. All mortgage-related fees will also be eliminated.
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 will be required to conduct property surveys and conveyancing searches. Whilst they may seem costly and time-consuming, they can be very beneficial to property buyers. 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 - Property purchases are extremely expensive. It’s a lot of money to save and spend at once so you have to be absolutely certain that you can afford the transaction. You will need to accurately budget your money and ensure you can afford daily living costs.
- There could be something wrong with the home - Some properties will be marketed as ‘cash buyers only’ for serious reasons. It could be severely damaged, be made of unconventional building materials, be extremely small in size or even be considered unmortgageable.
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Can You Save on Conveyancing Fees if You are a Cash Buyer?
Technically, yes cash buyers can save on conveyancing fees when purchasing a property. However, the reason for this is that some factors in the conveyancing process will be optional for cash buyers and so it’s vital you think carefully before proceeding.
As previously mentioned, mortgage buyers will be required to pay for a particular property and land searches to highlight any issues regarding planning permissions, building control permissions, contaminated land and more. These conveyancing searches will be optional for cash buyers.
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. If a problem is found and you continue with the transaction, you can then work on remedying said problem to increase the property’s value over time.
As a cash buyer, you will still be saving money by not having to apply for a mortgage. With this in mind, it would be wise to view the different searches on offer so that you can consider using the money you would’ve spent on a mortgage on these reports instead.
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 get to know the home as a mortgage lender would. There are 2 main ways that you can do this:
Conduct Property Searches
When applying for a mortgage, a mortgage lender will want to ensure the home is a worthy and safe investment 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. However, you will be investing in the property just as much as a lender would, so it’s worth researching the home before completing the transaction.
Your conveyancer or conveyancing solicitor will likely organise these searches as part of the legal process. But it’s still vital that you read the reports thoroughly and ensure all the vital checks are arranged. 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, the boundaries of the land and more.
It’s also worth asking the estate agent or seller questions when 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 ask the developer further questions and enquire about the 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 highly recommended you arrange one regardless. A property surveyor will assess the building and its structure. The report will uncover any and all major damage and will highlight signs of damp and subsidence. Whilst a homebuyers report is the most common survey type, there is also the option of a building survey which will provide a much more thorough inspection.
Whilst you may think ignoring the need for a property survey could save you money, in the long-run, it could actually do the very opposite. Repairing structural issues can cost you thousands. However, if it’s flagged early on, you can either ask to reduce the asking price by the cost of the repairs, or you could simply decide the property is not worth investing in at all and walk away from the sale.
How to Find Cash Buyer Only Properties
Both Rightmove and Zoopla are helpful property websites when searching for cash-only properties. The listing should openly state if the home is open to cash buyers only, but if it’s not immediately obvious, you will be made aware after making an inquiry.
Zoopla and Rightmove will also both have different tools to make use of when searching for a new home. Rightmove listings, in particular, will often show you the last 3 sales on the same street as the property listed to help you compare prices.
Whilst these websites are the most well-known and are often thought of as the most reliable, there are also other property portals to consider. A rising competitor is currently OnTheMarket, which was launched in 2015. This portal could be another good resource should you be searching for cash-only purchases still.
However, it’s important to note that online property portals are not estate agents. They are simply a means to advertise properties. After making an enquiry, don’t forget to arrange a viewing and to ask the estate agent as many questions as possible.
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.