Everything You Need to Know About Buying a House in Cash

Buying a House in Cash

I’m sure you’ve read by now that mortgage rates are at historic lows. So if buyers have the money to buy a home in all cash, is it even worth it at these rates? There are pros and cons to buying a house in cash and ultimately it depends on the buyer. Here are just some of the pros and cons.

Pros

  1. We’ll start with the obvious one. Even with today’s historically low-interest rates, a mortgage means you are still paying extra money in interest that you don’t have to.
  2. Buying in cash avoids closing costs associated with mortgage payments.
  3. If you have less than stellar credit, buying in all cash is a good option for you because your credit score won’t matter.
  4. When you factor out a mortgage payment, your monthly budget should go down significantly.
  5. You don’t need to worry about the possibility of ever having to sell for less than your mortgage amount because you won’t have one.
  6. Your offer is more attractive to the sellers because they know you have the funds to close the deal, and usually, the sale will close faster than one that is financed.

Cons

When it comes to the cons of buying with cash, there are three main concerns:

  1. Real estate can be a risky investment. If there is a crash and all of your money is tied up in your home, suddenly you’re stuck. A diversified portfolio is always less risky.
  2. You miss out on mortgage tax benefits.
  3. Your money is much less liquid. If you suddenly need an influx of cash, you could be out of luck until you sell your home.

Who Are the Cash Buyers?

While an all-cash offer sounds tempting, most people do not have the money upfront to spend $700,000+ on a home in Long Beach. So who does? While cash buyers make up anywhere from 40-57% of the market, a huge percentage of these buyers are investors. These are the people who helped restart the economy after the housing crash because they took advantage of low prices. They also invest money in foreclosed and distressed properties, something that is needed right now because of low inventory. But while this is helpful for the market, it can be harmful to people trying to buy with a mortgage, since sellers almost always accept cash offers over offers with a mortgage.

How to Look More Attractive with a Mortgage

Be flexible. When a buyer comes in with an all-cash offer, they are less likely to budge in other areas. They know their offer is attractive, so they feel like they shouldn’t have to give as much in other areas. So if you walk in with a flexible closing date and short inspection contingency period, the seller is more likely to look twice at your offer. A personal, handwritten letter to the seller never hurts either. Explain to them why you love the home and why you want it to be theirs. If they love the home as much as you do, they’ll want to make sure its next owners will it enjoy it as much as they did.

Real Estate Agents are Still Important

Even if you cut out the bank as a middle man, a real estate agent is still very important for cash buyers. They know all the details of negotiations and all the rules when it comes to buying with cash. They also have legal knowledge about the home buying process, including new rules in the state. If you’re the cash buyer, there’s no reason not to hire an agent – the seller pays the agent fees!

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About the Author
Shannon Jones has been selling real estate since 1998 and specializes in listing and marketing homes. She has consistently been one of the top Realtors in the Long Beach area. Prior to her award-winning career in real estate with the Shannon Jones Team, Shannon has had successful careers in journalism and public relations. She holds a bachelor's degree from UC Irvine and a master's degree from UC Berkeley. Shannon holds E-Pro, CDPE (Certified Distressed Property Expert), and PSC (Pre-Foreclosure Specialist) certifications. Shannon is very personable and maintains a very strong moral compass, always putting the best interest of home buyers/sellers above monetary goals. A California native, Shannon enjoys gardening, travel, reading, cooking and poker when she’s not selling homes.

MY DESIGNATIONS
Lic# 01247705 | CDPE (Certified Distressed Property Expert) | E-Pro | PSC (Pre-Foreclosure Specialist)