Would you bid cash?

[Mum5net]

DNiece is a FTB. She’s after a house at £220k. It’s going to sealed bids. My DSis and I have just received a small inheritance we could add to DN’s deposit and help her bid cash and then she could follow through almost immediately after completing with a mortgage. Has anyone done this and is it v complicated? What do we need to be aware of? Also do all sellers want a cash bid or do they care?

So you're saying that she'd pretend she was a cash buyer using your funds, transfer them back and then organise a mortgage? Yes that could go wrong.
Or if you're saying that she sorts the mortgage after she completes, that's also tricky as you would need to be joint owners of the house or legally sign the money away as a gift and rely on her honesty to get it back.

Lots of auctions require deposit on the day and then payment in full VERY swiftly after - I don’t think I have ever seen anything over 14 days, so two weeks to pay everything. Nice you want to help her out, but unless she can pay in full in a fortnight I don’t see this plan working.

It's not an auction though, just sealed bids? So best and final offers from the multiple people interested.

Sorry reading with tired eyes stuck on a train going nowhere. Cheers for the correction.

Yes, not an auction.
She's up against several couples and so will probably miss out. Me and DSis were just chatting through all the options.

Yep, sorry, apologised for the miscomprehension.

It's really nice you want to help.

Just thought of another flaw in this plan…
If DN owned the house, say for a week, then applied for a mortgage to pay us back, would DN technically still be a first time buyer?

You need to speak to a financial advisor to see if this is even possible.

Your neice might have to wait a while (6 months ?) before raising a mortgage on an unencumbered property that she has just purchased.

Lender might also want to know how she came to buy the property in the first place, without a mortgage, and then wants to mortgage it for a sizeable amount shortly afterwards. Would have the lender and solicitors screaming Money Laundering......and Not surprising either. Great way to "hide" dirty money.

I'm not sure you're getting the correct answers on this thread, I think there's a lot of guessing going on.
Basically you are doing two things, one is buying the house with pooled money.
The conveyancer would only be acting for her and not a mortgage company, so as long as the funds passed money laundering checks it would be usable. And you could either go on the deeds or not, but simpler not to if you trust her. You could even get a charge on the house but again that would complicate things. But I think you shouldn't do this at all if you don't trust her.

Then once the house is done and dusted she would then take out a mortgage to release the equity. This would need a solicitor to act on behalf of the mortgage company, and they would want to see all the information about the house, so searches, survey, etc, as well as her financial situation to pay it back. If any of that doesn't check out it might affect the amount they would lend if any. So that's a risk that you might end up being the lender.

I think it's sensible and doable but it does add a risk that the survey might not be good enough once the house is bought, but to find out more I'd conduct a broker or a mortgage company.
You may even be able to race the mortgage company, so you apply as normal, and if there are any delays then the mortgage offer will come in time, and if not then you can buy with cash until the mortgage comes through.
Expect the legal costs to be a little higher though.

Thank you all, DN is a great person so no doubts on integrity.
@johnd2 thank you, you have summarised quite succinctly what me and DSis were trying to achieve. You have also pointed me in a new direction. I still think the above might be do-able, and I completely agree with all the stages and caveats you suggest. But rather than jumping through the hoops and incurring extra legal fees, which would be inevitable, I'm going to suggest to my DSis and DN that I give my DN an interest free loan of £2k, repayable at say £25 or £50/ month, that she can add to her maximum bid. So instead of being able to go to sealed bid with £220k, DN can go to £222k and maybe DSis might match do the same and DN can go to £224k.

If you and your sister each fund her to the tune of £2 - 4k, will this mean that she won't need a mortgage at all?

Because if she does need a mortgage, you'll need to confirm that the money from you is a gift, not a loan. And you'll also need to show where your money is coming from.

DN will need a mortgage.
DN can reach the advertised price of the property (£220k) with her own savings and a pretty chunky mortgage for one person. She hasn't funds beyond the £220k. She's not asking for any help.
Just DSis and I were racking our brains as how we could improve her sealed bid situation. Our dead parent's house has recently sold, hence the small inheritance. But I take your point@Seeingadistance about the distinction of a loan and a gift.
It looks like DN will just need to be lucky on sealed bid day,

I'm confused! I assumed you meant you and your sister would just be loaning her an extra bit of cash to top up her offer? As obviously then she'd need the mortgage before she owned the house? Or do you mean apply for a bigger mortgage to pay you back?

I think the situation is that the house is £220k. DN can do a £50k deposit and £170k mortgage (for example). OP is suggesting that DN puts in £50k and she gives £170k so that DN is technically a cash buyer, but then at a later date DN applies to release equity via a mortgage and repays OP.

Oh but I thought I saw 2-4k mentioned... that's why I couldn't work out what was going on 🤷‍♀️😂

DN offered £221k. Stated her position - renting month to month rolling contract and solid deposit. However, hasn’t heard from EA yet. Odd they didn’t get back to her.
Bids had to be in at noon.

@Mum5net best of luck to her. Sounds like they have a higher offer and are running checks that they are proceedable.

This is in the north . DN thinks the higher bidder could possibly have a property to sell and might be in a chain but says she’s no idea why she thinks that…
if that is the case, would it be normal to take a day to consider? How do they tell what’s proceed able?
I am in Scotland so I’ve no experience. In Scotland you would know in literally 90 minutes!

So I'd expect them at this point to be asking for bank statements, proof of funds, and AIP for any mortgage. Also solicitors details and evidence they have instructed someone. If that does come back quickly (probably by Monday) they'll likely move to the next bidder.

Thank you @Springadorable so this isn’t the end of the road for her? She could still come through if they decide they want a FTB with fewer complications? Is this quite common?

I'd say it depends on how many other bids there are and at what price points. If there is only a few grand between them then yes she's definitely in with a shout 🤞

Sadly, DN found out at 11am from EA that another FTB had offered more. Onwards and upwards.