Buyers who offer more than they can actually pay

[WeBuiltThisBuffetOnSausageRoll]

After being messed around for months by a timewaster extraordinaire, we said enough was enough and put the house back on the market. Although our 'buyer' cost us a lot of money, the market has of course risen quite a bit in recent months, so that mitigates a lot of it.

We had quite a bit of interest, resulting in several offers - two of which were strong and realistic (not quite the highest), and we've since accepted one, who seems very serious, very keen and isn't hanging around, which is perfect for us!

However, some of the offers we received were from people who clearly did not have the funds available to pay the price they offered, had we accepted it, with their totals of deposits and agreed lending falling short by some way - by £10-15K. Added to this, the property needs work and modernisation, which was made very clear to them (and they would have seen when viewing), which makes it even more puzzling.

Is this normal? What's their game - does anybody know? Are they just hoping that they'll find another £15K down the back of the sofa, be able to twist the lender's arm, tap a family member (for what obviously has to be declared a gift and not a loan), eye-watering credit card cash advances?

I may be being unfair here, but I rather suspect that some of them see their initial task as making the highest offer, so as to exclude the competition and get their foot in the door, but never for one moment expecting to honour that offer.

Whether they're:
Over-optimistic and/or not very good with maths;
Counting on finding something to blame ('requiring' a significant reduction);
Thinking (or planning to gaslight) that the lender's valuation is THE only actual market price (irrespective of competition from would-be buyers in a seller's market), which automatically overrides anybody's offers;
Planning to let things progress a long way before springing 'an issue that has arisen' on you - or just to keep quiet and gazump the day before exchanging contracts (even in a rising seller's market)?

Why do they do this? Do they tend to somehow succeed or just end up wasting everybody's time and money (including their own)? Have you been the buyer in this scenario and how did it all work out for you? What are the worst horrors of this kind that you've experienced - as a seller, estate agent, observer or other?!

I would say that how much you love the house doesn't matter to the vendor unless it means you are absolutely determined to go through with the sale - that could be important. If vendors want a cash buyer make sure they are. The highest bid could be pie in the sky.

Unfortunately, this is true. People selling houses aren't usually in a position (or willing) to worry about how much a stranger really loves and wants their house (which could equally turn out to be either completely true or a pack of manipulative lies) when choosing a buyer.

From a vendor's pov, you would normally aim to exclude the unrealistically high/not financially supported offers for your own benefit/protection rather than to be benevolent to a perceived 'worthy' buyer, who could have been lying all along anyway.

It is concerning, though, how many 'cash buyers' suddenly change down the line and, once they have their foot in the door, turn out to need or 'prefer' a mortgage to buy it with.

As well as the people who claim to be cash buyers without even having any idea what the term means - presumably they reckon that they are cash buyers as they are buying it with money (which is just a synonym for cash) - albeit 90% borrowed - as opposed to with buttons, lollipops or luncheon vouchers.

It would be interesting to get an EA's perspective as to what they regard as 'proof of funds'.

From my experience, Estate agents only seem to rely on the buyers word & don't request the evidence to back it up.

Like all professions, some will be careful with their due diligence and others will just not bother. The latter being very stupid and short-sighted (as well as dishonest - since when was "Trust me, gov" ever actual 'proof'?), as that's much more likely to end up with sales falling through and them having to do fruitless work and wait much longer before getting any commission on the sale.

I agree, OP.
I'm in the UK & I think the system needs a complete overhaul.
I've had 'cash buyers' who are waiting for an inheritance cheque to be cleared (it never did) or relying on their investments to mature etc etc then weeks after the survey (which they were happy with at the time) & just before exchange need to drop their offer by £20k because the survey indicated that the house needs a new roof (it doesn't) ie their investments didn't mature to the amount they thought they would.
All throughout being reassured that they were 'genuine buyers' by the EA.
No, ES's do not do 'due diligence'.
I'm now a seller who is genuinely going to move into a rental because I've been so traumatised by the whole selling/buying experience.

Our EA said that they'd seen proof of our buyer's deposit, but it turned out that he later spent it on something else; so I suppose there's 'proof' and there's 'proof'. Even if they show a bank statement or similar, you can can probably write yourself a large cheque that will show in your account as 'pending' funds, but obviously will bounce.

I suppose the only guaranteed way would be to insist that the buyer pay their deposit into an account to be held by the solicitor, but that assumes an honourable seller, when we all know that you get just as many lying, timewasting, outrageous sellers as you do buyers - so why should they be allowed to keep full control of their side (the house), keep their options open and pull out of the deal for any reason, when the buyer's hands have been tied, going on a basis of assuming they will/might be dishonourable?

Exactly, 'proof of funds' is just pie in the sky.

My 'buyers' wanted the sale to progress quickly. I found a house that was ok but not perfect because I didn't want to hold up the chain. My offer was accepted - the estate agents didn' t ask for my proof of funds or any any ID (I had proof of funds & wasn't offering what I couldn't afford).

This is why buyers offer more than they can actually pay - they either hope that the vendor will get so far down the line, committing to their onward purchase that be they will accept a lower offer, or they are complete fantasists who envision living in a house they can't afford (I've experienced both).
I think this would change if there were penalties applied.
I work in finance, my job involves looking at every £ and penny that an individual declares. It's a shame that this doesn't apply to the biggest financial commitment that an individual is likely to undertake in their lifetime.

@Back2Black

* I found a house that was ok but not perfect because I didn't want to hold up the chain.*

Wow, you were really committed to that chain!

We provided the scanned bank statement and mortgage offer to secure our offer! Although I suppose we could then have spent the deposit the next day! I suppose that reduces the risk though, rather than just taking someone's word for it. We got the bank statement stamped in branch although that could probably have been faked?!

Our buyer's offer came with it being 'solicitor verified' which I assumed meant the solicitor had seen it and could verify it (perhaps they'd conveyanced a sale for them?)

When I was a cash buyer, the EA wanted evidence. I provided bank statements from within 2 weeks of the value of the property. I also provided the name and address of solicitor and their email and the EA confirmed with them that they’d been appointed.

Yes, I could have spent the money by exchange. But I clearly was someone with large sums of money in the bank at that point. I wasn’t one of those who said they were a cash buyer and several weeks down the line, turned into one of those who actually needed a mortgage or to sell something myself to have the funds.

There are no guarantees until exchange. Everyone has to know that. But evidencing funds knocks out total time wasters at the start.

If I was looking to. Market my house, I would ask each EA who did a valuation what process they went through with people making offers. I would never go with an EA who didn’t verify funds, mortgage in principle, an offer that a. Buyer themselves was holding etc.

But lots of people aren’t very savvy. Home buying isn’t a frequent experience for most and they can be persuaded by EAs who don’t want to putthe leg work into verifying buyers and lots of sellers have no idea about asking for proof of funds. This is very clear by how many buyers come in MN and are shocked when they are asked for their own proof of funds and don’t actually have them!

Nothing is guaranteed until exchange, but buyers and sellers really can give themselves the best chance. Of course realistic pricing is vital, but having got the paperwork and ID etc all ready beforehand, having a big stack of large envelopes and stamps and responding to requests for info by return, so ensuring everything keeps. Moving along as fast as possible is important. Really vital is quizzing the EA about the buyer before accepting an offer and ensuring the EA asks all do the Qs of prospective buyers and pushes on anything which isn’t clear. Even still you can’t be sure…but you can be as sure as possible. And all this applies at the moment in hot markets. When the market is cold, even getting an offer can be a struggle.

Just wondering how did you know each buyer's affordability? Some estate agents ask for proof of deposit, whether it is a cash buyer or not, .. But they don't ask for detail of income and outgoing nor profession. Just wondering