What cash for houses means
A cash sale is one in which the purchase does not depend on the buyer taking out a mortgage. In a property website's guide to selling a house quickly for cash, the approach is described as unconventional, and its appeal to sellers is put down to speed and relative simplicity. The guide notes it is not for everyone. Cash buyers can be difficult to find, and they often push to negotiate down.
The guide reports the view of the head of a property group that selling homes for cash and buying them the same way is steadily increasing, with reasons including a listing expiring, a divorce, and financial pressure. The guide also separates a buyer who can complete without a mortgage from one who makes what buyers call a "cash offer" while expecting a loan to be approved.
How a cash sale usually works
The guide sets out the steps it says sellers can take. An agent quoted in the guide says a genuine cash buyer can show proof of funds quickly, and suggests asking for that before accepting an offer. The agent quoted in the guide says offers should be made in writing. The guide also reports that agent's suggestion that sellers choose carefully who acts for them, so the person chosen is one believed to have the seller's interests at heart rather than someone after a quick transaction and commission.
The guide notes that some buyers describe an offer as cash because they expect to get pre-approval for a loan, or are confident a loan will be approved. The guide points out that approvals always come with conditions, such as a formal valuation being done, or the buyer's other homes being used as security. The agent quoted in the guide says these are not cash buyers.
A property marketing strategist quoted in the guide says sellers who want a quicker sale could also consider an auction. The strategist says the terms of an auction mean a contract cannot be made subject to finance, which gives sellers a similar level of certainty that settlement will take place as a cash sale would.
Cash buyers can be difficult to find, and they often push to negotiate down.
What sellers usually weigh
An agent quoted in the guide says sellers need a firm idea of what a property is worth, because cash buyers are likelier to negotiate down. To work out what a property is worth, the guide suggests having it appraised by a local agent, or gathering a few quotes to compare. The agent quoted in the guide also says a seller in a hurry may decide it makes sense to take slightly less for a quick sale, while a seller who is not in a hurry may prefer to wait for a pre-approved buyer who can pay more.
A property marketing strategist quoted in the guide says a "for cash" campaign should draw as much competition as possible from as many buyers as possible. The strategist says this can press cash buyers to raise their offers closer to what financed buyers would pay.
Cash buyers in the Australian market
A property news site reports on PEXA's Cash Purchases Report, which found that in NSW, Victoria and Queensland, more than a quarter of homes sold in 2023 were bought entirely with cash, by buyers the report describes as unaffected by interest rate rises. The report put the share at 28.5 per cent of home sales. Queensland had the largest share, 29.6 per cent, with NSW on 27.7 per cent and Victoria on 25.2 per cent.
PEXA's report suggests the buyers paying cash were likely to be retired, asset-rich homeowners who had accumulated savings and superannuation. The report suggests that in locations described as sea change or tree change, the likely buyers were retirees seeking cheaper places to retire, while inner-city purchases were likely to be made by wealthy owner-occupiers moving to a smaller or larger home, along with local and international investors. Among the places named as drawing cash buyers are Central Melbourne and Broadbeach.
The report quotes PEXA's chief economist saying cash buyers are changing how the residential property market works, and that the relatively large size of the group helps explain why the market held up in 2023 even as interest rates rose fast. A chief economist at AMP is quoted saying cash buyers acted to some degree as a shield against falls in the market.
Timeline
- 2023Cash purchases were 28.5 per cent of home sales in NSW, Victoria and Queensland.
Questions people ask
- What is cash for houses?
- It describes a sale in which the buyer does not need to take out a mortgage. A property website's guide to selling quickly says the approach appeals for its speed and relative simplicity, and that cash buyers can be difficult to find and often push to negotiate down.
- How does cash for houses work?
- The purchase is made without the buyer needing a mortgage. The guide says a genuine cash buyer can show proof of funds quickly, that offers should be made in writing, and that proof of funds should be asked for before an offer is accepted.
- Do cash buyers pay less?
- The guide says cash buyers are likelier to negotiate down, and quotes an agent's view that a seller in a hurry may decide to accept slightly less for a quick sale, while a seller who is not in a hurry may wait for a pre-approved buyer who can pay more.
- Who pays cash for houses?
- A property news site, drawing on PEXA's Cash Purchases Report, suggests the buyers paying cash are likely to be retired, asset-rich homeowners, along with wealthy owner-occupiers and investors in inner-city areas. The report found that in NSW, Victoria and Queensland, more than a quarter of homes sold in 2023 were bought entirely with cash.