Do Cash Buyers Need A Survey?
When buyers are purchasing a property with cash and not relying on a mortgage, a key question is whether they still need to obtain a survey. Covering the costs of repairs or defects uncovered later can hit cash buyers hard. Surveying provides insight into a property’s true condition to avoid nasty surprises. However, some cash purchasers may be tempted to skip surveys to speed up transactions or save money. Weighing up the risks and benefits helps cash buyers determine if proceeding without adequate checks is prudent.
Understanding the Survey Process
Before deciding if a survey is advisable, understand what the process involves for buyers:
- A chartered surveyor visits and inspects the property.
- They objectively assess the building’s condition and identify any issues.
- The roof, walls, foundations, electrics, plumbing and more are all examined.
- They determine if serious structural problems or major repairs are needed.
- The risks of potential defects are evaluated.
- Estimated costs for necessary renovations or fixes are provided.
- An overall opinion on whether the property represents a reasonable purchase is given.
- A detailed written report outlines findings and recommendations.
The survey equips buyers with expert knowledge of the property’s true state before transacting.
Gifting Money to Adult Children
Parents sometimes gift cash to help their adult children buy their first home or step up the property ladder. While well-intentioned, some financial considerations around gifting include:
- Inheritance tax may become payable if over the £325,000 tax-free allowance. Annual gifts can reduce liability.
- One-off large cash gifts may have capital gains tax implications.
- The gifted funds may affect the adult child’s eligibility for means-tested benefits or grants.
- Impacts on asset-based assessments for social care funding in future.
- Implications if the parents need to fund long-term care later in life.
- Whether other siblings should be treated equally in terms of gifts.
- The gifted funds cannot be easily retrieved if needed by parents later.
- Attaching conditions to cash gifts like paying towards future care costs.
While generous gifts can help adult children, understanding tax impacts and family dynamics helps avoid pitfalls.
Why Might Cash Buyers Forego a Survey?
Cash buyers not getting a survey conducted often cite the following justifications:
- Saving money on surveyor costs, especially on lower-value purchases.
- If the property was recently surveyed for another buyer, relying on their report.
- Appears in good condition based on visual inspection during viewings.
- Wanting a quicker transaction so proceed without delays of surveying.
- Being experienced investors familiar with assessing properties.
- I intend extensive refurbishments/renovations anyway so defects don’t matter.
- Having budgeted extra contingency funds should serious issues arise.
- Not need mortgage lender approval so valuation is not required.
- Being able to renegotiate the price if unexpected repairs are needed after purchase.
While understandable, these rationales often underestimate the risks of bypassing thorough professional surveys.
Reducing Risk Without a Survey
While unwise, some tactics may help cash buyers reduce risks if unwilling to get a survey:
- Hire a tradesperson like a builder to inspect the property thoroughly before purchasing.
- Ask detailed questions of current owners on any problems they’re aware of.
- Review any similar surveys buyers previously conducted on the property.
- Extend inquiries to neighbours about issues they may know about.
- Check council planning records for extensions, loft conversions etc.
- Visit during and after heavy rain to spot dampness or leaks.
- Negotiate a lower offer price to budget for unknown repairs.
- Ensure a portion of funds are reserved for rectifying unexpected significant issues.
- Make completion conditional on being satisfied with your inspection checks.
- Purchase enhanced structural insurance as a precaution.
While not ideal, these steps may help mitigate the risks otherwise addressed by formal surveys.
Potential Drawbacks of Skipping Surveys
Dangers cash buyers expose themselves to by purchasing without conducting an independent survey include:
- Hidden defects like subsidence, dampness, asbestos or woodworm go undetected.
- Large repair bills soon after purchase to fix unexpected issues.
- Discovering safety hazards that require urgent attention.
- Major structural problems that make the property uninhabitable.
- Learning the property breaches planning regulations if unapproved works are carried out.
- Devaluation if extensive problems exist that the buyer is unaware of.
- Buying a ‘money pit’ that needs far more work than originally thought.
- Inheriting historical maintenance issues due to lack of visibility on the past.
- Estimating refurbishment costs inaccurately with no professional guidance.
Avoiding nasty shocks after transacting highlights the need for thorough due diligence like surveys before exchanging contracts.
Types of Surveys for Buyers
Cash buyers can select from three main survey options according to their needs:
- Check a property for any urgent or serious defects and safety hazards.
- Identifies issues that need addressing as priorities.
- Less detail than fuller building surveys.
- Typically suitable for conventional modern properties in good repair.
Home Buyer Report:
- Bestseller report for older properties requiring some modernisation.
- Provides detail on conditions and faults across all elements of the building.
- Recommends repairs categorised by urgency.
- Estimates likely cost involved.
Full Building Survey:
- An in-depth inspection is best for unusually old properties or those visibly dilapidated.
- Specialist investigations like asbestos testing.
- Full technical detail on all aspects of construction and condition.
- Checks compliance with regulations.
- Valuable for buyers planning major conversion work.
The survey level chosen should reflect the property type, age, apparent condition and planned renovations.
Using Survey Reports in Negotiations
For cash buyers who opt to get a survey, the findings can assist negotiations:
- Renegotiate the price lower if the survey uncovers undisclosed problems.
- Submit details of required repairs and request vendors reduce the price accordingly.
- Ask sellers to remedy issues before completing the purchase.
- Obtain further contractor quotes to justify the requested discount amount.
- Make completion conditional on urgent safety hazards highlighted being fixed.
- Discuss sharing costs of essential repairs if vendors lack funds.
- Ensure the sale contract includes specific wording that defects were disclosed.
- Keep negotiations constructive by appreciating seller cooperation.
Where issues are identified by a survey, buyers are in an informed position to negotiate fairer terms rather than withdrawing.
Surveys Still Recommended for Cash Buyers
While surveys may represent an upfront cost, their importance for cash buyers remains:
- Independent unbiased professional assessment of the true property condition.
- Checking for hidden faults the buyer is unable to identify themselves.
- Avoiding expensive immediate repair costs after purchase.
- Alerts the buyer to any safety hazards needing urgent remedy.
- Valuable insights to guide refurbishment and renovation projects.
- Enables work budgets and schedules to be prepared realistically.
- Evidence to negotiate adjustments if serious issues are revealed.
- Provides documentation should disputes arise later.
- May identify ways to legally avoid upcoming maintenance liabilities.
Ultimately, surveys deliver crucial peace of mind. While valid reasons exist for cash buyers to waive them, benefits generally outweigh the expense.
Using Legal Professionals
As an extra safeguard, cash buyers proceeding without surveys should strongly consider:
- Appointing a solicitor to handle legal work even without a mortgage.
- Agreeing to only exchange contracts once solicitors are satisfied with property enquiries.
- Requesting sellers provide answers to standard property information forms.
- Asking sellers to contractually confirm full disclosure of known defects.
- Checking any applicable guarantees like damp proofing certificates.
- Ensuring purchases include standard property search fees.
- Making searches available to contractors to identify risks.
Though limited without a survey report, legal professionals can still execute checks to partially fill the due diligence gap.
In the quest for fast or low-cost transactions, cash buyers may be lured into dispensing with surveys. However, unknown lurking problems can make skipping comprehensive checks a false economy. For protection and avoiding nasty shocks, surveys remain advisable to reliably determine the condition being purchased. Intelligent negotiation can also turn survey insights into bargaining power for buyers. While the decision relies on risk appetite, cash buyers leaning towards an outcome without surveys should implement mitigations to avoid jeopardising investments. With so much at stake, the insight professional surveys deliver generally justifies the expense. Additionally, for those considering property transactions and managing their finances, it’s important to be aware of potential considerations related to gifting money to adult children. Understanding the implications and potential financial aspects ensures informed decision-making and financial planning.