Advice on making a house offer

[NervousFirstTimeBuyer]

My partner and I are planning to make an offer on a house which we really like, but we understand there are likely to be several other offers, and we're wondering how best to play it so that we maximise our chances without offering way more than we need to.

The house is only on the market now because a confirmed buyer had a chain that fell through, and the sellers didn't want to wait for them. Because of this, apparently all the new prospective buyers are either chain-free or in "very strong positions" (whatever that means).

We are chain-free, but we are also in what I think might be a very unusual position, in that — through good fortune — we have the cash to hand (i.e. we will not need a mortgage). So my question, without wanting to give too many specifics, is: what would be the best strategy for making an offer here? I assume, based on the interest in the house, that others will be offering at least the asking price. We are prepared to offer more, but find it very difficult to assess how much more will be necessary (for obvious reasons we'd rather not offer our absolute maximum straight off). How much do you think our financial situation gives us an edge over those relying on a mortgage, and what should we do?

It’s partly about the amount you offer and partly how you present yourselves as buyers. On the latter point, make sure you have proof of your funds you can share with the agent (there are many stories of people claiming to be cash buyers and then not being) plus a really good solicitor and a surveyor lined up. Basically anything you can do to show you won’t mess them around.

Thanks for the advice, @iamtherealwalrus. Proof of funds shouldn't be a problem, as I assume we can just share our financial documents. Should we offer to do that when we next speak to the agent, to make clear that we mean business?

As we have never done this before, I'm unsure about how to go about "getting a really good solicitor lined up". Is that something we need in advance of making the offer? How long might it take? It sounds like things are going to move extremely quickly, so I'm not sure we can get this in place before an offer will be accepted. Given this, what else can we do to show that we're serious?

I would offer the asking price and demonstrate to the estate agent that you have the funds available. I would ask for a recommendation for a solicitor. As you are not selling there is nothing a solicitor can do before your offer is accepted.

Yes, when you make your offer say you are a cash buyer and can provide proof of funds on request.

Finding a solicitor is usually straight forward (although perhaps they are busy at the moment I don’t know). There’s nothing for them to do now it just shows the agent you’re serious and that you’ve not chosen some awful online conveyancer who will slow everything down. As around for recommendations from friends. It isn’t a huge problem if you can’t sort it before the order it’s just a bonus if you can

The agent may well ask for proof of funds before putting your offer forward. A bank statement will do.
They will have preferred solicitors - up to you whether you use them. You organise the survey yourself.

In terms of the actual offer, how much of a difference would you expect it to make to the seller that we have the cash ready (once they are satisfied that we really do)? I have no idea really how significant this is, or how common it is, but I assume the fact that the sellers have already had a sale fall through due to a broken chain could influence their feelings about it. I find it hard to assess the strength of our position.

What sort of outcome might you expect in the following scenarios?

1. We offer the asking price, along with two other sets of buyers, where the other buyers are all chain-free, but require mortgages.
2. We offer the asking price, but another buyer without a chain but requiring a mortgage offers a little bit over.
3. We offer a little under the asking price, but another buyer with a short chain and no mortgage requirement offers the asking price.

I've heard that cash buyers will often make lower offers than others, but I don't know if we should behave in the same way as we would if we were not cash buyers.

In my experience being a cash buyer doesn’t make a difference to the amount that a seller is willing to accept. If there are several offers on the table, then a below asking price offer is unlikely to be accepted.

If I was trying to replace a lost buyer who I didn’t want to wait for, then speed is obviously a major concern for me. So I’d be interested in offers where the buyer adored my house and was very proceedable, so for me that would mean EITHER mortgage agreed in principle with an extremely short chain already well advanced (eg my buyer is selling their current home to a first time buyer and everything there is well-explained and doesn’t sound likely to go wrong ) OR cash buyer. I would be interested in buyers who adored my house and were asking questions with serious intent, like what is the earliest date we can move as we don’t want to hang around.

In scenario 1 I’d take your offer

In scenario 2 I might be tempted to accept the other offer. What i would do here is ask the agent to go back to you both and say, two good offers, don’t want to agonise, please confirm your best and final offer. Then I’d pick the higher offer, and cross my fingers.

In scenario 3 I’d take the other offer not yours.

We got badly burnt by a 'cash' buyer last summer. Our agent very possibly didn't do due diligence but either way, the cash buyer, midway through the sale, decided they wanted to borrow for the purchase to leave cash free for other investments, dragged the whole thing out for months then attempted to spectacularly gazunder us.

Prior to that, we had had an offer from a cash buyer, who once we accepted, started making noises about the fact that although they could purchase in cash (and this was verified), in an ideal world we would wait for them to sell their house too.

We were probably just very unlucky but those two experiences, coming back to back, would mean in future I'd be taking any cash buyer claims with a whole teaspoon of salt. For me now, it would have some bearing in that you would obviously be more attractive than someone with a massive chain, but in terms of cash vs mortgage I'm not so sure. There are a whole host of variables and of course there are definite positives to your situation - no mortgage survey required, no time delay for the mortgage to be approved, no issues with affordability but on its own it wouldn't be enough unless I thought all the offers were wildly over the actual value of my house and was worried that a mortgage survey would downvalue and there would be issues there.

So in terms of your scenarios:

1. I don't know. Perhaps you on the basis that you would be likely to get through the purchase more quickly and therefore less likely to want to renegotiate if we didn't hit the stamp duty deadline, but it's not a sure thing.
2. Other buyer
3. Hard to say, I'd be worried you would try and reduce the price again/it would depend on just how much under

It depends slightly on your local market. The way things are here at the market level I'm familiar with, if the house was in any way desirable and well priced you simply wouldn't get a look in offering under, regardless of your position. If your local area is quieter or you are looking at price points that are less busy, or more marmite houses it might be different but given what you've been told about other offers that seems unlikely. If it's a renovation project you might have the edge if I was worried about whether my house was mortgageable or not.

I meant to add, obviously someone who hasn't been burnt might be much less suspicious about the whole thing, I'm just giving my own opinion and experiences!

I think you probably need to offer asking price (if you think the house is worth it). Being a cash buyer should go in your favour as no waiting for the mortgage valuation/decision. But some sellers (me) are wary of cash buyers as people lie about this (I’m not sure how because agents are meant to check but mostly I think it’s when the money is tied up in certain types of account). We had this issue when our ‘cash’ buyer first raised a ‘small mortgage’ midway through the process (not sure the size of the mortgage matters so much but the agent was very vocal about that part. They then tried to add another sale to the chain at the last minute causing chaos. So some people are wary of cash.

Some agents will try and encourage you to take a lower price because of cash, it’s definitely a thing and actually secured us a discount on our current house because we matched an offer already accepted from another buyer who again posed as ‘cash’ and then decided they needed to sell some property.

So, I think your situation is about the only one where I would be excited about a cash buyer but with other offers on the table I would not be wanting to consider a discount.

Like @tentative3 I now view ‘cash’ buyers with some degree of suspicion and would probably not take another cash offer at face value. But in this scenario it could work in your favour, but probably only in terms of speed and not in terms of money off.

Definitely tell the agent that you can offer proof of funds if needed. If you really believe there is lots of interest and other offers, you'll need to offer the asking price. Try and fish out from the agent how many other offers there are and for how much and from who. They are not obliged to tell you but sometimes they can be surprising open about it - although beware as they do not have to be truthful.

Tell the agent to advise the buyers that you are chain free, flexible on timing and will move at their speed to exchange if you can offer that.

If you end up offering over asking price, my limit would be 10% over, but assess whether this is really needed, there are some areas where offers over is fairly common, but mostly houses go for asking price or close to it and a buyer who has no funding issues and will work with you is very valuable.

I personally don’t trust people who make a fuss about being a pure cash buyer (bear in mind anyone without a chain is a “cash” buyer). In my experience they’re more likely to try to take advantage of me because of their position, and no more likely to proceed without issue than someone with a mortgage. In the past they have tried to flex their muscle by taking money off their offer after surveys and before exchange just because they think they can.

The main think I look for (and I’ve done around 8 transactions in past 10 years for various reasons), is a RELIABLE buyer. Being pure cash doesn’t make you reliable. To be reliable you need to set out your expectations. Put forward a time frame within which you aim to do a) survey, b) conveyancing, c) exchange. You’d need to speak to surveyor etc to line up, so you look more committed when you offer. Then say your offer is subject to survey but takes into account xyz that you have noticed when viewing.

Tell the agent you want a very straightforward transaction with no mucking around. Try to find out why the other buyer pulled out. Did they find something wrong that couldn’t be negotiated?

Good luck, but don’t overplay your hand.

Offer the price you are willing to pay. The seller is going to accept the highest offer unless there’s very little in it and they see a material difference between your position and the other offer.

I was a cash buyer two years ago and don’t think it made any difference. The market was moving quickly and demand was strong in my area. I showed the EA my bank balance on my phone when I made the initial offer. Got a phonecall sometime later saying that numerous offers had been made and did I want to submit a best and final offer. I don’t think they were particularly bothered about mortgage vs cash.

My mum is the executor of a will atm and did prioritise a cash offer because the first offer that was accepted fell through because the bank valuation came back lower than the offer price.

Yes I’m not sure cash buyer is the huge thing it used to be as so many people lie about it.

But just present yourself as ready to go.