Selling house higher offer vs chain risk

Pat38493

We are selling our house and we have 2 offers.  One is £25K more than the other, but there is a small chain.  The lower offer is a cash buyer.  Higher offer is downsizing and their buying is supposedly a cash buyer.

Is there any data or info available in the public domain about how to guage the risk of house sales failing, based on number of houses in the chain?

£25K is about 3% of the asking price.  3% sounds low, but £25K is nevertheless a lot of money.

jackieblack

Our agent said that in his experience (30+ years), approx 10% for each link in the chain

Albermarle

 The lower offer is a cash buyer. 

Are you sure that the EA has checked the buyer out thoroughly. It seems not that uncommon that when it comes to the crunch, the cash is not always available. 

AskAsk

I have been told by my EA that the buyer is a cash buyer only to find out that actually that means they have equity in their property, which is sold subject to contract, to fund the purchase so they don't need to apply for a mortgage.

so check that cash buyer actually mean cash in the bank and not equity in a property currently under offer as a lot of EA uses the terminology of cash buyer flexibly!

Also check that the person has the funds in his bank account.  The EA may not be able to verify this until the offer has been accepted but at least he should make sure that the buyer confirms that the money is readily available.

Cash buyers are great but they can also be an issue as a lot of the time when it gets to the solicitors, they can't pass the ALM test for the source of the funds as solicitors worry when there is large cash transactions, for obvious reasons.

Pat38493

Albermarle said:

 The lower offer is a cash buyer. 

Are you sure that the EA has checked the buyer out thoroughly. It seems not that uncommon that when it comes to the crunch, the cash is not always available. 

AskAsk said:

I have been told by my EA that the buyer is a cash buyer only to find out that actually that means they have equity in their property, which is sold subject to contract, to fund the purchase so they don't need to apply for a mortgage.

so check that cash buyer actually mean cash in the bank and not equity in a property currently under offer as a lot of EA uses the terminology of cash buyer flexibly!

Also check that the person has the funds in his bank account.  The EA may not be able to verify this until the offer has been accepted but at least he should make sure that the buyer confirms that the money is readily available.

Cash buyers are great but they can also be an issue as a lot of the time when it gets to the solicitors, they can't pass the ALM test for the source of the funds as solicitors worry when there is large cash transactions, for obvious reasons.

Interesting points.  We have been told that the lower offer is a cash buyer who has received some kind of settlement from a prior injury or compensation claim of some type.  I don't know how much proof the EA has of that but I will ask again.  I will ask to make sure the cash is truly in control of the buyer and not for example in trust where the permission of another party is needed.

Second one, I guess the same questions apply to the cash buyer 2 steps down, but it may be less easy to get the information.

EAs always say they have obtained "proof of funds" before they will instruct the solicitors to proceed, but I'm not sure what that actually means and whether it's possible to "prove" that you have funds when it's actually not the case.

I've also heard about situations in the past where cash buyer tried to use their leverage as a cash buyer at the last minute to force the price down.

What's an ALM test?  oh - money laundering?

I probably should have said that we already accepted the lower offer last week after that person made 2 previous crazy low offers, but then the very next day, a person who had viewed the property back in September and said they would pay the asking price as soon as they had sold their house, came back with the "promised" offer.

We now have to decide whether to rescind our acceptance from last week.  The EA has not yet instructed solicitors to proceed so neither party is out of pocket up to now.

Gentoo365

I would go for the higher offer. They aren't really a 'cash buyer' it's just a smaller chain.

In my experience, 'cash buyer' from downsizing is just the same as a chain.

They still have to sell their property, and their solicitor will still go though a similar process for them to buy yours, with survey results, search packs, questions about minor things.

The only 'cash buyer' that is fast is when the buyer has the cash ready and is ready to exchange quickly.

Hoenir

I'd prefer the additional £25k. Not an insignificount amount. 

Pat38493

Gentoo365 said:

I would go for the higher offer. They aren't really a 'cash buyer' it's just a smaller chain.

In my experience, 'cash buyer' from downsizing is just the same as a chain.

They still have to sell their property, and their solicitor will still go though a similar process for them to buy yours, with survey results, search packs, questions about minor things.

The only 'cash buyer' that is fast is when the buyer has the cash ready and is ready to exchange quickly.

Maybe I wasn't clear, but the true cash buyer who supposedly has the cash ready to roll is the lower offer.  The other one as you say is not a cash buyer by my definition, but the person that is buying their house is claimed to be a cash buyer.

Also we are not in a particular hurry - we haven't even found a house yet although we are prepared to move into rented if we can't find something in the next few weeks, or even stay in our caravan for a month or two with the furniture put into storage.  In fact if it takes quite a few months, we can potentially avoid early payment penalties on our mortgage so in a way, it's in our interest for it to go slower (although this probably increases the risk of someone pulling out).

Martico

If you've not met the prospective buyers then this is the kind of situation where a good estate agent should come into their own - they should be able to advise on their perception of the two offers. Ideally you'd also have met the prospective buyers to form your own opinion as well. At this point, the estate agent is most interested in seeing through a sale that completes.

AskAsk

Pat38493 said:

Albermarle said:

 The lower offer is a cash buyer. 

Are you sure that the EA has checked the buyer out thoroughly. It seems not that uncommon that when it comes to the crunch, the cash is not always available. 

AskAsk said:

I have been told by my EA that the buyer is a cash buyer only to find out that actually that means they have equity in their property, which is sold subject to contract, to fund the purchase so they don't need to apply for a mortgage.

so check that cash buyer actually mean cash in the bank and not equity in a property currently under offer as a lot of EA uses the terminology of cash buyer flexibly!

Also check that the person has the funds in his bank account.  The EA may not be able to verify this until the offer has been accepted but at least he should make sure that the buyer confirms that the money is readily available.

Cash buyers are great but they can also be an issue as a lot of the time when it gets to the solicitors, they can't pass the ALM test for the source of the funds as solicitors worry when there is large cash transactions, for obvious reasons.

Interesting points.  We have been told that the lower offer is a cash buyer who has received some kind of settlement from a prior injury or compensation claim of some type.  I don't know how much proof the EA has of that but I will ask again.  I will ask to make sure the cash is truly in control of the buyer and not for example in trust where the permission of another party is needed.

Second one, I guess the same questions apply to the cash buyer 2 steps down, but it may be less easy to get the information.

EAs always say they have obtained "proof of funds" before they will instruct the solicitors to proceed, but I'm not sure what that actually means and whether it's possible to "prove" that you have funds when it's actually not the case.

I've also heard about situations in the past where cash buyer tried to use their leverage as a cash buyer at the last minute to force the price down.

What's an ALM test?  oh - money laundering?

I probably should have said that we already accepted the lower offer last week after that person made 2 previous crazy low offers, but then the very next day, a person who had viewed the property back in September and said they would pay the asking price as soon as they had sold their house, came back with the "promised" offer.

We now have to decide whether to rescind our acceptance from last week.  The EA has not yet instructed solicitors to proceed so neither party is out of pocket up to now.

the EA will ask for bank statements as proof of funds, or you should ask them to do so before accepting an offer and instructing a solicitor.  I always ask the EA to do this check even from buyers who take out a mortgage to check that they have the money for the 10% deposit and fees.  the EA is not supposed to disclose the amount of funds the buyers have to you, but my EA tell me how much the buyer has in his bank account so I can gauge how much money they have to play with and so how are they likely to afford costs that the survey may flag up.

obviously if they have double the deposit, then they are a lot safer.

ALM - yes, they will need to satisfy the solicitors where they got the money from.  If your buyer has the money from compensation, ask the EA to check that it has already been paid and not waiting to be paid.  We sold a property recently where the cash buyer was expecting compensation, but that was not expected until 3 months later and only if the builders exchange on buying their block of flats.

Speak to the EA and ask his opinion of the cash buyer as he has offered very low offers before, he may drop the offer price later on nearer exchange.  i have had this done to me and it was nasty.  it wasn't from a cash buyer but the practice is there, which is why you need to check he has actually got enough money for this new accepted offer including fees and stamp duty.

Unless the buyer can prove that he has the sufficient funds, i would go with the higher offer as they haven't come in with silly offers, which only shows the character of the person you are dealing with, that they are silly.

Pat38493

AskAsk said:

Pat38493 said:

Albermarle said:

 The lower offer is a cash buyer. 

Are you sure that the EA has checked the buyer out thoroughly. It seems not that uncommon that when it comes to the crunch, the cash is not always available. 

AskAsk said:

I have been told by my EA that the buyer is a cash buyer only to find out that actually that means they have equity in their property, which is sold subject to contract, to fund the purchase so they don't need to apply for a mortgage.

so check that cash buyer actually mean cash in the bank and not equity in a property currently under offer as a lot of EA uses the terminology of cash buyer flexibly!

Also check that the person has the funds in his bank account.  The EA may not be able to verify this until the offer has been accepted but at least he should make sure that the buyer confirms that the money is readily available.

Cash buyers are great but they can also be an issue as a lot of the time when it gets to the solicitors, they can't pass the ALM test for the source of the funds as solicitors worry when there is large cash transactions, for obvious reasons.

Interesting points.  We have been told that the lower offer is a cash buyer who has received some kind of settlement from a prior injury or compensation claim of some type.  I don't know how much proof the EA has of that but I will ask again.  I will ask to make sure the cash is truly in control of the buyer and not for example in trust where the permission of another party is needed.

Second one, I guess the same questions apply to the cash buyer 2 steps down, but it may be less easy to get the information.

EAs always say they have obtained "proof of funds" before they will instruct the solicitors to proceed, but I'm not sure what that actually means and whether it's possible to "prove" that you have funds when it's actually not the case.

I've also heard about situations in the past where cash buyer tried to use their leverage as a cash buyer at the last minute to force the price down.

What's an ALM test?  oh - money laundering?

I probably should have said that we already accepted the lower offer last week after that person made 2 previous crazy low offers, but then the very next day, a person who had viewed the property back in September and said they would pay the asking price as soon as they had sold their house, came back with the "promised" offer.

We now have to decide whether to rescind our acceptance from last week.  The EA has not yet instructed solicitors to proceed so neither party is out of pocket up to now.

the EA will ask for bank statements as proof of funds, or you should ask them to do so before accepting an offer and instructing a solicitor.  I always ask the EA to do this check even from buyers who take out a mortgage to check that they have the money for the 10% deposit and fees.  the EA is not supposed to disclose the amount of funds the buyers have to you, but my EA tell me how much the buyer has in his bank account so I can gauge how much money they have to play with and so how are they likely to afford costs that the survey may flag up.

obviously if they have double the deposit, then they are a lot safer.

ALM - yes, they will need to satisfy the solicitors where they got the money from.  If your buyer has the money from compensation, ask the EA to check that it has already been paid and not waiting to be paid.  We sold a property recently where the cash buyer was expecting compensation, but that was not expected until 3 months later and only if the builders exchange on buying their block of flats.

Speak to the EA and ask his opinion of the cash buyer as he has offered very low offers before, he may drop the offer price later on nearer exchange.  i have had this done to me and it was nasty.  it wasn't from a cash buyer but the practice is there, which is why you need to check he has actually got enough money for this new accepted offer including fees and stamp duty.

Unless the buyer can prove that he has the sufficient funds, i would go with the higher offer as they haven't come in with silly offers, which only shows the character of the person you are dealing with, that they are silly.

At the risk of sounding paranoid, does the EA phone the bank and ask them to confirm that the statement is genuine?  I doubt it’s that hard to fake a bank statement if you are really determined.