Buying a house with cash puts you in a unique position.
Sellers will want to work with you because the deal is more likely to succeed than with non-cash buyers.
If you’ve never done this before, understanding how buying a house for cash works is essential before going ahead with it.
What is buying a house for cash?
When you use cash to buy a house, it means that you don’t need a mortgage to complete the purchase.
In other words, all the funds needed to buy it are already in your bank account.
You can’t use physical cash to buy a house. It is still electronically transferred, and you must comply with money laundering checks.
Several circumstances might cause you to buy a house for cash. We have outlined these below.
What causes someone to buy a house for cash?
Using cash to buy a house is often a great decision.
Saving money
By paying in cash, you avoid paying interest on a mortgage, as would otherwise be the case.
Inherited money
You might have inherited a huge amount of money in a Will.
Already have a property
You may have already sold your previous house and have been staying in rented accommodation or with a family member.
Sudden influx of cash
For example, you could have recently sold your business for a huge payout. Or perhaps you have won a large sum of cash in the lottery.
Organisations that buy houses for cash
You will often find large organisations that buy a house for cash.
These companies aim to buy a faulty property at below market value, renovate it, and then sell it for a profit.
What is the process of buying a house for cash?
Buying a house for cash is similar to any ‘typical’ house-buying method.
There are just fewer hurdles involved.
Step one: Agreeing a price
First, you need to agree an offer on a property. This is done in the usual way: verbalising your figure to the estate agent, who then relays it to the homeowner.
You then might negotiate on price to reach an agreement.
Step two: instruct a solicitor
You should next instruct a solicitor on your purchase.
Like with all house purchases, this is optional but highly recommended. They will then do the necessary checks – more on this below.
Step three: Show proof of funds
The estate agent will usually ask for proof of funds.
As a cash buyer, you’ll need to demonstrate the source of the funds to comply with money laundering regulations.
Step four: exchange contracts
Your last step is to exchange contracts and then transfer the funds. At this point, the sale will be completed, and the house will be bought in cash.
What steps can I avoid when buying a house in cash?
You will not need to contact a bank about borrowing money from them.
This can save you lots of time, as the process of applying for a mortgage usually takes several weeks.
You are also not legally required to get a survey completed on the house or for searches to be carried out.
However, it is highly recommended that you still do these things.
You aren’t forced to follow these steps because the bank usually makes lending money compulsory. But you aren’t tied to this since you aren’t borrowing money.
You can avoid a house chain altogether if you find a chain-free seller. Neither of you will rely on funds from elsewhere to complete the transaction.
Do I need a conveyancer to buy a house in cash?
Yes. It is highly recommended that you get a conveyancer to support you when buying a house in cash.
You shouldn’t attempt to handle conveyancing yourself without prior experience or expertise.
While conveyancing is generally quicker for a cash buyer, this doesn’t mean that it’s easier.
Many of the same processes apply. And you could also need to show proof of the source of your funds, which requires external expertise.
When does the seller receive funds from a cash buyer?
You will usually send all your money to your solicitor before completion day. Then, once completion day arrives, all these funds will be transferred to the seller.
Do I have mortgage payments when I buy a house in cash?
No. You don’t need a mortgage if you have all the funds up-front to buy the house.
You thus won’t have any mortgage payments. The only main reason this would happen is if you buy a house in cash and then take out a mortgage afterwards.
This is commonly known as ‘delayed financing’. It is a tool that some cash buyers utilise to grow their property portfolio.
