Cash Buyer - what advantage

rolfknudsen

Hello

My apologies if this already has been covered somewhere.

We are looking to buy a flat in Central London. We have 70% of the asking price in cash and will get a mortgage for the remaining amount.

1. Do having such a large chunk in cash give us any advantages?
Everyone talks about being a cash buyer as a great asset, but since this is
my first time on the buying market I am not sure exactly what the reasoning
is behind this?

2. We are looking at a flat in the Barbican. Part of the reason for looking there is because we
think the flats has kept their value despite the set back on the property
market.

This also means that we are expecting a slight increase in value in the near
future.

Does anyone have any opinions on this? Will now be a good time to buy
here?

3. What should we offer? 10% below? 15%?
An identical flat was sold 15% below the current asking price in December 2008 and I cannot
see the the market has gained since that?

Thanks!

zzzLazyDaisy

Being a cash buyer is an advantage because you don't need a mortgage. So you can move quickly because you don't have to wait for mortgage approval, and there is no risk of the lender withdrawing the offer of a mortgage at the last minute.

You are not in that position. A high deposit should help you to secure a good mortgage deal, but it won't give you the same advantage as a purchaser, that being a cash buyer would.

Emmzi

you should offer what you think it is worth. you don't know if they have priced on a valuation, a full survey, a guess at what it might go for within 4 weeks, or an inflated aspirational figure.

pie81

I presume you have nowhere to sell? this makes you a more attractive buyer because it means there is no risk of you pulling out of your purchase down the line because you have failed to sell your property.

also, you'll be a slightly more attractive than someone who has, say only a 15% deposit, because the seller (and estate agent) will know that you will not struggle to get a mortgage. some sales at the moment are falling through due to the buyer's inability to get the mortgage amount they expected, this is unlikely to be a problem for you so the vendor can feel more secure that their sale won't fall through.

Doozergirl

Personally I wouldn't make much differentiation between a cash buyer and someone with a large deposit. They're both good in my book.

It doesn't open magic doors but it makes you attractive to vendors.

Offer what you think the property is worth to you. I'm not as optimistic about capital gains as you are.

themanbearpig

You aren't a cash buyer.

Apart from being quicker to complete, a cash buyer doesn't have to bother with valuations, which are usually down-valued, so in theory the vendor has a shot at getting a cash buyer to pay more. Its unlikely to happen though.

rolfknudsen

Thanks a million for your thoughts.

Doozergirl - Can you elaborate on your concerns on capital gain? Do you think the market still has a downwards curve?

Running_Horse

The other thing about someone who walks in with a "I'm a cash buyer give me respect" attitude, is you know they are going to be a right PITA, and expect you to grovel to them when they demand £20,000 discount for £2,000 of work identified in the survey. To be honest, as a seller I dreaded them and BTLers looking for a bargain, and was happy to sell to an honest couple with a mortgage.

pie81

As for your question about property values in the Barbican...

I'm currently looking at selling in north london (islington area) and buying in south London (balham area). what I've been told by agents in both areas is that there is very little stock on the market at the moment, but greatly increasing numbers of buyers. this is pushing prices up and also meaning decent properties sell very quickly. they expect this MAY change towards the end of the year if property owners see the higher prices and decide to sell - this will mean there is no longer a shortage of stock and prices will come down a bit.

if you believe all this (and I have no idea whether it's true, except that there does seem to be a shortage of stock) then that means that you may be better off waiting till the end of the year.

the barbican I would say is a very specific sort of market - the architecture is not to everyone's taste, and it's very urban. That means there may be a relatively limited pool of buyers for when you come to sell on - even if the prices hold up you could find that it takes a while to sell - worth asking the agents about this/looking on propertybee etc. Also it occurs to me that annual service charges are likely to be enormous due to all the communal areas - again something to check out.

Doozergirl

rolfknudsen wrote: »

Thanks a million for your thoughts.

Doozergirl - Can you elaborate on your concerns on capital gain? Do you think the market still has a downwards curve?

I am worried about the rise in interest rates, when it comes, causing a lot of distressed sales. Anybody who has seen their rate come right down into the realms of the ridiculous is going to struggle with the increase unless they've been putting money aside. Remortgages will still be difficult for a long while to come so whilst things do seem to be bouncing back a little I think it's mainly due to a lack of property on the market and a smallish number of buyers still outnumbering those vendors with realistic expectations.

If the amount of property on the market does increase and the number of buyers notsomuch, the result won't be a positive one. Statistics are funny things. When there are no sales except distressed ones then the average property price will show as much lower than before. Now that there is a little movement, I think there is a balance there which is levelling out to show us just how much prices have genuinely fallen by (bearing in mind that price falls really haven't been even across areas and proeprty types but very different indeed in some parts)

I wouldn't exactly describe myself as a bear but I don't think we're going to see a decent bounce back for some time; I am buying again now but with a contigency plan in place. I don't buy for capital gains, it's important to buy cheap in the first place.

rolfknudsen

pie81 - thanks for your reply

Service charges £900-1000 a year - high or reasonable?

The barbican area is highly sought with studios starting high and 2 bedrooms going for 400k upwards