We get a lot of questions from investors who are buying a house with cash. What are the steps to buying with cash? And what are the advantages to being a cash buyer?
Steps in buying a House with Cash
The first step in buying a house with cash is to ensure that you have all your funds in place. If you’re making a cash offer and want to be competitive, having a letter from the bank to confirm that you have the cash on hand is a good idea. It’s safer to give a proof-of-funds letter instead of a bank statement, which contains sensitive information. When this has been completed, it’s time to make an offer on the home you love. After the cash offer, put contract contingencies in your cash offer to protect yourself in the deal.
After that, find a conveyancer or property solicitor to help you with searches, contracts, dealing with the Land Registry, and stamp duty. If there are no issues or delays, you should be able to sign the contract and finalise the transaction. Check the contract with your lawyer before signing it to ensure that all the details are proper. Make sure you’re satisfied with what the sellers agreed to leave in the house and that all your questions have been answered. If you’re buying a house with cash, you won’t need a mortgage valuation survey, which can save you time and money.
Benefits of buying a house with cash
The process is quicker.
Another advantage of selling a house for cash is that property sales are frequently considerably faster and more straightforward when a cash buyer is involved. If a person needs to get a mortgage or a loan from a bank, they can expect to wait around 2 weeks to a month from the time they apply
It’s less likely that the deal will fall through – The mortgage application process can be problematic, ranging from being rejected down by the lender to taking far too long. The sale is more likely to go through if the bank is taken out of the picture.
Less stressful – The buyer does not need to be concerned about the mortgage process, and the seller is confident that the buyer will be able to raise the funds.
You’re attempting to entice buyers – Cash buyers are more appealing to sellers than buyers who use a mortgage. This not only increases your chances of getting the house you want, but it also puts you in a strong negotiating position: because selling a house to cash buyers is often quicker, secure, and simpler than trying to sell to someone who wants a mortgage, you’re much more likely to get a reduced-asking-price offer accepted.
Money is saved – You’ll spend less on the home in the long run because you won’t be paying interest on a large loan. You’ll also save money by not having to go through the mortgage application procedure.
In the long run, there is more security – You own the property from the beginning as a cash buyer. You won’t have to worry about falling behind on your mortgage payments if you run into financial difficulties later, and you’ll always have a roof over your head until you decide to sell it, no matter how bad things get.
Drawbacks of buying a house with cash
Liquidity shortage – It’s a significant sum of money to spend. Make sure you’ve budgeted appropriately to ensure you can afford it in addition to your living expenses.
Lack of flexibility – Even if you have the funds, having too much of your money linked to one purchase may limit your alternatives down the road. It may also make it more difficult to sell later, as you’ll need to make sure you have enough money to cover the deposit on your next place.
Lack of checks – While the surveys and inspections required by the mortgage lender may appear time consuming and costly, failing to do so can put you in a perilous situation.
Faults with the house – Occasionally, properties are advertised with the phrase “cash buyers only.” This may raise some eyebrows because it could suggest that there is a problem with the property, making it difficult or impossible to obtain a mortgage. There could be structural difficulties such as subsidence or fire damage, for example. As a result, if you’re a cash buyer, it’s critical to pay for a house survey so that any flaws can be identified.