What does 'Cash Buyer Only' mean when buying a property?

Find out what Cash Buyer Only means when you are buying a property. 'What does Cash Buyer Only mean?' plus over 150 other property related terms and jargon in plain English

Cash Buyer Only

Have you seen the term 'cash buyers only' on a set of property details? Why is it that some properties are reserved only for those with bundles of cash? And of course can you get around this?

Estate agents point out a "cash buyer only" property to stop those who need a mortgage inquiring about it. So what makes some properties different that a bank wouldn't want to lend money for you to buy it?

There can be structural issues - such as subsidence with no insurance cover and no clear indication on whether the situation is deteriorating or has stabilized.

But the most common reason is that the property doesn't have an indoor bathroom or sometimes lenders might even refuse if there is no indoor kitchen.

I have no idea what makes this such an issue in many circumstances. I mean, yes, there is some plumbing work to do when you move in but if it is obviously a house (just a very dated one) such properties are usually priced well below the market value to reflect this so they should be as safe an asset as any other for a lender.

Banks argue that mortgages are for residential properties and a property without a toilet (and perhaps kitchen) is uninhabitable and so not residential but that seems a bit pedantic if a house is obviously a house. Still, they make the rules.

Getting a mortgage on a cash buyer only property

Yes you can! But before I start a word or realism. If the property is priced to reflect the no bathroomness and no kitchenness of itself then the chances are a developer with cash is going to snap it up.

But, but, but - let's say they haven't and you want it. How do you do it?

The best approach is to talk to mortgage brokers about lenders that will do 100% retentions. I'll explain this with an example:

Lets say there is a house on the market for £100,000 but it has no bathroom. You have a £5,000 deposit.

What you need is a lender who says "I think this house is worth £100,000 (or more) if it had a bathroom but until then it is worth nothing". In other words they value the property at (or above) the amount you would need for a mortgage but then say they won't lend anything until it has a bathroom.

In property lingo this would be a £95,000 retention - everything you want to borrow is blocked until the condition (having a bathroom) is met.

Now you agree with the seller for a long period between exchange of contracts (when you pay your £5,000 deposit and become legally bound to buy the house) and completion (when you have to pay the other £95,000 and pick up the keys). Lets say 3 months.

You also agree with the seller that during that period you can have free access to the house for the purposes of fitting a bathroom and you get this written into the contract.

You also agree with the seller that if they pull out after exchange they are liable to the costs of said bathroom and perhaps throw in a penalty amount as well for all your wasted time.

Once the bathroom is in you go back to the lender and say, "You know you said that house would be worth £100,000 if it has a bathroom ... well now it does!" and the lender sends a surveyor round to flush your brand new toilet and tick a box on a form.

The lender is now ready to release the funds because the property is "residential" and you can go ahead with completion.

It's fiddly ... but it is possible .... so if you have seen a property that you really want but it says 'Cash Buyer Only' and you're ready for a bit of mucking around you can pull it off!

To find out more about Cash Buyer Only scenarios and how to navigate them pick up a copy of my ebook How to Really Buy a Property.