Cash or Mortgage?
Cash or Mortgage?
What should you do if you receive an offer in cash which is slightly lower than an offer from someone taking a mortgage?
Have you missed out on a house you really wanted due to a cash buyer?
In Trafford we currently seeing a large portion of our buyers have the cash in the bank! They can be investment buyer, who know that values are rising fast and will get a good rental yield and a large capital growth. Others are fortunate buyers who have sold a higher value property in London and the South East to release their mortgage and buy here mortgage free. We also find that many lucky youngers have been gifted huge deposits by their parents and grandparents. These buyers are leaving the average couple who work hard and save religiously in the dust!
The problem presented is that those with cash can avoid all the dramas of buying with a mortgage. The main issue we see at present is that around 75% of the houses sold in Trafford are down valued at mortgage survey! This is causing a huge problem as many young buyers have saved just enough for a 10% deposit and are therefore unable to make up the shortfall between the bank’s valuation and the price they have agreed to pay in this competitive market place. It is therefore in the vendor’s best interest to sell to a cash buyer, or at least someone with a good 20-30% of the cash in the bank! Ethically this concerns a lot of sellers and agents, we want the younger couples to secure their 1st home; but both vendor and agent also know they need to secure the best price for their client and if a bank will prevent them doing this they have no choice but to choose against those with large mortgages.
This is a tough call. The banks are still very risk averse and due to the pace at which prices are rising in this area their surveyors just can’t find enough evidence to justify lending the agreed figures. This is a problem for which we do not yet have a solution, but are always happy to offer our advice on a case by case basis. Let’s hope the banks and their surveyors catch up with the buoyant market and help the younger generation secure their 1st homes.