Tips for buying a home with cash
How is buying a home with cash done? While not ideal for most people, this scenario does occur, particularly when sellers have noted that there are already competing cash offer on the property. Here are some things to expect if you’re buying a home with cash on the barrelhead.
Buying a home with cash tip No. 1 – Leverage your position
Since a cash buyer like yourself can skip the loan qualification process, the seller may like that your money can lead to a quicker sale. The added power this gives the cash buyer can be leveraged into requests for such things as a closing timeline, home repairs, warranty and more. You may even be able to get the seller to cover closing costs as a contingency of your cash deal.
Buying a home with cash tip No. 2 – Work with a broker who does cash deals
In order to avoid potential legal issues in the future, it’s a good idea to use a real estate broker or lawyer who has cash home sale experience. You want a clear title on the property, and even in a cash deal, things can accidentally be overlooked.
Buying a home with cash tip No. 3 – Measure your cash budget
Don’t buy with cash if doing so fails to suit your financial situation. Make sure you have plenty of cash left over for emergencies and other needs. If the home is an investment for future turnaround, consider whether you’ll be making more than what a mortgage would cost (assuming you’re eligible).
Buying a home with cash tip No. 4 – Leave yourself an out
If the home turns out to be a “Money Pit” a la the Tom Hanks film of the same name, you’ll want to make sure you still have an escape hatch before things go south. Schedule a home inspection before finalizing the deal. If the seller seems particularly desperate to sell or the property has been on the market for a while, use that in your favor and try to get them to pay for the inspection. It’s cutthroat, but that’s life in the big city.
Buying a home with cash tip No. 5 – Estimate costs
Sale and post-sale costs should be estimated ahead of time. Transaction costs, origination fees, property appraisal and mortgage interest can be saved with a cash sale, but in the end, buying without enough information can lead to you paying more due to a low-ball home valuation or higher taxes. Home improvement costs may be high, so looking into that before buying is wise.
Buying a home with cash tip No. 6 – Understand what no mortgage means
Remember, there are tax benefits to holding a mortgage. A cash sale will mean that you won’t be holding that kind of good debt on your ledger. Having a mortgage on your credit report can make it easier to borrow or obtain good rates on other financial products like credit cards.
Buying a home with cash tip No. 7 – Get the appraisal
While it may cost a few hundred dollars, having your potential new home appraised is the only way to know for sure that you are buying at true current market value.