Losing out to "cash buyers"

Arciphel

Hi guys, looking for some advice. Just lost out on our third property in a row due to a lower offer from a "cash buyer". For context, we are selling our 3 bed semi (almost sale agreed) and looking to move into a 4 bed detached in same area. Would be financing new house with a mixture of savings and proceeds from sale of current house.

Last three houses we have bid on, we have made a higher bid - but vendor has gone with a lower bid from a cash buyer who does not have a property to sell, or isn't waiting for mortgage drawdown.

Last EA I dealt with told me that my bid would be to be "significantly higher" than a cash buyers, and tried to get me to up my bid even though the property was already sale agreed at that point (presumably to have a higher fall back bid in case the preferred buyer pulled out).

Anybody else have any experience of this, or have a good strategies to get around it?

neris

Are the properties your bidding on ex rental/investment properties? A seller would probably be happier to have made a decent enough return to get the guarantee of a payment and loose out on a few quid. Fear of a falling market knocks seller confidence aswell to grab what they can

Arciphel

Nope they are all owner-occupied homes, 4 bed detached and the like.

looksee

I don't know if they still exist, but you used be able to get a 'bridging loan' - a high interest very short term loan to carry over for the situation you are in.

I just did a quick google and apparently they are still available. They are expensive, been there, done that, got caught years ago in a different financial climate and was stuck for 18 months paying off a bridging loan before the buyer's (the only buyer) mortgage was released.

awec

There are no strategies unfortunately.

You need to outbid them, and outbid them by a large enough amount that the vendor is willing to give up the ease and security of a cash buyer.

DownByTheGarden

IF you had your own house at leats sale agreed you would be in a much better position. I know a few people who have had to knock their buyers on the head because they couldnt sell their own houses. The people I know just had to move on and all went for cash buyers in the end because they didnt want to have to repeat the experience.

Royale with Cheese

You've actually got two disadvantages there compared to a cash buyer there, you're in a chain as well as relying on a mortgage. Anything goes wrong with either your finance or the finance of whoever is buying your house and it falls through. Given the uncertainty around interest rates (and possibly declining prices) right now it would take a fairly large offer over a cash buyer for me to consider that. If I had made the decision to sell right now I'd want the property gone asap.

argolis

If I was selling and had the choice between a mortgaged buyer and a cash buyer bidding maybe 5k lower, I'd be tempted by the cash buyer as it's a lot less risk of falling through.

On the flip side, if I was buying and I was a cash buyer I wouldn't bid more than the highest bid... I would check with the agent if the highest bidder is mortgaged and I would offer 5 - 10k less in cash for the same reason.

If you as the buyer are told the seller is going to go with the lower offer, you've got to make a better offer to overcome the price of the risk, it's that simple. I'm moving house at the moment, I arranged to get mortgage approval on the basis of "keeping" our existing house so that I could have a stronger bid when buying. Still selling the current house but we're not officially in a chain for the purchasing side of things which helped. I appreciate not everyone is in a position to do this, I'm just making the point that you do what you can to make your bid as strong as possible.

looksee

If I was selling and had the choice between a mortgaged buyer and a cash buyer bidding maybe 5k lower, I'd be tempted by the cash buyer as it's a lot less risk of falling through.

Was in that exact situation a couple of years ago, and I did just that, sold for 5k less to the cash buyer. And even at that got a very good price.

Dante

Could cash buyers be the likes of investment/pension funds?

ELM327

This is nothing new, we were up against it too.

Bargain_Hound

We sold our 3-bed to a cash buyer. Not an investment fund, just an elderly couple looking to downsize into something newer. I also know a couple who sold up for a decent price and took the risk moving back with parents until they found their next house so they were not in a position of being in a chain. They had the finance ready to go (inclusive of the profits from their sale) putting them in a better position to buy (Risky though)

Selling to a cash buyer is very straight forward as a seller, but unfortunately makes it difficult for those in chain or depending on finance approval.

Kurooi

Pretty much what you say it is, EA is trying to get more money out of you.

Gumbo

https://www.boards.ie/discussion/comment/119848579#Comment_119848579

They don’t tend to get involved in small individual dwellings.

Gumbo

https://www.boards.ie/discussion/comment/119848628#Comment_119848628

Any evidence of this? For an EA to risk a €10k offer for €100 is very foolish.

Bargain_Hound

https://www.boards.ie/discussion/comment/119848653#Comment_119848653

I'm not sure I would agree with that. 5 properties (15 years old) in our small estate have recently all been bought, in separate private sales, by investment companies and leased back to council.

And a friend sold to an investment company (30 year old property) last year. Very straight forward to deal with.

Gumbo

https://www.boards.ie/discussion/comment/119848671#Comment_119848671

Everyday a school day.

I haven’t seen it happen yet but my experience is them buying large apartment schemes here in Dublin.

Seems risky for individual units.

Dante

https://www.boards.ie/discussion/comment/119848653#Comment_119848653

I have heard many instances of this happening recently.

Here is just one example from last month https://www.businesspost.ie/news-focus/the-e1-7m-starter-home-how-investment-funds-are-inflating-prices-in-dublin-suburbs/

https://www.boards.ie/discussion/comment/119848628#Comment_119848628

And yet the op is losing out to the cash buyer, so it would seem obvious to most that the only way to incentivise the seller to sell to the op would be to offer well above a cash offer. Which is what the EA said.

Gumbo

https://www.boards.ie/discussion/comment/119848899#Comment_119848899

Yes. Mass purchasing I have heard of. Just not one single house here and there I haven’t.

Toots

https://www.boards.ie/discussion/comment/119848621#Comment_119848621

We moved out of our apartment a couple of years ago and rented it out so we could buy without being in a chain. Apartment was still in negative equity so the sale would have been very long and drawn out, which would have been a mark against us as buyers, in addition to being in a chain. Luckily my parents had the room to take me, my husband and my 2 kids.

When we managed to sell the apartment earlier this year (tenants bought their own place so figured we'd take the opportunity to get rid of it) and we went with a cash buyer who had bid 5k lower than the highest bidder because the highest bidder was using a mortgage and the cash buyer could close the deal faster. By that stage our tenants had already moved out so we were paying 2 mortgages, and it was literally a case of "time is money" as any delays with the bank or life insurance or any of the associated issues that often crop up with mortgages would have cost us thousands.

OP you'd be in a much better position if you were sale agreed on your own house. A relative of mine bought a house over the summer, while selling their old house and encountered a couple of situations where EAs told them they were wasting their time offering if they hadn't got a buyer lined up for their old place yet.

Kurooi

https://www.boards.ie/discussion/comment/119849150#Comment_119849150

Bidding more makes your bid more attractive? I've never thought of that. Truly you are on to something.

walterking

https://www.boards.ie/discussion/comment/119848579#Comment_119848579

yes, I bought a property (holiday home) for my pension fund a few years ago and I was in effect a "cash" buyer. You look like you are almost a cash buyer. The phrase "cash buyer" just means you are not dependent on a mortgage being drawn down

One strategy the OP could look at is to find a place to rent short term after they have sold their house as as they are using the proceeds of the house with savings, they are then a "Cash buyer"

But at present you are a "hybrid cash buyer" in that you just need the current property to be sold and you are not dependent on a mortgage, so once you have a signed contract with a buyer of your house, you should approach sellers as a "cash buyer" and make it known that you do not require finance and maybe get your solicitor to confirm that a contract has been signed to sell your house and that you have funds in place to complete without requirement of finance.

https://www.boards.ie/discussion/comment/119850109#Comment_119850109

I appreciate that part is easy to understand, it’s the part where a buyer using finance has to be even more attractive when bidding against a cash buyer that you may be struggling with. This is why the EA explained to the op that he/she needs to bid a fair bit more than a cash buyer. As another poster explained to you, an extra 10k means €100 to the EA, they are not going to sweat over it, certainly not going to lose a sale over it, but 10k may be enough to sway the seller.

riclad

if you are bidding on 4 bed homes you are likely to get outbid by cash buyers ,the no of 4 bed units on the market is tiny, people are worried about a recession thats predicted or house prices falling ,they want to sell as soon as possible ,maybe look at 3 bed houses with a garden thats big enough to build a 1 bed extension in the future

herbalplants

Yes, i did this. Sold our home and cashed in order to give me an advantage while looking for a new home without being in a chain.

We are lucky in the fact we have another house where we can live while we are looking for new home.

jrosen

Your just the less attractive option when selling a house. In my experience banks/brokers/solicitors can all drag their heels and make the sale process so much longer than it needs to be. So when someone comes along and they have the money ready to go its a no brainer for the seller if they can make the same money or not far off it.

You would be better to be sale agreed, even if your buyer was a cash buyer or at least not in a chain you could make that known to the EA so pass on to the seller.

Arciphel

Thanks to everyone that has taken the time to comment, some great points and I appreciate everyone who took the time to chime in.

Would you believe in the last few hours the EA has actually called me back and said the seller is mulling over my higher offer and they will come back to me before the weekend.

My initial suspicion is that the other "cash buyer" maybe wasn't as liquid as they said they were, or maybe they got spooked by the state of the economy of something like that (or maybe their job is a bit tenuous, hopefully not as I wouldn't wish that on anyone) but in any case I'm going to see how it pans out. For what it's worth, my offer was €10k higher than the other "cash buyer" and the asking price of the house was just over €500k.

herbalplants

https://www.boards.ie/discussion/comment/119857967#Comment_119857967

Delighted, hope that works for you. What is meant for you, won't pass you.

Arciphel

We have gone sale agreed at our original offer price... not at the €10k higher bid. Just one data point but I think market is cooling down coming into the end of the year, what will happen next year is anyone's guess however.

Graces7

https://www.boards.ie/discussion/comment/119848391#Comment_119848391

A bridging loan worked for me way back.. As soon as the sale went through I cleared it- but my new house was in a much less expensive area.

Browney7

https://www.boards.ie/discussion/comment/119849212#Comment_119849212

The currency had a good piece on this a while back (behind paywall): https://thecurrency.news/articles/44909/your-new-neighbour-is-jp-morgan-why-global-capital-is-piling-into-irish-social-housing/

One quote alluding to DCC's practices in the recent past: "Kenny has seen the long term leasing market change and grow in the recent years. Where before it was smaller players coming to them with portfolios of older homes, now it's institutional money buying newly built stuff".

Article is focussed on institutionals and new large schemes but does outline how individual older properties haven't been immune from purchase