Buying a property with Cash
As a homeowner you probably started out small some years ago and now, after slowly inching your way up the property ladder, you are finally in a position to buy a home for cash. What a relief it is to know that you will have no more worries about monthly home loan repayments! Being a cash buyer puts one in a position of strength, but you also have to be aware that there are some drawbacks to being a cash buyer. We look at some of the pros and cons of being a cash buyer, both from a buyer and seller’s perspective:
The benefits to a seller of having a cash buyer
- The whole process of buying and selling the particular property is faster for all parties.
- There are no contingencies such as applying for a bank loan on the buyer’s side which can delay the process by months until approval of the loan is granted.
- There’s far less risk of the transaction being cancelled due to a buyer being refused for a home loan by a bank or lending institution.
- There are huge savings due to the fact that there are no or less origination costs.
- Cash buyers are not making an offer on your property on condition that they sell their property first: they have the full amount that you may accept, available right now.
- If you are in need of money urgently, a cash buyer is the answer.
The disadvantages of dealing with a cash buyer
- Low offers on your property! If you are in a position where you do not have a lot to lose by accepting a low-ball offer, this won’t apply to you.
- Cash buyers may try and deduct repairs or improvements from the asking price due to their position of strength.
- As with any buyer, the deal can fall through at any time.
- Cash buyers do not only have more leverage, they also have more willing sellers prepared to come to an agreement sooner than later, so the competition to retain the buyer will be stiff.
- As a seller, you have no guarantee until you have signed the final contract and receive the money.
Risks to a cash buyer
- After purchasing the property, you may find some hidden issues with the property. Always remember, as a cash buyer you are at more risk than the seller.
- Property owners who will only consider cash offers may have something to hide, such as a property that will need considerable investment to upgrade or even regularise.
- Cash buyers may have peace of mind knowing they own the property after concluding the sale, but what if they need the money or part of it later down the line?
- If you as a cash buyer find yourself suddenly in the position of being “asset rich but money poor”, can you survive for some time?
- Always be sure that putting all your eggs in one basket is the right way to go.
Advantages for the cash buyer
- You own the property outright.
- You are in a strong position to negotiate a better deal and thus save thousands of euros.
- If you buy in an area that is up and coming, you stand a chance to make substantial profits on your investment.
- The deal will be quick and you will take ownership sooner, given everything goes according to plan.
Why are cash offers often a better alternative for sellers?
Cash buyers are the answer if you are in serious need of money sooner than later: the deal is usually closed quicker and there’s no waiting time for approval of home loans. The only drawback is that you may get offered less for your property.