A question I’m often asked is, “Should I tell the estate agent I’m a cash buyer?”
The premise behind this question is, no doubt, estate agents think a cash buyer will transact a deal quickly and with less hassle as, in their minds (experience) mortgages take longer (too long) to arrange.
So, a cash buyer will always be preferable.
But not always a necessity.
They bring certainty to a deal.
Well, in my simple world the answer to the question is, yes, if you are a cash buyer and no, if you’re not.
But there is a lot more around cash buyers and agents’ expectations than my simple view.
By the way, what I am about to tell you is based on my experience and, as ever, I’m not saying there is a right or wrong, and I’m definitely not trying to create a rule.
I know that other investors, with other experiences, might disagree with me and that’s fine.
This is what I’ve experienced.
First, many investors assume they will be asked to provide proof of being a cash buyer (or in a more general sense proof of funds, I’ll talk more about this in a moment) when they first register with an estate agent.
I have never experienced that, but I know some investors have.
If you have proof you are a cash buyer (or proof of funds) then I think that can only be a good thing, and I wouldn’t be shy and hold back. It shows serious intent, and ability to see a deal through.
So yes, it’s probably a good idea to take a bank statement (or bank statements) when you register with an agent. I wouldn’t make a big deal about it, I’d just casually say “by the way and here’s some bank statements to show I can buy cash if you want to see them…”
But even if you haven’t got any proof, I’d still go to the estate agents anyway.
It might just be me, perhaps it’s because I’m of a certain age, but I’ve never been asked for proof of funds when registering.
I think whether you are more or less likely to be asked will depend on market conditions.
When the market is hot, agents will want to filter out ‘time wasters’ as early as possible.
When the market is slow, any buyer will do.
Here’s what I always do when I offer on a property.
I will tell the agent I am a cash buyer, if I am.
But, at the time of making an offer I will also tell them that I am going to apply for a mortgage.
And I’ll say, “If I need to complete in cash because the mortgage takes too long, I will be a cash buyer. But Mr or Mrs estate agent, in my experience, a mortgage can be just as quick as doing a cash deal, so if the mortgage is available quickly, I’ll be using a mortgage”.
To date no agent has ever queried this.
And, of course, I always wait for the mortgage. I mean, why wouldn’t I?
In fact, I have claimed to be a cash buyer when making an offer on many occasions (because I was) but from memory I can only remember one occasion when I was asked to prove it.
As for proof of funds, as opposed to proof of being a cash buyer, if you have it then flaunt it.
When registering with an estate agent, or when making an offer, it can be helpful to produce an AIP or DIP, Agreement in principle and Decision in Principle.
Essentially there are one and the same. Your good mortgage broker will send your details across to a lender who they think is a good fit and the lender will say words to the effect of, “Yes if you find a suitable property, we’ll lend to you”.
From the estate agents’ point of view, it shows that obtaining a mortgage will be a formality (assuming the property checks out) and you aren’t going to waste everyone’s time by trying to buy a property which you ultimately can’t get finance for.
You’re already one step ahead of those who haven’t obtained an AIP or DIP first.
But, and there’s always a but, in my experience some mortgage brokers will obtain a DIP before you find a property, and some prefer you to find a property and then obtain a DIP, before you make a full mortgage application.
So again, as ever, there are no hard and fast rules on this.
By the way, if you’d like me to put you in touch with my very good mortgage broker, please email me email@example.com, and I’ll make the introduction. Just to be transparent, if you end up doing business together I’ll get a small commission in recognition of my introduction.
Here’s to Successful Property Investing.
(ex) Chartered Surveyor, author and property investor
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