Over the last few years, the idea of selling houses for cash has become much more attractive for many people. Competition in the sector has prompted an improvement in prices, streamlining of the process and more importantly, rapid settlement. This article will cover the most popular reasons for selling houses for cash and the considerations behind each decision.
Mortgage Arrears
We know that the UK property market has been relatively buoyant in recent years. However, the ever-increasing cost of living and uncertain employment market has pushed many homeowners into mortgage arrears. In addition, UK base rates have been at historic lows for some years due to the 2008/9 financial crisis and Covid pandemic, although there is speculation we may see an increase very soon.
As mortgage rates begin to tick higher, ahead of a Bank of England base rate rise, there will likely be a drip-feed effect on the market. Over the last decade, many people have taken advantage of fixed-rate mortgages at historic low levels. If, as expected, base rates do increase, experts believe that many people will struggle to refinance mortgages when their fixed-rate term comes to an end.
In many ways, this is a ticking timebomb created in an environment of artificially low-interest rates, introduced to support economic recovery. Will regulators be able to remove this crutch without a detrimental impact on the UK property market?
Consequently, it seems inevitable that the number of homeowners in mortgage arrears will increase. Indeed, as you will see from the graph below, mortgage arrears are already starting to tick higher.
Source: https://propertyindustryeye.com/mortgage-arrears-latest-figures-from-uk-finance/
If You’re at Risk of Arrears
As your finances deteriorate, it is crucial to act quickly to retain a degree of control and avoid repossession of your home. In a perfect world, you would look to remortgage, but if your credit rating has fallen and your income is under pressure, then this avenue may not be open to you. Furthermore, if your home is repossessed, it will often be sold at a large discount to the market value as mortgage lenders look to recoup their losses.
Here at Cash House, we can offer highly competitive cash purchase prices. In addition, the fact that sales are completed in less than a month reduces mortgage repayments and, for many, additional refurbishment costs. We also cover legal fees, with our team of specialist solicitors available at short notice to begin the process.
Probate
Amidst the grief of losing a loved one, many families are faced with an array of financial challenges, which can often be overwhelming. The sale of assets and execution of their will is often complex, especially if a home is involved. Unfortunately, this is before we even consider any inheritance tax issues.
Those familiar with the process will recognise that “grant of probate”, essentially permission to sell granted by the court, can often take months to come through. However, when you also consider it could take, at best, another 2 to 9 months to sell a property via the “traditional route”, the process is both time-consuming and tough. Therefore, it will be no surprise to learn that many executors looking to liquidate the assets of a deceased estate now consider selling houses for cash for a quick sale.
Selling a Probate House for Cash
We have more than seven years of experience in handling cash purchases, recognise the difficulties of the probate system and the need for prompt settlement. However, even though the average traditional sale process can take two and three months, this may be extended if you are involved in a lengthy chain. Indeed, as many people have experienced to their detriment, if one element of the chain is broken, very often, you will find yourself back to square one.
As well as handling the legal process, we also cover legal fees as part of our comprehensive package. The process itself is relatively simple:-
1. Check to see if your property qualifies for our service
2. Receive an offer within 24 hours
3. An impartial professional surveyor will visit your property
4. We will formalise our offer
5. All fees are paid by us
6. Our specialist legal team begin the formal sale process
7. Prompt settlement in as little as 14 days
Even with no inheritance tax liabilities, outstanding mortgages, pressure from beneficiaries, and often extensive legal fees can create a complex environment for executors. Acting promptly with property sales not only releases essential capital but also removes exposure to a potential reduction in the value of the deceased’s home.
Landlords – Selling
You may be surprised to learn that many landlords are looking to reduce their exposure to the private rental market, often using our services as cash buyers. There are many reasons including:-
1. Personal financial difficulties
2. Increasing costs associated with the rental market
3. Health issues
4. Raising capital for retirement
5. Alternative investment opportunities
Very often, those looking at the private rental market from afar consider it to be a cash cow with very little additional expense or management time. Some years ago, this may have been the situation, but council property sales have prompted greater reliance on the private rental market. However, there have been profound changes of late. The balance of control has switched with landlords taking on more legal obligations, and tenants now have ever-increasing rights. Additional tax charges have also eaten into many private landlords’ healthy, profitable income streams.
Source: https://www.nrla.org.uk/research/landlord-confidence-index
In recent times we have seen difficulties in the employment market in the aftermath of Covid, leaving many landlords facing growing debts. To avoid what can sometimes be a domino effect, mortgage arrears on one property can bring down a rental portfolio, the option of selling houses for cash is often the best course of action.
As we undertake cash house purchases to either rent out or resell the properties, we are up to speed with private rental regulations and legal obligations. This in-depth understanding of the market means that we appreciate the often delicate situation landlords find themselves in. The idea of being caught up in a chain of property transactions, often leading to delays and disappointment, can push some private landlords over the financial precipice. On the other hand, the idea of cash settlement within as little as 14 days, leading to increased liquidity and reduced financial liabilities, is attractive for many.
Re-investment opportunity
We live in a world where investment opportunities often arise relatively quickly. These opportunities can take a range of different guises including:-
1. Property
2. Business investment
3. Stock market investment
4. Pension fund investment
5. Cryptocurrencies
In these circumstances, time can often be of the essence with a limited window of opportunity. Whether you are a landlord looking to sell one of your properties or a homeowner looking to raise capital for an investment opportunity, working with a cash buyer is often critical. Joining the usual property sale process may not be an option due to the often extended sales process, concerns regarding the chain’s strength, and uncertainty about the completion date.
On the surface, some property sellers may find it unpalatable to sell for cash at a discount to the market value. However, this does not take into account the overall picture, as you will see from the graphic below:-
It is essential to look at the broader context. The additional charges relating to a traditional sale compared to the relatively quick settlement from a cash buyer. As you will see, we also absorb legal costs, working with our team of solicitors to secure prompt payment. So, if time is of the essence, your window opportunity is relatively small, then a cash buyer is, for many, the perfect option.
Avoiding transaction chains
A survey by Which? magazine cast a fascinating light on property chains and the impact on property sales. In 2016, the magazine surveyed 2000 homeowners about property chains and their individual experiences. The two main reasons for a breakdown in property sales were as follows:-
1. Buyer forced to pull out because their own sale had fallen through (21%)
2. Seller had pulled out because the process was taking too long (13%)
Unfortunately, many people will resonate with these challenges when involved in property chains. Other prominent reasons why a property chain could collapse include:-
3. The buyer/seller changes their mind
4. The buyer/seller falls ill, splits with their partner or loses their job
5. The buyer is unable to secure a mortgage to support their offer
6. Delays with legal firms
7. Surveys reveal problems with the property
We live in a world where cash is still King, whether property or any other type of investment. Consequently, many people are now looking at selling houses for cash to avoid transaction chains.
For those looking to move home, selling your property for cash will put you in a powerful position when looking to purchase a property. You will have the opportunity to negotiate a discount on your new home, often promoting you to the front of the queue of potential buyers. As we touched on above, a traditional property sale could take up to 9 months, whereas a cash purchase could be settled within 2 to 3 weeks. A huge difference!
Alternative to bridging loan when moving house
As the UK financial services industry expands, many people are actively considering bridging loans when looking to purchase a new home. This allows them to acquire their new property before their current home is sold. As we touched on above, when you consider the potential issues with transaction chains, in theory, this is not a bad idea. However, even though bridging finance is usually a form of short-term finance, the interest charges can be high. In the current climate they can range from 0.8% to 2% per month.
There is no guarantee that you will either sell your current home or achieve the price required in the short term. What was intended to be relatively short-term finance can often become a long-term headache for many. You may also encounter several additional charges such as:-
1. Exit fees
2. Arrangement fees
3. Legal fees
In a perfect world, the bridging loan would allow you to secure mortgage finance. Giving you time to sell your existing home relatively quickly and repay the original loan with interest. There is the option of a fixed repayment date or a flexible bridging loan. However, typically the maximum duration is no more than one year. If you weren’t able to sell your current house within the twelve-month period, you would face additional challenges. This includes, but is not limited to, the headache of refinancing the bridging loan. A “simple” process can very quickly get very complicated!
So, when you consider the traditional discount negotiated by cash buyers against the charges incurred when using bridging finance, cash tends to be King. The ability to sell your current house for cash also removes the uncertainty and the pressure this brings. When considering your options, it is essential to look at the finer details and the array of expenses with different types of finance.
Consider all of your options when selling houses for cash
It is important to remember that competition in the cash buyers’ market has increased dramatically in recent years. Consequently, the often wide discounts to the market value of years gone by have reduced. We have built our reputation on offering a fair price for your home. We also take care of the legal process/fees, significantly reducing transaction times. Our dedicated team will begin working with specialist legal partners as soon as a sale is agreed. This removes voidable stress and strain for sellers.
Conclusion
As we have demonstrated above, there are potentially high additional charges if the sale of your home is delayed or you are forced to consider bridging finance. However, when compared against the traditional discount available to cash buyers, you’ll often find financial and practical benefits in considering a cash sale. Here at Cash House, we will take care of valuation and legal fees. This will eliminate/reduce refurbishment, mortgage, legal and agency fees associated with the traditional sale process.
We have more than seven years of experience in property investment and fully appreciate the trials and tribulations of selling your home. But, unfortunately, many people tend to look at the headline figures when comparing traditional property chains against cash buyers. Only when you dig a little deeper, you find that the devil is in the details. There are many situations indeed where there are significant benefits to selling houses for cash.
