Cash is king – what you need to know as a cash buyer

The general sentiment is that a cash purchase is always a better option when buying property. However there are many factors to be considered before putting pen to paper.

Verbal vs. written contracts for conveyancing

The upside to cash purchases

One of the most appealing advantages of buying a property for cash is the fact that no interest will be paid on a home loan, which over a typical home loan duration can amount to a significant sum. Many purchasers feel this allows for more flexibility on a monthly basis as no repayments need to be taken into account.

Further, there is no need to worry about financing being approved which can often be a stressful and time-consuming process. Your credit record will have no bearing on your ability to purchase the property and no bond registration costs will be due.

The prospect of a cash transaction can also be a more attractive option to serious sellers. Often a cash purchase can result in a smoother and faster process as the purchase relies on fewer conditions. Since a seller might see this as an advantage, the buyer may also be in a position to negotiate a better purchase price.

It is worth noting though, that buyer will be liable to pay the full purchase price into the transferring attorneys trust account in accordance with the offer to purchase, and a guarantee will be issued to this effect. This means that a purchaser must have access and means of transferring this substantial sum of money when required.

Of course, where there are benefits to be taken advantage of, there are typically potential pitfalls to be avoided, and purchasers should consider a cash buy from all perspectives before taking the leap.

Potential disadvantages to a cash purchase

If you are purchasing a property with cash, it might mean that a large portion of your savings or cash reserves will be tied up into one asset which can cause problems if an emergency arises. A property can take months to sell and register in the new owner’s name, leaving one cash strapped in the interim. Raising a mortgage bond against your property in this instance can take some time causing unwanted pressure.

While purchasing cash might work for some, it may not for others. There is a possible middle ground where a buyer is able to spread the risk by opting for a small mortgage. Not only does this approach leave you with some cash liquidity but also gives you the chance of being approved for mortgage finance with the best available interest rate.

Before a decision is made regarding purchasing cash or not, all opportunities and consequences should be discussed with an expert, such as a mortgage originator who can provide valuable insight into financing a property. Follow Snymans on Facebook for more legal information, tips and news about property.

Recommended for you

Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

Do you need a gas compliance certificate?[post_view before=""]

If you’re selling a property with a gas installation, a certificate of conformity will need to be obtained before transfer of the property. This certificate is issued in terms of Regulation 17(3) of the Pressure Equipment Regulations and has to be issued by an authorised person.

Read More
Buying tenanted properties - don’t get caught out
Contractual Matters

Electronic signatures in South Africa[post_view before=""]

There’s an ongoing discussion in the commercial world, especially in property law, around the types of documentation that can be signed electronically.

Read More
Curatorship - what does it mean to be put under curatorship?
Contractual Matters

A closer look at bank assisted sales[post_view before=""]

A bank assisted sale (or distressed sale) is the sale of the owner’s property with the assistance of the bond holder (the bank). Contrary to popular belief, the bank doesn’t sell the property but rather assists the owner with the sale in order to limit damages for all relevant parties.

Read More
Minors and immovable property
Contractual Matters

What does the Coronavirus lockdown mean for your Offer to Purchase?[post_view before=""]

We are experiencing unchartered territory with the current lockdown due to the Coronavirus and while it is impossible to predict what the future holds or have immediate answers to what this might mean for each property related scenario, we can offer some advice to those who have signed an Offer to Purchase prior to or during the lockdown in South Africa.

Read More
Your Trusted Partner in Residential and Commercial Property Transfers
Contractual Matters

Rectifying information on a title deed[post_view before=""]

A title deed is the formal record of who the current owner is of a specific piece of land so naturally, making sure that this information is accurate and up to date is incredibly important.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

Cash is king – what you need to know as a cash buyer

The general sentiment is that a cash purchase is always a better option when buying property. However there are many factors to be considered before putting pen to paper.

Verbal vs. written contracts for conveyancing

The upside to cash purchases

One of the most appealing advantages of buying a property for cash is the fact that no interest will be paid on a home loan, which over a typical home loan duration can amount to a significant sum. Many purchasers feel this allows for more flexibility on a monthly basis as no repayments need to be taken into account.

Further, there is no need to worry about financing being approved which can often be a stressful and time-consuming process. Your credit record will have no bearing on your ability to purchase the property and no bond registration costs will be due.

The prospect of a cash transaction can also be a more attractive option to serious sellers. Often a cash purchase can result in a smoother and faster process as the purchase relies on fewer conditions. Since a seller might see this as an advantage, the buyer may also be in a position to negotiate a better purchase price.

It is worth noting though, that buyer will be liable to pay the full purchase price into the transferring attorneys trust account in accordance with the offer to purchase, and a guarantee will be issued to this effect. This means that a purchaser must have access and means of transferring this substantial sum of money when required.

Of course, where there are benefits to be taken advantage of, there are typically potential pitfalls to be avoided, and purchasers should consider a cash buy from all perspectives before taking the leap.

Potential disadvantages to a cash purchase

If you are purchasing a property with cash, it might mean that a large portion of your savings or cash reserves will be tied up into one asset which can cause problems if an emergency arises. A property can take months to sell and register in the new owner’s name, leaving one cash strapped in the interim. Raising a mortgage bond against your property in this instance can take some time causing unwanted pressure.

While purchasing cash might work for some, it may not for others. There is a possible middle ground where a buyer is able to spread the risk by opting for a small mortgage. Not only does this approach leave you with some cash liquidity but also gives you the chance of being approved for mortgage finance with the best available interest rate.

Before a decision is made regarding purchasing cash or not, all opportunities and consequences should be discussed with an expert, such as a mortgage originator who can provide valuable insight into financing a property. Follow Snymans on Facebook for more legal information, tips and news about property.