Buying a House Without a Mortgage

15/12/2015
Buying a property without a mortgage can cause confusion about whether you really need to do all the legal checks you'd have to do if you were getting a mortgage. For most cash buyers that I speak to, they initially see not getting a mortgage as an opportunity to complete more quickly, take a view on technical issues and save money.

Although I appreciate the draw of saving money and getting conveyancing completed faster I always take cash buyers through the following reasons for carrying out the standard conveyancing process you would go through if you were buying with a mortgage. I explain why getting it wrong could lose them far more than they might save.

My best advice is to follow the same process a buyer with a mortgage would take. It can be a false economy to save a few hundred pounds at the outset to find out later that you can't sell your property to someone buying with a mortgage .

Do the checks a mortgage lender would do

When buying with a mortgage the solicitor acting for the buyer also acts for the mortgage lender and must follow strict guidelines set out in the Council for Mortgage Lenders' Handbook (You can read the CML handbook here). Whereas a cash buyer can choose to ignore certain things, a mortgage lender on the other hand cannot. Some key things a mortgage lender are concerned by:

✓ that you get property searches (invariably four searches (click to learn more) but it depends on the mortgage lender) 
✓ that the property wasn't sold less than 6 months ago;
✓ if the property is concrete built;
✓ if there is no formal management company in place; or
✓ if it is a new build and there is no new build warranty such as NHBC or Zurich Insurance

As a cash buyer you can choose not to be worried about these issues however you run the risk of an issue when you come to sell or if you try and remortgage. 

No need for a property survey

If you were getting a mortgage then you'd need to get a mortgage valuation survey. Although the mortgage valuation survey isn't a detailed Building Survey, it is at least a condition inspection where a RICS surveyor considers the value and - to a lesser extent - condition of the property. Missing property defects can be costly and with some issues such as subsidence costing in the tens of thousands to repair, opting not to get a survey on a property you are looking to buy without a mortgage can prove an expensive mistake.

You may have a very keen eye for potential issues however most savvy cash buyers get a RICS surveyor to give their property a check over to ensure any glaring issues are picked up and for the reassurance that they will be indemnified if the survey undertaken is subsequently found to have contained costly errors and omissions. 

No need for property searches

Much like when you get a mortgage valuation survey, a mortgage lender requires certain property searches to be undertaken to provide information held by the local council about the property. Knowing whether building works or extensions have been applied for and signed off is an important part of the conveyancing process and something that the local authority search gives evidence about. By not finding out this information you risk buying a property that might not have had appropriate planning for extensions/alterations. Similarly, the property might be built on contaminated land or in a high flood risk area which may affect your building insurance.

No recourse to the seller - Cash Buyer Beware

Doing your due diligence during the conveyancing process is important especially as a property is sold 'Caveat Emptor' (Buyer Beware) in England or Wales

The principle of caveat emptor means that a buyer is not able to sue a seller regarding any property defects after they take ownership of the property. These might include a broken tile, slippage from subsidence or even works completed that aren't in accordance with current building regulations. If you buy a property and didn't check these issues then the problem is yours and the costs of making good are borne solely by you.

The best advice when you are buying a house without a mortgage is to treat the process as if you were getting a mortgage. Ask questions, get information, don't cut corners and be led by your conveyancing solicitor as to best practice when buying a property. By not doing this you have a higher risk of potentially missing something that may reduce the value of your property in the open market in the future.

If you have any questions on this subject please call me on 0333 344 3234.

Author: Andrew Boast MAAT MIC, Conveyancing Director at SAM Conveyancing
Andrew has been working in the legal sector since 2000 and has helped thousands of buyers successfully buy their property. He excels in handling complex conveyancing issues and can help you with his expert knowledge of best practice conveyancing strategy.

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