Cash is king – but does it really mean lower sale prices?
A new study suggests cash buyers secure lower sale prices than mortgaged purchasers – but is that really the case?
The survey by comparison site GetAgent looked at the average price paid by cash buyers over the last 12 months and compared it to buyers with mortgages.
The data shows that across the UK the average paid by cash buyers over the last year was £220,100 – nine per cent cheaper than the average paid by buyers with a mortgage, £240,758.
“Cash buyers are preferable to many sellers because they provide a much simpler transaction with fewer hoops to jump through and often come without a complicated chain. The flip side of this convenience is that cash buyers have a far stronger position when it comes to negotiations and often sellers will accept a more sizeable reduction for the speed and convenience of a cash sale” says GetAgent founder and chief executive Colby Short.
However, what isn’t clear from the research is whether the homes bought with cash were smaller or in less desirable locations – thus contributing to the lower price.
Downsizers, for example, typically make cash purchases of smaller homes using the proceeds from the sale of larger properties; younger buyers seek larger and dearer properties as their families grow and statistically are more likely to have mortgages.
Colby says cash has become more significant in recent years for a variety of reasons.
“Brexit uncertainty left many on the fence and so those looking to sell have had to do so with a lower price expectation due to a dwindling level of buyer interest. Therefore, finding the golden ticket of a cash buyer with honest intentions in a market slowdown has prompted an even greater tendency to sell with a greater cash discount in order to get a sale over the line” he believes.
“At the other end of the transaction scale, the continued affordability of borrowing money due to low interest rates has seen many aspirational buyers commit to a greater sum than they may have otherwise.”
In the GetAgent analysis, the gap between cash and mortgaged purchases was highest in the North East and North West, where properties bought with cash go for 12 per cent less, while London is the only region where cash will cost you more – six per cent more than the average price paid by a mortgage buyer.