Is cash really King when it comes to buying property?


Many in the real estate industry firmly cling to the belief that cash is still King when it comes to buying real estate. Industry experts will tell you that cash talks when it comes to sealing a deal and it is true there are a number of advantages to going in with a cash offer. However it’s not necessarily all smooth sailing when you opt to go in with cash when buying a home.

Award-winning property consultant Michelle Kerr says, “Cash always talks but the price offer talks louder.” “Most sellers will be focused on the price being offered first and foremost,” Ms Kerr said. “Sellers do find the prospect of a cash offer appealing, but not at the expense of the final selling price.” Ms Kerr said buyers often assume they will get a sizeable discount for a cash offer, however they can end up disappointed if it’s used as a tactic on a home that is highly sought after. She cautioned that rather than dealing with a plethora of ‘cash’ buyers, the vast majority were those who had gone in prepared and had a high level of pre-approved financial backing. She also cautioned prospective buyers about being aware of the conditions surrounding a ‘cash’ offer. “It’s important to be aware that a cash offer is unconditional and that you are now legally bound to proceed to settlement or risk being sued for the full sale price, less your deposit if you choose not to proceed,” Ms Kerr warned.

Ms Kerr said although it could be seen as the best option for both buyer and seller, cash offers did not come without their complications. She said buyers looking to secure finance to make a cash offer needed to be aware that the bank may still require a valuation on the property you are hoping to buy. “The seller is not obliged by law to allow the valuer access to the property,” she said. “In most case sellers are happy to oblige, however you can’t guarantee that they will and there is no way you can force them, which in most cases means no valuation and therefore no loan approval.” Ms Kerr said with record low interest rates, many with the means at their disposal are choosing not to let their money just sit in the bank attracting bank fees. These same people found themselves at the mercy of stock market volatility, so instead, they are putting their money into bricks and mortar.

However, she added lower rental yields were having an impact on investors looking for the highest returns on their money and she cautioned that they should focus on a long-term objective, rather than getting caught up in the daily ups and downs of the market. She says in very soft markets, you tend to see a high level of cash offers as opportunistic buyers look to prey on seller’s desperation. “Even though the market has softened in the last 12 months, we are certainly not in that type of market at the moment. “Good quality homes will always be in fashion and will always be highly sought after.”

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Michelle Kerr