Is It Better to Be a Cash Buyer in Property?

If you are in the market for buying a new property and have the funds available, you may be thinking of doing so as a cash buyer. However, it’s important to understand there are pros and cons to being a cash buyer. To help decide therefore whether it is the right route towards buying property for you, we are going to highlight some of the advantages and disadvantages in the following post.

Advantages

Faster Process

Perhaps the biggest advantage of going down the route of buying a house as a cash buyer for you and the seller is it is quicker. Generally speaking, most home buyers, especially those going down the mortgage route have to wait to be approved for their application or are waiting to sell their current property, or maybe it’s both. These scenarios are what really slows down the process and are responsible for it taking as long as 6 months or even more to complete. When you are a cash buyer, you don’t have any of those worries – you have the funds already and don’t need to sell or need a mortgage before you can buy.

Securer Process

There are always risks when buying property. On average, around one in every three property sales fall through. Therefore, the more secure you can make the process, the better. It is often the case property sales fall through because of cash flow related issues and buyers not being able to secure the funds to finalise the sale. When you buy property as a cash buyer, though, these are obviously issuing you don’t need to worry about. It is also going to make the seller feel more comfortable selling to you because they know you have the funds available.

No Property Chain

A huge bug bares for anyone entering the property market, especially in England and Walers is the dreaded property chain. As well as making the whole process more complicated, it also increases the chances of the property purchase falling through, as any part of the chain could break at any time before the title deeds and contracts have been exchanged with signatures. When you buy with cash, you don’t need to worry about this because you cut out the middlemen from the process.

Disadvantages

Cash Is Tied Up

Although it’s fair to say this will not always be an issue if you’re a cash buyer, it’s important to be aware of the possibility. When you buy a house, it means the cash you have is no longer liquid and is therefore wrapped up in that house. To access that money again, after buying, you would need to put your new house on the market or sell it to a buyer. This could be a problem if you have gotten used to being able to access that money whenever you need it.

It also depends on the reason you are buying. If you are buying, for instance, to renovate and then sell it to another buyer, then the cash being wrapped up in the property is not likely to be a huge issue. However, if this is going to be a property you intend on living in, you need to make sure you have the funds to pay for the daily costs associated with living in it. It’s also not a wise idea to use all of the money you have to buy property because if anything else comes up and you really need some money, you will be stuck.

Chance of Your Offer Being Rejected

It’s fair to say most sellers are keen on cash buyers because it means they get access to the funds for the house they are selling sooner. As most cash buyers tend to put a lower offer than the asking price in because of the quickness and easiness of buying directly with cash, you may put yourself out of the running for the property, if the seller has already received a lot of interest from people willing to spend the asking price.

You need to take the time to review and discuss the pros and cons of being a cash buyer with your financial advisor or someone else you trust with experience in property buying and selling, before deciding if it’s right for you.