In the housing market, the cash buyer is king, and most sellers would prefer to sell to a person buying in cash as they appear to give the advantage of a quick sale. But with all parties under time pressures to complete the transaction it is not uncommon for cash buyers to look at what options they may have to shorten the conveyancing process in order to “get the deal done”. However, we explain why this is actually a very bad idea…
What is a cash buyer?
A cash buyer doesn’t mean someone with a suitcase of cash – they will have to make a bank transfer and comply with money laundering rules just like any other purchaser. The term ‘cash buyer’ can stem from a number of scenarios:
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- The buyer has enough money in the bank that they do not need to get a loan or mortgage to fund a property purchase
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- They have re-mortgaged to gain access to more cash but are not planning on selling their existing property (usually for investment properties or holiday homes)
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- They have enough equity in their current property that they do not need a mortgage when buying the next one(often the case when people downsize)
If you are a seller and your estate agent tells you they have an offer from a cash buyer, it is important to assert what type of cash buyer they actually are. The advantage of a cash buyer with nothing to sell who will not be delayed by a property chain is obviously greater than one who will not need a mortgage but will still need to sell their property.
What is the process for buying a residential property as a cash buyer?
While the length of time to complete on a property when buying in cash can be shorter than those buyers who have to apply for a mortgage, the actual process isn’t that different. Cash buyers will still have to instruct a conveyancer to handle many aspects of a purchase including:
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- obtaining the contract pack and explaining it
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- liaising with the seller’s conveyancer
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- property searches, queries and checks
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- manage the transfer of monies
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- exchanging contracts
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- preparing a draft transfer deed and completion statement
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- sending stamp duty to HMRC
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- registering the property in their name at the Land Registry.
Are conveyancing searches necessary?
Technically, as a cash buyer, you can choose whether to get property searches carried out on the property you are buying, including the local authority search, water and drainage search and environmental search. However, these are dangerous corners to cut, and it is worth noting there is not a single mortgage lender who would take the same risk.
Mortgage lenders perform many checks to ensure they have all the necessary information about a property before they lend the money for a property purchase. Cash buyers should consider the same risk assessments as a lender by allowing their conveyancer to do the relevant property searches.
Whilst the contract papers and title deeds received from the sellers’ solicitors will reveal information about the property, were buyers to rely solely on these documents and not request searches, they would have an incomplete picture of a property. The standard conveyancing principle is called “caveat emptor” or “buyer beware” which means that a buyer is expected to undertake searches and investigations on a property to enable them to acquire a good and marketable title.
It is the duty of a conveyancer to ensure that the property being purchased by their client does not have foreseeable problems with the title, which might mean that the property is worth less than anticipated and might be difficult to sell in future. Conveyancers are under an obligation to provide competent advice to their clients in relation to a transaction and at THP Solicitors we feel it is our professional responsibility to recommend that these searches are conducted.
Opting not to get a searches done might seem like a money and time saver, but it could end up being a costly mistake if any hidden costly surprises are not discovered until after the property purchase is completed.
Ultimately, searches help buyers make a completely informed decision about the property they are about to purchase. They are designed to protect the buyer and the buyers’ finances. If you are a cash buyer you are in a prime position, but don’t compromise this by cutting out the searches. They will only set you back a few hundred pounds but the consequences of not having them could potentially cost you thousands.
How we can help
THP Solicitors residential property team is one of the largest in the Thames Valley and we are members of the Law Society’s Conveyancing Quality Scheme. If you would like advice on buying or selling a property, please contact us on email ResidentialQueries@THPSolicitors.co.uk