Home Buying in Houston>Question Details

Kelly Robins…, Home Buyer in Grand Rapids, MI

Are there any advantages to buying a home cash?

Asked by Kelly Robinson, Grand Rapids, MI Mon Nov 12, 2012

I was deathly ill a few years back and was in a coma for 35 days, after waking up I went through 3 years of rehabilitation and in the process lost my job and was unable to pay my bills, therefore my credit is horrible, but I have a decent amount of cash due to a lawsuit.

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It makes a buyers life much easier because they don't have to deal with a lender and permits you to move more quickly than a buyer who does have to deal with a lender. This gives you as a buyer leverage with a seller but it's limited. If you're going to take as long to close as a seller needing a mortgage much of the leverage is negated.

Be certain that you still retain the right to have the home appraised and that you may terminate the contract if the home fails to appraise for at least as much as your paying. Also do not let the appraiser get a copy of the contract or know how much you're paying for it, be certain it's done blind.

A good buyer broker will be able to help you and make certain you're well represented. I've attached a link below on how to find one regardless of where your buying a home.

Good Luck and Happy House Hunting.
1 vote Thank Flag Link Mon Nov 12, 2012
Hello Kelly,
I am so glad to know that you have recovered!
You should speak with your CPA or financial advisor to weigh the pros and cons of paying cash for a home. If you can not get a loan due to your poor credit or if the interest rate is higher than you can make in an solid, safe and sure investment, cash may be your answer.
However, with the incredibly low interest rates available, you may be able to make more money by keeping your cash working for you in another investment, why would you want to lose that extra investment income?. EX. If you can obtain an interest rate of 3.5% but you can get that much or more in dividends (some non taxable) why not keep your money working for you? When interest rates go up, as they will eventually, you will have the liquidity to earn a higher return on your money. You could use the dividends to pay your mortgage, at even lower rate than available in the mortgage market thru your investment advisor or brokerage firm if you have one.To do that you would have to keep some % of the money in an account for the lender's security however, that money would still be earning interest or dividends and you would not be using your principal. Remember to factor in the tax advantages of a home loan in your consideration, but with interest rates at an all time low, there isnt much of a deduction currently.
There are many possible answers to your question, and many ways to finance a home, depending on your individual investments, available funds and comfort level.
I stongly advise that you speak with your CPA or meet with one to help you make your decision.

If i can help you in anyway, feel free to contact me.

Myra Ephross ABR,ASR,ALHS,CHMS,CNE
Prudential Anderson Properties
281 650-9779
1 vote Thank Flag Link Mon Nov 12, 2012
Hello Kelly,

First of all, I am sincerely happy to know that you are out of peril and hope that you have completely recovered. I remember answering a previous question of yours 2 days ago.

There are a lot of advantages to buying a home cash. I do not know of anyone who would not like to be debt-free! That is tops to it's many advantages. Also, you will save on a lot of closing costs (those fees that are associated with the loan), like loan origination, loan discount & mortgage insurance (if paying less than 20% down payment) & of course the interest over the life of the loan. I also experience that you have more bargaining power if you buy cash because you are the most qualified of all prospective buyers.

Please do not hesitate to contact me however you feel comfortable (phone or email), to be able to discuss better. I want to be able to help you achieve your goal of home-buying given your specific situation.

Have a good day!
1 vote Thank Flag Link Mon Nov 12, 2012
Other than obvious advantages paying cash does not get you that much special consideration form most sellers. A seller would gladly wait 2 more weeks to close if they get more money doing so, so cash buyers don't get the huge discounts many cash buyers imagine they will get from a seller. I like not having a mortgage to pay, but many wealth advisers might tell you to leave some cash in the bank and borrow the cheap money out there these days, of put down 50% and borrow the rest. I would suggest you speak to a loan officer and your tax adviser.
1 vote Thank Flag Link Mon Nov 12, 2012
Kelly,

I'm sorry to hear about your illness. Hopefully since you are looking to buy a home, that means you have recovered.

With your situation, the first advantage about paying cash for a property that comes to mind is you won't have to worry about qualifying for a loan.

Best of luck!

Chad Gray PA, Realtor
Luxury Living Fort Lauderdale
Coldwell Banker Residential Real Estate
754-300-6040

100% of clients rated our service as "EXCELLENT"!
1 vote Thank Flag Link Mon Nov 12, 2012
Yes it is a big advantage, because most of the sellers will take a good offer. If you're not working with a real estate company or agent please feel free to call me.

Thanks

Anthony Taylor Realty
832-301-4841
0 votes Thank Flag Link Sun Nov 18, 2012
Cash money talks and sellers listen, especially if you can offer a seller a quick settlement. Some sellers have been through the mill with buyers who make offers and then can't get the financing. You also benefit from reduced costs and fees of settlement. Good luck!
0 votes Thank Flag Link Sat Nov 17, 2012
Kelly,

I am sadened to hear about your illness but so happy for you to have recovered. Paying cash may be one way to buy but you might check with your bank and see if you can put the money in an IRA and use it as collateral for the purchase this would allow you to get back on tract to build your credit and take advantage of the currant interest rates. Once you have your credit build back up you could then make adjustments. A large down payment goes a long way with smaller banks that hold their own notes, I suggest talking to one and see what your options might be.
0 votes Thank Flag Link Thu Nov 15, 2012
Hello Kelly,

In this day, you are not alone in having credit problems. Lenders are interested in your situation now. Are you working now? You definitely have a good "explanation" of why your credit is flawed. If you have late or missed payments on a previous mortgage (more than 1 in the last 12 months), that will be a problem getting financing. There are plans for those with low credit scores that have substantial reserves. Yes, it is easier to buy with cash and most will say you should not go into debt if you can avoid it. On the other hand, interest rates are hovering near 3 - 3.5%. That is for a 30 year loan. How many believe that rates will stay this way for 30 years? You might want to think about putting your money into a retirement account that will most probably have a much better return over the 30 years. And for right now anyway, interest on a mortgage is deductible.

I am a licensed mortgage loan originator as well as a Realtor® so have some knowledge here. Hope this helps. Let me know if I can be of service.

Arnold Richie, Realtor®
Terry Burnaman Realty
http://www.yournewhomehouston.com
0 votes Thank Flag Link Wed Nov 14, 2012
Lots of good advice here. Pay special attention to Larry's answer, excellent advice in there. Best of luck...Jim
0 votes Thank Flag Link Tue Nov 13, 2012
Thank you and I will definitely follow your advice.
Flag Tue Nov 13, 2012
I hear this from home buyers in relatively good financial shape, who are trying to buy Short Sales or Foreclosures; however Banks in either transaction would look at net and care little where the funding originates.

A Cash Offer may sway some FSBOs or a pre-foreclosure seller who may just want to pay back payments and walk away with a little cash, but there are many variables including equity position, rehab, repairs, liens, and pitfalls to avoid with these sellers.

Homes listed on MLS have commissions paid by Seller, so use a Buyer's agent who represents you, not the Seller, be certain to use a REALTOR® they have a responsibility to look after your interest so ask them to help recommend a good appraiser and inspector as well.

Bottom line - CASH is king, it has certain advantages in traditional transactions such as quicker closing, no PMI..., but with interest rates low, you may decide to have it work at a higher rate of return. I agree with Myra, and if you or anyone would consider an investment property, contact me. The inventory of rental property is in high demand, having one in the right market may provide positive cash flow and a better return on your investment.

Best wishes on the Financial Rehab as well.
DanCan@KW.com | Dan Lopez
Direct: 713-480-6933 | Office: 281-647-1600
0 votes Thank Flag Link Mon Nov 12, 2012
It sounds as though your options (due to credit history) are limited so cash may indeed be your best course. Another option may be to purchase under owner financing so you can preserve your reserves and simply use a portion as your down payment. Few O.F. sellers are as concerned about credit as they are about the down payment.
0 votes Thank Flag Link Mon Nov 12, 2012
wow, Kelly - you've been through a lot........glad to hear you're back on your feet - (literally and figuratively!)

If you have cash with which to buy a home......you will be loved by all sellers!!!

That's a huge advantage!

All the best!
0 votes Thank Flag Link Mon Nov 12, 2012
Glad you are well and well on the way to recovery. Paying cash gives you a lot of leverage in negotiating the price, no liens, and certainly a lot less closing costs. Good luck with your purchase, if you decide Houston is the place to be you can get a whole lot of house for a lot less money.
0 votes Thank Flag Link Mon Nov 12, 2012
It may be your only option. Sounds like you may have a tough time getting a normal mortgage.
0 votes Thank Flag Link Mon Nov 12, 2012
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
Sure, you don't have to pay interest. Three weeks coma, means you had a traumatic brain injury. Glascow Coma scale score is about 5-6? My coma is 5 weeks long as well. Did you attend TIRR? Makes you appreciate life. God loves us a lot, we have a reason for still be down here on Earth as does everyone. I'd love to help.


Joe Cano - Realtor/Locator
(281) 785-5132
Web Reference: http://joelocator.com
0 votes Thank Flag Link Mon Nov 12, 2012
You can save on closing costs associated with having a mortgage. You also will not have a lien on your house from the bank, so you will own your house free and clear. The main advantage would be that you can generally have more leverage in negations with a cash offer, which closes faster as well.

Buck Doheny
Keller Williams Realty
Minneapolis, MN
612-803-2718
0 votes Thank Flag Link Mon Nov 12, 2012
Kelly,

There are several advantages for a buyer when purchasing a home with cash. These include saving a lot of money on expenses related to getting a new mortgage and setting up escrow accounts. Other advantages revolve around a quicker closing and possibly no appraisal on the home which should make a seller happy. The seller might be willing to negotiate a better sale price because of these issues.

However, with mortgages at record lows, you might still look into getting a mortgage and keeping some of those funds for that "rainy day". Even with bad credit, a buyer still can get a mortgage...you just have to find the right lender. This type of lender might charge you a bit higher interest rate and possibly require more money down, but a non-conforming lender (someone that would not resale the loan...credit unions come to mind!) could possibly work with you.

Welcome back and good luck with your home search!!

Mark McNitt
m 832-567-4357
Bernstein Realty, Inc.
Houston, Texas
0 votes Thank Flag Link Mon Nov 12, 2012
I am glad to see that you are back on the road to good health and strength Kelly. The advantages of purchasing a home cash in my opinion are, no monthly mortgage or any of the other associated fees that go along with having a home loan, not having to go thru the astringent loan application process, you have a paid for asset that you can borrow against if need be for collateral and as long as the property is your homestead you will still be able to qualify for the the tax break. Also most sellers are a little more willing to negotiate with you on price because you have cash and they won't have to wait for you to obtain financing.

God speed,
0 votes Thank Flag Link Mon Nov 12, 2012
It is always better to pay cash. There are so many fees you will save by doing this, less speedbumps that you could hit and a much easier closing. Let me know if I can help you in your search.
0 votes Thank Flag Link Mon Nov 12, 2012
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