Are cash buyers not as sought after anymore?

[matt1986]

I’ve put in a couple of offers recently on properties where I’ve proven to the EAs that I’ve got sufficient funds and measures in place to buy for cash and complete quickly.

Property one:

2 Bed mid terraced house in need of some work, but mortgageable. Currently vacant, probate property. 

Advertised price £105k, likely value when works completed circa £120k. My first offer of £85k dismissed, and subsequently 87, 90, and final of 91.5k. Feedback was that the vendors holding out for £100k. Walked away from the deal. Didn’t excite me now.

 

Property two:

3 bed semi detatched house, in need of full renovation throughout. Bad electrics, full rewire required, polystyrene ceiling tiles, some questionable floor joists downstairs, obvious damp concerns, and barely useable kitchen. Another probate vacant property but in a very good area with strong growth.

Advertised price £170k, likely end value circa £210k but requires a lot of investment this one. For perspective an identical layout house in fair - good condition on the same street was sold STC within 5 days recently for 200k, I knocked the door and found out that agreed price was the full asking price and things appear to be progressing quickly.

I was keen for this one, so put in what I thought was a strong offer for cash of £155k, which was quite abruptly and rudely dismissed by the agent, who told me basically not to waste anyone’s time with anything less than the full asking price! The vendor in this instance seemingly not caring about where the money came from, and the property was marketed competitively. I told them politely if the vendor changed their mind then they could get back to me but we were obviously on different mindsets regarding value.

 

Property three:

Another mid terraced, this time a 3 bed. Looks largely a turn key investment opportunity, tidy, well maintained, with a small family looking to upsize to a little larger house with better parking and closer to preferred schools. Spoke direct with the vendors on this one at viewing, they have a house seen that they like, but waiting to receive an attractive offer on theirs before showing interest. We spoke about the possibility of renting back to them to afford them some leverage in their purchase, they seemed interested.

Advertised price £140k. Bang on valuation in my book, and needing only a bit of paint and perhaps new carpets before rental. I knew I wasn’t going to get anything hugely exciting in the way of BMV due to the market and their finances for their next house, but thought a cash offer would provoke some interest in a discount, and for me the property would cash flow nicely and quickly from good rentals on this street. Offer in of £120k, rejected (expected, just giving myself room), usual EA feedback talk of a possible grand or two off taken with a pinch of salt, second offer up to 125 (more realistic I thought), then 127 after a few days, then found out that property sold to another buyer (figures not disclosed), who was part of a chain.... oh well, told them if it fell through to get in touch.

 

So is it just the market boom right now? Am I being unrealistic with my offers expecting too much bellow market value? Have I just not come across a suitably motivated seller yet? Or is it possibly a combination of the above?

I’ll happily admit I’m quite new to this, maybe I naively expected being a cash buyer to open the doors (forgive the pun) to better deals, and make a BRR... strategy stretched out more realistic. But right now I feel that showing agents proof of cash in the bank (in as least arrogant way possible) isn’t really much incentive for anyone I’m coming across. Furthermore I feel like I’m p***ing agents off (Property two particularly gave me that impression!) and short of building rapport with them I’m losing credibility and being seen as a time waster.

I’m eager to expand my portfolio, but I’m not desperate, so maybe I need to return when it’s not such a seller’s market. Bit of a confidence knock though, I’ll gingerly admit.

[nicholas_b]

Realistically the market in many places mean people are getting the price or near the price they're asking for.

A cash buyer doesn't hold that much sway because mortgage offers dont take that long, in the scheme of things, to come back, so vendors are willing to wait a few weeks if it means getting 10/15k more.

With general conveyancing the process takes a similar amount of time whether it's a cash buyer or mortgage so it doesn't really make a difference I dont think.

[haf1963]

Yup - I am also finding being a cash buyer doesn't seem to make much difference in negotiating a bmv price - a lot, no doubt, to do with the 'booming' market. Though its also true that buying cash doesn't make much difference to the timescales and I have often bought 'cash' but had plenty of time to get a mortgage while the deal was going through - I suspect I am not alone here

[EvolutionBlogger]

90% of sellers only care about price. 

Also, a lot of buyers show proof of funds, and then go ahead and use a mortgage anyway 

 

[matt1986]

Seems I'm not alone then, would have thought simply buying chain free would be worth something in its own right also though, but again, maybe a sign of how buoyant the market is.

Would anyone care to critique my approach to submitting offers though? As an investor, I'm obviously looking to buy below market value to some extent, and I hear of people sometimes submitting offers of 25-30% below the marketed price, I've never started anything like that low, often somewhere between 10-20% as a start depending on my enthusiasm to get the deal, however I've been getting a very cold vibe off agents when doing this, almost as a shock that I'm not offering the full asking price or close to it. I'm being fully transparent when I'm enquiring, explaining that I'm investing, and ultimately looking for a deal that works financially. They're most accommodating when trying to sell the property, yet seem borderline insulted and/or annoyed when an offer comes in that allows for a discount on the market value! Whilst I appreciate that's the name of the game, and they're working for the seller not the buyer, I don't want to be burning bridges with these agents, or having them see me as 'that guy again'.

[EvolutionBlogger]

I wouldn't worry about burning bridges with agents. Most of these guys are in their early 20s and will forget what you look like, this time next week 

These agents want to close a deal and move on. They are under a lot of pressure to do that. Your offer of 20% under market won't help them 

There is nothing wrong with making low offers, but it depends what properties you're looking at. For prime city centre properties, then low offers won't work. If the property an ex local in Sunderland, the agent would bite your hand off, for an offer at 20% under market 

And as I said, I don't think cash offers really matter any more

[matt1986]

Fair comments, thankyou for your thoughts.

[haf1963]

or you could try your local auction as I have had some success there in the past - a bit more risk and need a bit of luck but do-able as a cash buyer

[EvolutionBlogger]

16 minutes ago, haf1963 said:

or you could try your local auction as I have had some success there in the past - a bit more risk and need a bit of luck but do-able as a cash buyer

Good idea. Auctions are basically for cash buyers 

[matt1986]

Thanks. Yes, auctions are on my radar going forward, been doing quite a bit of research on how they work, and the things to look out for.

I hope to visit an auction house post pandemic, and get a feel for the place before going in with bidding in mind. 

[EvolutionBlogger]

There is one area where you can make a killing as a cash buyer. Leasehold properties with cladding, that are unmortgageable

If you're willing to take some risk, then you can get huge discounts. This cladding issue won't be around forever

[matt1986]

Leaseholds really aren’t my bag personally, doesn’t necessarily mean they won’t be in the future ofcourse.

Trying to keep my focus on regular single let houses in this early stage for simplicity sake, and it’s the bulk of property in the area I’m investing.

Definitely interested in unmortgageable houses though. I thought property two would have been a stretch to get a mortgage on in its current condition. 

[CH_]

I'm not sure a cash offer is particularly appealing to a vendor and certainly not worth them selling thousands cheaper. The fact that the buyer isn't in a chain probably would be appealing. Generally if you can supply proof of funds for deposit and some sort of proof that you are OK for a mortgage in my experience you are seen as good as a cash buyer. Also need to factor in your competition, in desirable locations you're likely to get first time buyers etc also interested who don't need to worry so much about stamp duty, high finance costs, ROI, aren't in a chain and probably have agreement in principal for a mortgage. In my experience that means you're unlikely to get a BMV deal on such properties. We use the promise of not doing a survey to sweeten a deal, obviously a slightly risky strategy but gives peace of mind to the vendor and avoids problems when the surveyor inevitably starts questioning things.

[EvolutionBlogger]

The problem is that there's 'property gurus' all over the internet, talking about cash buyers. BMV deals and motivated sellers!

The reason they're on the internet, is because they're not out doing deals!