When someone is looking to purchase a home in the UK, one of the first tasks that they complete is getting approved by a lender. This approval gives them the ability to look for a house that falls within the loan they were pre-approved for.
Getting pre-approved can expedite certain obstacles that will come with putting an offer on a home. If this is already completed and a buyer has a letter certifying so from a lender, then the process of purchasing after an offer is accepted can continue.
Getting a loan pre-approved and being able to provide proof to a seller is often the quickest way to move through a home purchase. Finances are usually the biggest obstacle in buying a home.
However, there is one way to purchase that can move the process forward even more swiftly: being a cash buyer. In basic terms a property cash buyer is a person or company that does not need a mortgage to purchase your home. It may be because they have savings or because they have already sold their property and have received the proceeds.
Buying a house with cash forgoes all of the necessary and time-consuming steps that must be taken with getting approved for a loan. The average closing time for a house with a loan and mortgage is 4 months. For a cash buyer, the closing time can sometimes fall under 14 days.
This drop in completion time can be a huge motivator for sellers to move forward with a cash buyer. People are often in situations where they need to sell their home as quickly as possible. A quick sale also looks better if the deal falls through or if the home needs to be sold again.
Cash sales may not be as uncommon as you think. They typically account for almost 25% of single-family home or apartment sales each year and in 2018 that total was 38% of home sales.
Someone may be purchasing a home with cash for a variety of reasons. If the home is hot on the market and the buyer really wants it, cash is often the required way to go. A quick sale and closing time are enticing to a seller. Cash buys often occur if a company is interested in the property as an investment or if the property needs repairs and a profit can be made after fixing it up.
In traditional sales with a mortgage, many transactions fall through. This may be because the buyers do not get the mortgage and have been unable to secure a new one. Also buyer remorse is another common reason. With normal conveyancing periods, the buyer has a lot more time to regret his or her decision to buyer or indeed may find somewhere else they like more, leading to the buyer pulling out of the transaction.
This can also be the same with sellers who may change their minds or pull out because the sale is taking too long. The risks of the transaction collapsing are of course greater the longer the conveyancing period takes and also higher if there is a long chain involved.
If you are interested in making a cash offer on a house there are many benefits. Like mentioned before, it cuts down on closing time, but it also gives a seller more confidence in choosing you over other buyers (if you have a letter from your bank proving you have the funds). You are more in control of your home purchase because you do not have to follow the contingencies and requirements of a lender.
A cash buyer will often pay more money upfront, but they save a significant amount of time and money with paperwork, documentation, appraisals, and other contingencies. And when you are in the process of purchasing or selling a home, time and money are more valuable than anything.