Selling house higher offer vs chain risk

Bigphil1474

No, the EA won't ring the bank. If a buyer presents a bank statement they'll take that as being real, unless there are obvious issues with it. Not sure someone wanting to buy a house would go to the trouble of faking a bank statement just to appear to be a cash buyer - what's the incentive? Their solicitor will check they have the funds and where it's come from in any case.

Personally, I'd go back to the cash buyer and tell them you've had a higher offer - maybe negotiate them up? £25k is a lot, doesn't necessarily have to be the full £25k, but unless you are their best friend, why would you basically give someone £25k when you aren't in a rush?

I think there's pluses and minuses with all types of buyers. The people down sizing will have experience of buying and selling houses , the cash buyer might not (important when the survey is produced), the people down sizing might be old - what if one of them croaks it before completion, the cash buyer might just pull out if they see something better, they've no buyer to worry about. It's always a bit of a roulette game.

Albermarle

Pat38493 said:

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.

I would presume the bank would not release such personal info to an EA, even if they did ask.

AskAsk

Pat38493 said:

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.

as someone had said, the EA has no authority to call the buyer's bank to confirm the details.  he will take that at good faith. but as someone else has said, there is no reason for the buyer to forge the bank statement.  people tend to lie about how much money they have to be considered as a serious buyer and then drop the offer price later as a strategy but they are unlikely to go as far as forging bank statements as that is a criminal offence and may be reported to the police, so no one will do this simply as a bidding strategy.

donutandbeer

Sometimes I feel that a person in a chain has more to lose (and therefore is more committed) than a cash buyer. We had experienced a cash buyer dropping out of the sale not long after their offer was accepted, presumably having a change of heart (this was before any survey but solicitors were involved).

I also feel that I would be kind of offended (?) by a casher buyer who tried with offers too low before - just makes me think they might not be that into the house.

AskAsk

donutandbeer said:

Sometimes I feel that a person in a chain has more to lose (and therefore is more committed) than a cash buyer. We had experienced a cash buyer dropping out of the sale not long after their offer was accepted, presumably having a change of heart (this was before any survey but solicitors were involved).

I also feel that I would be kind of offended (?) by a casher buyer who tried with offers too low before - just makes me think they might not be that into the house.

yes, a cash buyer may have less to lose as they don't need to move out of their house so a person who has sold their house may be more motivated to continue with the purchase else they lose their buyer.

i find cash buyers tend to try it on and get things cheap.  whenever i get a cash buyer offer, they are always a lot lower than someone who has their property STC.  so accept a cash buyer offer with a pinch of salt as they tend to be less motivated than someone in a chain as they will be considered for more properties as they have more buying power.

RelievedSheff

I would be going for the higher offer with the small chain.

Pat38493

Thanks for all the advice.  I think we will end up sticking with the lower offer because we got more information that makes us less confident about the higher offer - they are saying they viewed another house they really like, they want to view our house again but this means we have to alert the current offer what is going on and may lose the current firm offer.  Also we found out that the higher offer is moving out of a really old mansion type property and therefore there is more risk of survey results resulting in issues with the pricing at their buyer.

Mainly, our EA this morning seemed to be hinting that she is now more concerned about the higher offer compared to last Friday.

Also we have seen a house we really like that is significantly below our top budget, so this gives is a bit more comfort that we don’t desperately need the extra £25K.

Regarding the cash buyer, the money was held in trust by her solicitor but has now apparently been released to her and is in her sole control.

Maybe it will end up being the wrong decision but frankly, if the current cash buyer starts to mess us around, I will just pull out and go back to market.  As mentioned above, we are not in any desperate hurry.