A staggering 71 per cent of buyers in prime central London chose to buy property using cash this year, according to research by the estate agency Savills.
Even outside London, cash buyers accounted for a record 46 per cent of all purchases in January 2023, according to the estate agency Hamptons.
Despite the Bank of England’s base rate of interest being held at 5.25 per cent in September — the first month the Bank has not raised the base rate since December 2021 — the higher-rate environment is deterring many buyers from taking out a loan, but those with the ability to purchase outright are still doing so.
At my property-buying agency, Black Brick, we have seen a similar trend. Last year around a third of our deals were cash. So far this year that number has risen to 57 per cent.
Being a cash buyer in this market is an advantage. It can help you to negotiate a lower price and win competitive bids.
Vendors often prefer a cash buyer over one that needs finance, as they will be able to transact faster and aren’t reliant on a bank’s valuation. But if you are relying on financing your next home, then how do you beat a cash buyer?
My first piece of advice is to be organised. Hire a credible solicitor, ideally one that is used to conveyancing in the area or development you are buying in. This gives comfort to the selling agent and vendor that the deal won’t be let down by a poorly performing lawyer.
Submit your offer in writing. Your offer letter should state the amount you are offering, who your lawyer is, who the lender is, the amount you are borrowing and your time frame for exchanging contracts and completion. Ask your bank or mortgage broker for a supporting letter to add weight to your offer.
If you are in competition on a property and up against a cash buyer, consider offering a bit more than the cash buyer if you can. Bear in mind there will be a bank valuation, so you don’t want to go overboard here, but this could help to swing things your way.
Be on good terms with the selling agent. They are more likely to recommend that their client accepts your offer if you can build a good rapport with them.
Hire a buying agent. This may sound like a sales pitch, but it’s certainly true that estate agents will often prefer our offers over offers coming from unrepresented buyers who they don’t know, even if those buyers are cash.
Estate agents know that we, like other buying agents, represent serious, committed and organised buyers who have also passed anti-money-laundering checks. An unrepresented buyer they have no relationship with is a higher risk option even if they are a cash buyer.
Be persistent. Even if you lose out to a cash buyer, keep track of the property until it exchanges contracts. As buying agents, we have lost out at times to other buyers willing to pay more for a property, only for the buyer to withdraw, allowing us to swiftly move back in and purchase the property at a lower price.
Remember that it’s not always about the pounds and pence. Money isn’t the only concern for sellers, particularly those who have lived in their home for many years. They may also be concerned about who the buyer is, and whether they are handing their home over to someone they believe will look after it going forward. Be human. Talk to the owner, tell them you love their home and why you want to buy it. It will make a huge difference.