How to compete with a cash buyer

How to compete with a cash buyer

Making an offer on a house is exciting – especially if you are a first-time buyer – but also fraught with complications. One of the challenges might be when you are competing with a cash buyer – someone who doesn’t need to sell a property first or rely on a mortgage to fund their purchase.

At a glance - how to compete with a cash buyer

Why might a seller prefer a cash buyer?

Property sellers often prefer cash buyers because they offer a faster, more secure path to a sale. Cash buyers do not require a mortgage, and are chain-free – they are not dependent on the sale of a property to facilitate their purchase. Mortgage approvals, surveys and conveyancing slow things down, especially in long chains.

If you have a mortgage, can you compete with a cash buyer?

Yes, it is possible to compete with a cash buyer, even if you need a mortgage and you’re in a property chain. This is because a cash buyer is more likely to make a lower offer to a seller, on the understanding that they can agree a quicker sale. Sellers might still be swayed by an offer that is closer to the asking price, even if they have to wait a bit longer for the sale, and are willing to accept the uncertainties of a chain.

How to make your offer more attractive to a seller

There are some things you can do to compete with a cash buyer.

Get a mortgage in principle

You can speed up your mortgage process by securing an ‘agreement in principle’. This is when a lender has confirmed the amount that they are prepared to lend to you, after doing some basic checks of your income, spending and financial commitments. While you will still need to make a formal mortgage application, this happens after your offer has been accepted.

Be able to proceed

If you are in a chain, it’s important that you are able to proceed, especially if you are in competition with a cash buyer. So if you are selling at the same time, you need to have accepted an offer on your property. This will convince your seller that you are serious about buying, and give you some leverage.

Consider your position in the property chain

It helps if the chain you are in is small – and you are near the bottom of it. The longer the property chain, and the closer to the top of it you are, the more insecure your position. You are going to be more dependent on things beyond your control. Large chains collapse easily, and cash buyers know this. The strain of the chain can be used to their advantage.

Be flexible on timescales

Cash buyers have speed as one of their key assets. If you can be agile and agree to a seller’s exchange and completion dates, this will help you compete with a cash buyer. This may mean negotiating with your buyer, too. All parties within a chain will have to agree on an accelerated timescale, including solicitors and third parties (such as surveyors).

How to negotiate the house price

How much should you offer?

There are no hard and fast rules, but if you are competing with a cash buyer, it is generally accepted that you should try to offer up to 5% more. The estate agent will be able to advise on what price a seller is looking for, but may not tell you what the cash buyer has offered.

Should you offer more than the asking price?

Yes, you can go above the asking price. If you find yourself in a ‘bidding war’ with the cash buyer, that may be what you need to do to get your offer accepted. But don’t go beyond your budget, how much the property is realistically worth or what your mortgage lender has agreed you can borrow.

When should you negotiate on price?

If the property has not sold for a number of months, that is a good opportunity to make a lower offer than you might otherwise have done.

Is the highest offer always the best offer for a seller?

No. The reality is that even if you make a higher offer than a cash buyer, the seller may feel that a cash buyer represents a more secure and quicker sale. But not all sellers are the same – some might be prepared to wait to get the higher price.

What happens if a seller accepts a cash buyer's offer?

The property is taken off the market, a memorandum of sale is issued and the seller instructs their solicitor. An exchange date is usually agreed quickly between the buyer and seller.

Frequently asked questions

Can a cash buyer always beat a mortgage buyer?

No. Cash buyers sometimes expect a discount so often make lower offers than the asking price. Buyers with a mortgage can outbid them.

Do sellers always prefer cash buyers?

No. Sellers like cash buyers because of the better chances of a quick sale, but that isn’t always what sellers are looking for.

Can I negotiate a house price if there is a cash buyer?

Yes, sellers are always open to negotiation, especially if they have struggled to find a buyer.

Can I compete with a cash buyer by offering more?

Yes, cash buyers traditionally make lower offers, so buyers in a chain and with a mortgage are in a good position to have a higher offer accepted.

Find your next home with haart

If you are interested in buying a property contact your local haart branch today.