I’m a cash buyer – how much can I haggle off the price of a house?

New figures suggest cash buyers are moving in amid the housing market downturn.

Overall, cash buyers purchased 34 percent of all homes sold this year, according to Hamptons figures, representing the highest level in seven years.

This matches data from Zoopla. It says that over the past five years, cash buyers were responsible for only one in five sales. This year the property website also suggests that one in three sales will be through cash, rather than through mortgages.

And in many parts of the country, cash buyers are likely to make up an even larger share of purchases.

It is fair to say that higher mortgage rates have weighed heavily on house prices and sales volumes this year.

Bank of England data showed mortgage lending for home purchases continued to fall in September, with activity falling by more than a third compared to the same period in 2022.

However, despite the sharp fall in mortgage-backed purchases, the total number of homes sold in September is 17 per cent lower than the same period last year, according to HMRC figures. This suggests that cash buyers have a role to play in supporting the market.

Aneisha Beveridge, head of research at Hamptons, said: ‘In the wake of a shift to higher interest rates and a resulting calmer housing market, it is perhaps unsurprising that cash buyers have remained much more resilient.

‘Most of this has been driven by downsizing companies who prefer a calmer market so they can plan their further purchasing before selling their own home.

“Higher mortgage rates have also acted as a catalyst, causing some households to downsize sooner to pay off their remaining mortgage balances and become mortgage-free.”

Is now a good time to buy with cash?

In some ways, this is a good time to buy with cash. Homes are staying on the market longer, which means some sellers are feeling increasingly desperate and more willing to consider lower offers.

Zoopla announced last week that it takes almost two weeks longer for houses in England to be sold compared to the same period last year.

And according to Hamptons, the average number of days between when homes hit the market and when they are listed is 61 days.

This ties in closely with Rigthmove, which says the current average time to sell homes is 59 days.

To put that in context, Hamptons says that this time last year, the average home took 45 days to find a buyer. The year before it lasted only 28 days.

Henry Pryor, a professional buying agent, says: ‘This is a good time to buy for cash, even if it isn’t the exclusive club you might expect.

“Nearly 40 percent of the deals we currently close involve a cash buyer, someone who almost always trumps a buyer who needs a mortgage. Cash buyers can also usually get a better deal.”

However, Pryor admits that many cash buyers are also in danger of overpaying.

He adds: ‘Buyers with cash can afford to be more generous with an offer on a property they like, and don’t get the sanity check of a mortgage valuation. It’s all too easy for these buyers to overpay.

‘They rarely have help other than a lawyer and often rely on the selling agent for advice on what to pay.’

What discounts can a cash buyer expect?

Another sign of a struggling housing market is the fact that sellers are having to lower asking prices to find a buyer.

According to Hamptons, 53 percent of homes sold last month had their asking price reduced before the sale.

In October last year, 40 percent of homes were sold after a price reduction. According to Hamptons, 29 percent of homes were sold in October 2021 after a price reduction.

This creates an additional complication in that buyers could claim to have received a large discount on the asking price, when in reality the asking price had to be reduced due to a lack of interest.

According to Rightmove, the current average price reduction is around 6 percent.

Looking at the average discount on the final asking price compared to the sales price, Rightmive says it averages around 4 percent.

Ultimately, as buyer’s agent Henry Pryor often says, asking price should not be mistaken for true value.

Stuart Cheetham, CEO of MPowered Mortgages, believes that if you’re not embarrassed by your offer, it’s probably not low enough.

He says, ‘Go low, make a bold offer, why not. Do your research on the property and the area.

“Find out how long it’s been on the market, find out the buyer’s situation, interview your agent.

‘Take advantage of an advantageous position as a cash buyer.’

Henry Pryor believes that a cash buyer will ultimately pay less than someone buying with a mortgage.

He says: ‘I think in today’s market a cash buyer should be worth 5 per cent more than a buyer with a mortgage.

‘It’s something the buyer should shout about during negotiations and it’s important that you can prove it.

‘All buyers must make an offer on a property that has been for sale for some time.

“These sellers can’t afford to be picky and wait for a buyer to bid so hard because there will be less competition.

“Keep in mind that you should never measure the success of your deal by the asking price.”

It is also important to remember that the UK property market is not just one market. It consists of thousands of local markets that all behave differently from each other.

“The market is not homogeneous,” adds Stuart Cheetham, “so it is difficult to give specific advice to cash buyers.

‘There will still be a few areas where sealed bidding continues to take place where houses are selling above asking price, but this is because demand is high in a certain part of the country.

‘Once again, other parts – now the majority – will see lower demand and therefore be able to offer higher discounts.

‘The amount of the discount also depends on how realistic the seller and his estate agent have been with their asking price from the start.

‘The most important thing is that you do your homework and don’t be embarrassed by a ‘cheeky’ offer. If you’re not ashamed, you’re probably too high.”

If you were buying with cash, would you buy now?

The big question is whether or not cash buyers should buy at this point unless they really need to.

Both Lloyds Bank and property group JLL recently predicted that house prices will continue to fall until 2025.

Last week, JLL said property prices across Britain will have fallen by 6 percent by the end of 2023 and by 3 percent the year after.

So on the one hand, you could argue that this is a good time for cash buyers to transact, due to reduced competition from mortgage buyers and buy-to-let investors.

However, others will argue that house prices need to fall further and that waiting will ultimately be the better option.

Stuart Cheetham says ultimately it will depend on one’s situation.

‘If you are buying a property to live in for a long time, for ten years or more, make sure it is the right property and get the best possible discount.

‘When it comes to an investment or a buy-to-let, time is on your side. We’re not at the bottom of the market yet, so you might want to wait. Be sure to take advantage of the discount now, but for the right home’

Henry Pryor adds: ‘Cash buyers don’t get a discount or a bargain, they can’t immediately sell the property they buy for more money.

“What they can do is get a better deal, be the buyer of choice when there are others who want a property but need a mortgage.

‘We are not yet at the stage of the market where there are more sellers than buyers. There are only sellers who are generally more optimistic than buyers.’