Cash buyer discount when buying property

MrThrifty

Out of interest, does anyone have a feel for the size of discount a cash buyer can expect these days when buying property? With the market the way it is and the banks airing on the conservative side when issuing mortgages, a cash buyer can often mean the difference between selling a property or not (in terms of the sale going fully through with no issues). So what kind of discount might sellers typically be prepared to give over the amount that they are prepared to accept from other buyers (in chains etc). Are we talking 5%, 10%, or even greater?

I know it might seem like I'm asking how long is piece of string, but I think it's fair enough to assume that the discount can be expressed as a percentage of what a non-cash buyer would offer for a property that the seller would accept. E.g. If a seller is happy to sell a property to buyer 1 who is in a chain for 200k, what % less might they be prepared to sell to buyer 2 who is a cash buyer?

Kosseegan

A lot depends on the condition of the property. There will be a greater discount for a fixer upper. A walk-in situate in a mature area would have a very small cash discount.

whippet

you have asked an impossible question really.

a cash buyer is no different in reality to someone who has the mortgage agreed with the bank and is in a position to offer, agree and proceed.

As for the discount this will depend on:

- Financial position of the sellers (regarding neg equity etc.) If they can't actually accept your offer as they can't pay the remaining neg equity. It just might not be possible.

- The seller's mindset and valuation .. some people are delusional some are realistic.

- The 'need' for the vendor to sell .. they might just be dipping their toes in the water to see what it might fetch. Get a good price they might then decide to sell or alternatively hold on.

- Length of time the property is on the market ... if it is new to the market they might hold out for a better offer, if it is there for a few years .... just accept to get out.

- are there any other offers? the sellers might want to weigh up the options of accepting a low 'cash' offer against the risker 'higher' offer of a buyer who is in the process of selling another property.


What I am trying to get at, there is no definitive answer to your question. If you are interested offer what you feel the property is worth. Decide yourself what your max buy price is and then decide on your strategy of getting the best price.

D3PO

personally speaking if I were selling you would get zero discount for being a cash buyer.

i couldnt care less if you won the money on the horses or if you get a mortgage it makes no difference to me where the money comes from. Theres no financial benefit to me from you buying in cash.

The only benefit as I see it is that it means your not relient on selling a property before closing, but then again that is no different to a first time buyer anyway.

zac8

Forget about buyers in a chain. Estate agents don't take these seriously and rightly so.

There is a big difference between cash buyers & those with mortgage approval.

A lot of sales fall through and that is often down to buyers having difficulty finalising their mortgage. If you find a house that has previously been sale agreed but now back on the market then that seller could very well entertain a larger discount for a cash buyer.

MrThrifty

zac8 wrote: »

Forget about buyers in a chain. Estate agents don't take these seriously and rightly so.

There is a big difference between cash buyers & those with mortgage approval.

A lot of sales fall through and that is often down to buyers having difficulty finalising their mortgage. If you find a house that has previously been sale agreed but now back on the market then that seller could very well entertain a larger discount for a cash buyer.

While I appreciate all the feedback, zac8's seems to be on the money in terms of understanding the situation out there. There are sales falling through left, right and centre all the time and I've even heard of cases where a bank had preapproved a couple but when they tried to proceed with buying a property, the bank asked for further info and changed their minds. Also have heard stories of banks not letting people go ahead and buy a particular property because they felt it was not a good 'investment'.

So cash is definitely king at the moment from what I see in the market. The question is, assuming a seller just wants to sell and can afford whatever loss is 'necessary' and the bank has no issue with them selling at whatever price, what percentage discount is reasonable for a cash buyer in return for peace of mind on the seller's side that it's all done and dusted. From what I can see, the majority of sellers out there seem to fall into this category.

I know I'll get responses along the lines of 'sure you can't put a price on peace of mind' etc. or that it varies from person to person, but I have a sense that actually you probably can. If you believe the general opinion of the media at the mo that prices will fall by 10 to 15% more, then maybe that sets a limit to the discount. I.e. why take more than a 15% cut in selling price now if that might be the most it will drop by anyway, plus there may be more buyers then with banks lending more etc.

mrgaa1

a cash buyer is only useful to someone, probably a developer, who is selling houses under pressure from their lending institute who would take some cash and drop the price a little. Otherwise cash is the same as a cheque when it comes to the transaction when going through a solicitor. Cash has to be declared

littleredspot

I've viewed houses (in need of lots of work) where the estate agent has said from the outset, that the seller is only talking to cash buyers.

DrPhilG

I just bought a property from a bank and they gave no thought to cash discount at all. They just said that mortgage approved is as good as cash and if you weren't mortgage approved they weren't even interested in a bid anyway.

kennyb3

D3PO wrote: »

personally speaking if I were selling you would get zero discount for being a cash buyer.

i couldnt care less if you won the money on the horses or if you get a mortgage it makes no difference to me where the money comes from. Theres no financial benefit to me from you buying in cash.

The only benefit as I see it is that it means your not relient on selling a property before closing, but then again that is no different to a first time buyer anyway.

Surely extra quick closure comes at a discount, giving the current monthly falls in house prices?

How many mortgage approved buyers have re-negotiated price 3 months after having an offer accepted?

Again though it does depend on circumstances and how reasonable the house is price. There seems to be a lot of owners out there chasing the market down and losing - some after sale agreeds have fallen through.

If i was a genuine seller looking to emigrate with no negative equity, i'd most certainly give a cash buyer a discount to get out quick with the rate houses are falling. The discount wouldn't be huge however - maybe a few percent, certainly not more than 2-3 months worth of falls in price.

Milk & Honey

D3PO wrote: »

personally speaking if I were selling you would get zero discount for being a cash buyer.

i couldnt care less if you won the money on the horses or if you get a mortgage it makes no difference to me where the money comes from. Theres no financial benefit to me from you buying in cash.

The only benefit as I see it is that it means your not relient on selling a property before closing, but then again that is no different to a first time buyer anyway.

You presumably want money though. The advantage of a cash buyer is certainty. You can take booking deposits and issue contracts only to wait weeks while " the buyer gets their preliminary mortgage approval confirmed". After several weeks the bank
A. thinks the house was overvalued and won't lend the full amount,
B. thinks the buyer is not earning enough and won't lend the full amount
C. thinks the house needs repair and wants to retain some of the loan until the work is done.
D isn't happy with the paperwork and keeps looking for more and more written confirmations of everything from planning permissions to surveyors professional indemnity insurance .

Eventually your sale breaks down and there is no money. How long to you want to go on iterating the above?

Victor

As above, I don't think its about cash -v- mortgage dependent -v- chain depenedent, its about how soon you expect the buyer to be able to give you that cash. In a failling market, that might be worth a small few per cent.

f9710145

We sold our house to someone who was mortgage approved, first time buyer, and it dragged out for ages. However, as we knew we were the only ones interested in the house we were buying we just took the line that if our sale eventually fell through and we had to start over at a lower price, then we'd just be putting a lower price on the one we wanted to buy, overall just saving in stamp duty. If we'd been through a deal falling through a couple of times then we might have considered a cash buyer at a lower price, but certainly not at the first run. Incidentally our purchase is also dragging out, again nothing to do with us, so the seller has had no problems or delays due to us being mortgage financed.