Home Buying in 07040>Question Details

Ben, Home Buyer in Cranford, NJ

First time buyer..Which one is the best option? Paying in cash or financing?

Asked by Ben, Cranford, NJ Wed Aug 8, 2012

I see some very nice houses in the neighborhoods that I am looking to buy a house ( Union or South Orange, Maplewood, NJ ) but to my shock is that I can afford to pay in cash. Is that a good idea? I know the house price still going down but apart from that are there any other advantages of financing vs buying in cash? I plan to live in the house forever if not ...then not less than 10 -15 yrs. And if I decide to pay in cash is there a need to hire an agent?

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I would not be sure that prices in Maplewood and South Orange are "still going down". Actually, the market is showing the contrary. Paying cash for a house can give you a distinct advantage over other buyers and can help you get a discount on a property. You should consider the "opportunity cost" of using your cash (tying it up in a property) when the cost of borrowing is so historically inexpensive. You might do better to invest that cash in the market and borrow the funds for the home purchase. If you would like a referral to a mortgage professional who can discuss various products/rates with you please email me.

Hiring an agent is a separate issue. Purchasing a property can be full of potential land mines for people who do not do it everyday-- and most people don't. I would not recommend going it alone without the aid of someone who knows the local market and the process. Anyway, the seller pays the commission in the transaction so using an agent can only benefit you without adding cost to your purchase.

I'd be happy to give you some inside info on Maplewood and S. Orange. Contact me at your convenience.

Allison Ziefert, Realtor
1 vote Thank Flag Link Wed Aug 8, 2012
If you are in a position to pay cash and you do not want to have monthly payments, I would definitely do that.
Most people do not have the cash to buy a house, they also feel that since the interest rates are so low that they would rather hold onto their cash.
The prices are no longer going down in this area, they are actually moving up. The houses are selling quickly and selling well.
If you are in a position to buy now it is a very good time.
Using an agent really does not having anything to do with whether or not you pay cash or finance. Agents can negotiate a good price on the houses and also can help you with neighborhoods, inspections and many other things that you need to know to purchase a house.
Please let me know if I can be of help to you with purchasing.
0 votes Thank Flag Link Wed May 29, 2013
Yes, cash is often considered "king" but it is also a great time to borrow money if your credit is in good order. Weigh both options so you can make an informed decision.

As far as working with an agent goes, how you'll pay for the house has no bearing on the value of working with an agent. A good agent will help you negotiate the very best price the market will bear and stay with you from search through close.

Good luck to you!
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
0 votes Thank Flag Link Fri Sep 28, 2012
Cash is king! With a cash offer you can often negotiate a better price. sellers like cash offers because then they do not have to worry about a buyer not being able to obtain a mortgage or other financing complcations. Cash or financing, you should work with a licensed real estate agent to represent you on all facets of the home buying process, from negotiating price, terms and inspection items, as well as to keep you on track for key dates during the process. The seller pays the realtor commission.
0 votes Thank Flag Link Thu Sep 27, 2012
Hi Briasdad,
Cash is definitely an advantage. The seller will not have to worry about you getting approved for a mortgage. You also will be able to close quicker which could be important to the seller. Could get you a better price. There is also great peace of mind that you can live comfortable in your home and not have to worry about making the mortgage payment for the next 15-30 years. Congratulations to you for having saved a sizeable amount to be able to consider this! A very good financial position to be in.

Explore your options. Do some home work is you are doing with this questions to us. I would suggest you speak to a mortgage lender and learn about the loans and rates available to you. Also speak to the tax accountant that does your taxes and see what his opinion is regarding tax write offs for owning a house and how you might save.

Yes you definitely need to work with a real estate agent. We work with this everyday. The Maplewood and South Orange are definitely heating up with houses selling quickly and with multiple offers. Home buying may look simple, but it is not. There are so many steps to take to get to the end result. A good agent with guide you every step of the way with integrity and knowledge.

If you would like to email me at carol.eisenstein@prudentialnewjersey.com with your email address, I would like to send you some literature to read about the home buying process that I know you will find helpful.
0 votes Thank Flag Link Thu Aug 9, 2012
Hi Briasdad,

Cash is definitely King in this market however you should consider the benefits of financing versus paying cash for your home. Depending on the amount of cash you have, you could also consider purchasing investment property that could be a source of income. Its definitely worth checking out the benefits to a cash purchase or finance with your tax preparer before you make a choice.
As far as working with an agent, whether you purchase with cash or financing, a Realtor will save you valuable time in finding a home along with many benefits.
You should note that the cost of using an agent is paid by the seller.
0 votes Thank Flag Link Wed Aug 8, 2012
Dear Briasdad,

What I love about your question is your plan to live in your new home at least 10-15 years! As a financial professional, I have expertise in investments, insurance, retirement and real estate. Real Estate has always been an ideal long-term investment and homeownership has traditionally been the largest and most secure asset in the family investment portfolio. Home equity offers great tax advantages and the costs to finance a home today are at historic lows that homebuyers in the 80's & 90's could only dream of. In fact there are many today who can only dream of getting approved for these great home loans. With this in mind, my advice (assuming you have a retirement plan and 12 months savings for emergencies) is to to avail yourself of the cheap financing and buy MORE home so that your condition and location are PRIME. In the long term, which is happily where your goals appear to be, buying a great home in a prime location will pay off more than just about any other strategy I can think of. This is where using a professional realtor can really make all the difference. Choose a realtor who listens to your needs and only shows you properties that are going to help you achieve your financial future.
0 votes Thank Flag Link Wed Aug 8, 2012
Briasdad cash is a good thing to hold onto as well. Currently in my area you can get a 15 year home loan with a minimum of 20% down at 2.875% with a flat 699.00 closing cost. I have never seen the cost of money so cheap. in this lending enviornment you may not want to pay cash. The Fed is doing everything they can to drive interest rates down and this can only last so long. Take advantage of it while you can.
0 votes Thank Flag Link Wed Aug 8, 2012
Every deal and every situation is different and having an experienced agent on your side to guide you costs you nothing, so yes working with a good agent is a definite plus! An agent will help you decide if taking a mortgage is the best way to go when making an offer on a home. Interest rates are at historic lows and many of my buyers are financing when they too can afford to pay cash, cash is king no matter how you look at it, but sometimes having cash on hand is the best decision. And prices in the areas that you are searching are stable and multiple offers are common.
0 votes Thank Flag Link Wed Aug 8, 2012
First of all, using cash rather than financing a home purchase with a mortgage is certainly an option and can actually be a slight advantage, especially if you are competing against another party(ies) in a multiple offer scenario.
Otherwise, using cash, when interest rates are as low as they are, hold no advantage to you and actually will inhibit you from other investments you could possibly make during this time period.

Secondly, in the general area of Maplewood and South Orange, i can tell you home prices are actually on the upswing and in fact multiple bids are occurring in 35-41% of the homes sales this year-to-date.

Lastly, hiring a good agent, doesnt coast you as a buyer a penny as the commission you agent will earn is paid for exclusively by the seller in NJ. More importantly, there is a lot more to buying a home than simply finding one online and negotitating the sale price. Frankly, I am under the impression that 75-85% of my earned commission gets earned after the accepted offer phase and up through the closing signing stage.

If you have any questions, please feel free to call me without any obligations or check out my website at http://www.goodhomesforgoodpeople.com
0 votes Thank Flag Link Wed Aug 8, 2012
Buying a property using cash is always the quickest and lowest cost to ownership. Financing will allow the interest deduction if you need it. Cash is King!
0 votes Thank Flag Link Wed Aug 8, 2012
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