Cash only, please: why you can’t buy some properties if you need a mortgage

A 12-bed property in Co Galway on sale for just €395,000; a three-bed semi-d in Donegal for €110,000; a one-bed in south Dublin for €270,000.

The catch? The properties are being sold to cash-only buyers.

Yes, if you’re in the market for a new home – or indeed have your eye on a potential investment property – you may have come across properties that clearly state that cash buyers only will be considered.

But why are such properties restricted to those with the funds to buy the property outright?

Cash only

While there can be various reasons why vendors look for a cash buyer, typically, properties that come to the market looking for a cash buyer do so because there is an issue that will prevent a bank lending against it. In other cases, the seller may just want an uncomplicated sale.

“The issues can be as follows: planning; structural defects; property is derelict with no kitchen, bathroom, or electricity; property has pyrite or mica issues,” says Michael Dowling, mortgage broker and managing director of Dowling Financial.

In Moycullen, Co Galway, for example, Michelle Burke Auctioneers is listing a 12-bed, 12-bath property – with two fishing boats included – in an “idyllic setting” on the shores of Lough Corrib, for the knock-down price of €395,000.

While the property was built more than 100 years ago, it was upgraded and extended over the years, and according to the agent, and now has a “design and layout [that] is both quirky and delightful”.

This layout does not, however, comply with planning – which is why the property brochure advises that the sale is for cash buyers only.

In Rathangan, Co Kildare, Kelly Hudson has a three-bed detached home for just €235,000 – the catch? It’s a wooden cabin.

According to agent John Kelly, while the cabin has planning permission, its construction means it would be “really hard to get a bank to lend on it”.

Construction issues also remain a problem. In Balbriggan, Conerney Estate Agents has a three-bed, three-bath semidetached house for sale in Moylaragh Crescent. It’s on the market at €225,000, but will only suit cash buyers, as “there is some pyrite evident”.

In Donegal, it’s not uncommon to find properties looking for cash buyers due to the ongoing issue surrounding the use of mica blocks.

A three-bed, two-bath semi-D in Letterkenny is currently on the market for the knock-down price of just €110,000. Similarly, a picturesque property in Ballyliffin is on the market for just €150,000, as it is “affected by defective concrete with external and internal cracking”. The sale, which includes furniture, is to cash-customers only.

Apartments often also feature. Numerous boom-time apartment schemes were built without appropriate fire and safety features, resulting in significant bills for homeowners to sort these out. Sometimes they have been carried out – but sometimes they remain to be done.

In Drumcondra, for example, Leonard Wilson Keenan has a spacious two-bed apartment at the Griffith Hall development. Typically, a two-bed property in the area would sell for north of about €350,000, but this one is on the market for €315,000.

Why? “The development is in the final stages of having remedial fire and safety works carried out so only cash buyers can purchase until all works are completed,” according to the agent.

Similarly in the docklands, DNG is looking for a cash-only buyer for a two-bed apartment on Clarion Quay in the IFSC. Like a number of other properties in the area that were built around 2005-2006, it has fire safety issues.

On the market for €495,000, agent Stephen Harrington says mortgage-approved buyers have expressed interest in the property, but banks won’t lend until all works have been carried out and a new fire certificate is in place.

Sometimes, however, vendors just want a quick sale.

In Wexford, the vendor of a two-bed holiday home, “with development potential”, in the seaside village of Courtown is specifically looking for a cash purchaser. Selling agent Sherry FitzGerald says it’s likely because the vendor is looking for a straightforward sale, without any of the delays that can be associated with getting finance.

Not obliged to disclose

While the aforementioned properties are clearly indicated as being suitable for cash-only buyers, curiously enough, there is no obligation on the vendor to disclose any issues with the property to the estate agent.

If, however, the estate agent learns about it, according to the Property Services Regulatory Authority (PSRA), which is charged with regulating estate agents, they must then disclose this. Agents “cannot knowingly provide misleading information to prospective buyers in respect of the property advertised for sale”, says a PSRA spokesman.

The onus then – as when buying any property – is on the buyer to check out the suitability and condition of a property before buying.

“It is advisable for a potential purchaser to use competent professionals to undertake the necessary surveys, due diligence and to ensure that their solicitor asks the necessary questions, and makes the necessary inquiries, on behalf of their client with the vendor’s solicitor, relating to the property for sale,” the PSRA advises.

In any case, it is typically in the interest of an estate agent to make sure that any issues are disclosed upfront; after all, it’s in no one’s favour for issues to arise later in the day, and the sale to fall through time and again.

As agent Kelly says, it’s definitely better to be “straight up” about any potential issues that the cash-only label can denote.

“I’d rather put that [cash only] on than misguide people,” he says, “A lot of people think you’re being smart, but you’re not. You’re trying to save people time..

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Remediation work

But might a bank change its mind, if the buyer intends to undertake remediation work or to seek retention planning permission?

The agent of the aforementioned Balbriggan property, for example, says it is eligible for a grant through the Pyrite Remediation Scheme, which was established to help homeowners impacted by defective blocks, and which covers 100 per cent of the costs involved in repairing such a property.

However, even when work is on the agenda, getting a mortgage can still be difficult, says Dowling.

“The bank will want a structural survey and costings on the proposed works. Based on these documents, they take view and can lend, but always on a case-by-case basis,” he says, adding that issues of mica and pyrite “can be difficult, depending on the extent of the problem”.

If it’s a planning issue, “it depends” on the particular circumstances, he says.

Discount

Of course, those willing to take on a property that may have some issues will be likely to look for a discount. Reducing the pool to cash-only buyers means it will likely take longer to sell, says Kelly.

And with a smaller pool of potential buyers – plus possible issues that will cost to sort out – you can often expect a lower price.

As Dowling says, “They are buying knowing the issues, but get a discount on the price.”

The aforementioned Moycullen property has a “very keenly” priced asking price of €395,000, while the Balbriggan property is “listed at a very competitive price”.

Even where there are no issues, a cash buyer may be able to negotiate a better price, due to the speed with which they can transact.

Under the hammer

Many cash-only properties also come to the market at auction.

Richard Hoey is head of private clients with auction platform BidX1. And of those residential properties put up for auction, “a fair amount” will be cash only, says Hoey, noting that issues with boundaries, mica and pyrite are ones that can crop up.

“It’s a mixed bag,” he says.

About 70 per cent of purchasers of residential property on the auction site are cash buyers, with the remaining buying with finance of some sort.

Cash buyers only: Five examples

Bel Air, Ashford, Co Wicklow

Three-bed semi-detached.

Asking price €295,000

Moycullen, Co Galway

12-bed detached home.

Asking price €395,000

Rathangan, Co Kildare

Three-bed log cabin.

Asking price €235,000

Buncrana, Co Donegal

Three-bed semi-detached.

Asking price €110,000

Clarion Quay, IFSC, Dublin 1

Two-bed apartment.

Asking price €495,000