Cash: money in coins or notes, as distinct from cheques, money orders, or credit.
You may have come across the term “cash buyer” when buying and selling property. You have more than likely seen “cash buyers only” when browsing homes on property portals like Rightmove and Zoopla. But what exactly is a cash buyer?
A cash buyer is someone who can buy a property without the need for a mortgage and doesn’t have to rely on the sale of their house through a property chain. They buy the entire property with cash and therefore don’t need to go through regular processes like waiting for another property sale to complete or getting funds from a mortgage lender.
So why all the hoo-ha around cash buyers? Being a cash buyer in the property market comes with many advantages, yet there’s still a lack of clarity about what being a cash buyer entails, especially in the UK property market.
In this guide, we’re breaking down everything involved with being a cash buyer in the UK, including what you need to do to be a cash buyer.
How common are cash buyers?
In 2018, around 30% of people who purchased a property in the UK were classed as “cash buyers”, with the overall number varying by region: West Somerset, for example, was responsible for more than 60% of cash buyers. It was the South West, however, that accounted for the majority of cash buyers with 37%. Wales was second with 35%, while London had the smallest number of cash buyers with 21%.
Cash buyers are probably more common than you think and are often investors or people who have just sold their home but haven’t moved as part of a chain. They also might be using an iBuyer (more on that in a bit), which has enabled them to buy their home outright.
What is a “cash buyer only”?
Remember those “cash buyer only” property listings you’ve come across? Well, you might be wondering why you see them when browsing property portals like Rightmove and Zoopla. Cash buyers are typically advertised when a property is deemed unmortgageable.
An unmortgageable offers a chance to buy a property that isn’t usually available to buyers with mortgages. These houses are great renovation opportunities, where you can fix them up and sell them on at a significant profit.
Advantages of being a cash buyer
Being a cash buyer has several advantages that aren’t only limited to unmortgage properties. You can buy any type of home as a cash buyer, and speed sits nicely near the top of the list of benefits. Houses bought without a mortgage or that aren’t part of a chain often complete faster – and the overall process tends to be much smoother.
Sales that are part of a chain can be particularly frustrating, as the process is essentially taken out of your hand. Not only can the chain breaking cause you to lose out on your dream home – but it can also be costly, with the average buyer losing just shy of £3,000.
There are occasions where cash buyers can also purchase their home at a slightly cheaper price (between 2-4%), with vendors keen to accept a cash offer as it comes with fewer complications. This gives the cash buyer more power in the market, which can result in up to five percent off the initial property price.
How do cash offers differ from traditional house-buying practices?
As mentioned in the section above, speed is the key driver when someone is buying with cash. The process is typically faster, as there is no mortgage application. This means there are fewer documents and no need for an underwriter.
Being a cash buyer means you will still need to go through regular property checks, such as hiring a surveyor, and you will need to prove your proof of funds. Cash-only offers can still break down, but the chances are much smaller because both the buyer and the seller eliminate certain aspects, such as mortgages and chains.
How to be a cash buyer
Having the flexibility to buy your next home chain-free is great, but it’s not all plain sailing. For starters, you need to have the cash. In the world of buying bricks and mortar, the amount you need can be significant – with the average house price in the UK currently around £235,000.
Unless you have a Scrooge McDuck-like money pit to swim in, coming up with the required funds to purchase a house with cash isn’t easy. However, there are ways to buy your next home with cash and without a chain that won’t require you to rob a bank (please don’t rob a bank).
There are other ways, however. iBuying sees a real estate company purchase your home directly, giving you access to its full worth instantly. This allows you to become a cash buyer and search the market for a new home with more flexibility and less hassle.