Anyone purchase houses with cash?

[Badger]

I didn't exactly buy a house with cash but I did build a house in the mountains with cash. I designed it and swung the hammer as cash became available. I only had the timber frame built for me. It took me about 8-10 years though. Sold it as it became too much work to maintain from a distance. Taught me that if things got rough I had the experience to build a small house to live in although I may be getting a little too long in the tooth now.


Cheers!

 

[Surewhitey]

A question for others who've been through this: did the seller ask for verification of assets? Did it have to be cash, or could it be the balance in a brokerage account?

We just provided screen shots of accounts intended to be used. Then when offer was accepted, we transferred to the "hub bank" and got the cashiers check for closing.

Spent 10 minutes closing (most of this was chatting)... Super easy.

 

[stephenson]

Proof of Funds requirement is pretty typical, particularly in a competitive marketplace.

Have done both recently - last cash closings were waaaay easier and faster. Also, I felt like I was in control, not some group of evaluators at mortgage companies/financial institutions.

 

[Dtail]

We bought our retirement house for cash. There were 10 offers on the house, all above the asking price and ours was the 3rd highest, but the only one for all cash.

 

[youbet]

We bought our retirement house for cash. There were 10 offers on the house, all above the asking price and ours was the 3rd highest, but the only one for all cash.

Was your offer considerably lower than the highest offer meaning the seller gave up significant bux? Or, was your offer close to the highest offer meaning the selling gave up only a small amount for the convenience of a cash buyer?

Personally, I'd prefer a cash buyer. But, I wouldn't give up very much on the selling price to get one vs. a pre-qualified buyer using traditional mortgage financing.

 

[Sunset]

It seems like most of the real estate world is set up for the benefit of the brokers: realtors, lawyers, banks and their mortgages, etc. When paying cash, it’s you, and your pot of money, against the world.

You can avoid signing up with a realtor, and the obligation of going through the realtor, if you’re proficient with the internet. Do your own searches on Realtor/Redfin/Zillow.com. Look up taxes, assessed values, etc. in city and county databases. The more realtors (buyer + seller) involved, the more people to go through, like when making an appt or scheduling anything. Theoretically, this eliminates @2.5-3% of cost.

The seller will prob have an agent. When you decide on which house, and discuss $ offers, bring up the point of no buyer agent eating into realtor commission (usually 5-6% shared between buyer/seller realtors). Seller realtors, unless you push the issue, will have already planned to act as your, the buyer’s agent and collect the whole 5-6% (dep. on sale price). So you insist that they not, and pass some of that savings to you.

When you look at a house, be sure to have a well-charged phone (for taking pics) and comfortable/not dress-up clothes, in case you need to crawl somewhere.
Have your check-book available, in case you decide to make an immediate offer.
It’s useful to have funds in separate account/s that are approx to offer price. Eg. I wouldn’t want to give a statement showing $2m in the account, if the house is only $250k. $275k would be enough, purchase price+ closing costs + utilities for a year. I usually print statements, use permanent marker over the account #’s, then zerox the statement, so that the account # can’t be read/felt through the paper (yes, I’m paranoid). Keep them in a folder, and then it makes it easy to tour a house, make an offer, give your check deposit and hand over statement/s for proof of funds.

Yes, cash purchases can be completed very quickly. Once you provide a legit offer, and proof of funds, all parties will be happy to meet in a few days and collect your money. But don’t rush it. All cash offers have an advantage, so respect your timeline needs.

Be sure to schedule an inspection, with an inspector you find, not a seller’s recommended inspector. Now would be a good time to look into this so that when you need one, you’ve figured it out already. Also, unless you grew up in the house, go step-by-step with the inspector for the entire inspection. Bring a well charged flashlight, a well charged phone for taking any necessary pictures, and lots of questions. If you don’t know any, then check a book out of the library and familiarize yourself with the bowels of a house. You’re paying a couple to few hundred dollars, so might as well get an education for yourself.

The inspection is a good contingency clause to add to your offer, as a way to back out of the offer, should you need to. Also, when you put down a deposit with your offer, put down enough to show your serious, but not too much that would hurt, should you change your mind and back out. If you back out b/c of an inspection related reason, then you would be able to get back your deposit.

Be sure to get title insurance, unless you feel super comfortable doing the legwork. And good luck!

Lots of good advice.
I also go up on the roof, and I follow the inspector the whole time.
Finally I put down $1,000 deposit, Yes the real estate agents whine, and complain like crazy, they want to handcuff you into the sale, and earn interest on it (?). I've bought 3 houses this way, nobody has refused to sell me a house with a $1K deposit.

 

[HI Bill]

A question for others who've been through this: did the seller ask for verification of assets? Did it have to be cash, or could it be the balance in a brokerage account?

For my purchase, which was only 50% down ($500K), they did require verification of assets. Post 9-11, they have to track all of the $ and transfers. I used statements from my checking and brokerage accounts for verification. $ sent from overseas accounts had to be tracked from the foreign institutions, all the way to the account that the funds come from to purchase the house. They want to make sure you aren't laundering $, or using terrorism-related $.

 

[partition1]

We took out a HELOC to buy our rental properties with cash. And yes, we've been asked for bank statement to prove we had enough assets.

 

[gooddog]

Have bought several houses, even commercial property cash. Never regretted it. Less fees, less paperwork, less insurance hassles (commercial prop). Also have a guaranteed return on your money, with mortgage interest.

 

[landis207]

Cash is King!

We have bought our last 2 homes for cash. We went from a 1 hour, 30-40-page title signature meeting to a 2-page remote meeting which was wonderful. And not dealing with a bank/lender is a huge advantage. You can insure the home the way you want, instead of the way the bank demands!

 

[Bamaman]

We had a 3350 square ft. home on 4 wooded acres, and bought our daughter a 2800 square ft. home--all paid for.

My wife found a great deal on a 5200 square ft. foreclosure on a street where the homes went from 5000 to 10,500 square ft. And somehow I scraped up the money to pay for it. Because I was a cash buyer, we got a better deal.

My biggest problem was paying Homeowners' Insurance on 10,000+ square feet of homes. Alabama property taxes are ridiculously cheap.

After taking 6 months to move, we sold the 3350 square ft. home to 3rd person that looked at it for list price. Then I booted my daughter out of her house for bad behavior and sold it to my real estate agent for what I had in it.

Then we moved an hour away and paid cash for a 3950 square ft. home, and it took 6 months to get out of the 5200 square ft. home. Again, I sold the big house to the third person to look at it for the list price.

That gets me down to our present home which I installed a pool this Summer. And we still have a waterfront lake house that's been in our family 5 generations since 1945. And I spend Fall days blowing and raking leaves--and doing maintenance at the lake.

I would hate to think what it'd be like to have a mortgage on a home in retirement. Even with a defined pension, I'm still spending more than I like to spend--raising a 9 year old granddaughter.

 

[jayanu]

>> This is my retirement house until I die unless I decide to leave for other reasons (which I might!). Nothing is cast in stone.

Depends on your age. Do remember when you get older 70% of the population need some kind of Long Term Care. - at home, assisted living, nursing home, Dementia ward etc. Most of the LTCi would not pay more than $!25K between a couple for 3 years. Insurance is expensive and gets expensive every year.
You may have to start thinking about the CCRC option!

 

[jayanu]

We paid for a Condo in 55+ community by cash.
Your age is something to keep in mind. The mortgage rate is ls less than 3%https://www.businessinsider.com/personal-finance/best-mortgage-refinance-rates-

Can you get a higher return in the stock market for the next 15/30 years? The answer is obviously yes. So your age and desire for a higher return can help you decide - purely from the financial point of view and not an emotional viewpoint.

 

[Montecfo]

Was your offer considerably lower than the highest offer meaning the seller gave up significant bux? Or, was your offer close to the highest offer meaning the selling gave up only a small amount for the convenience of a cash buyer?

Personally, I'd prefer a cash buyer. But, I wouldn't give up very much on the selling price to get one vs. a pre-qualified buyer using traditional mortgage financing.

This seems to be the tack of most sellers in my experience. Closings are virtually always for cash. As a seller of houses (when I was flipping) we did not find cash offers more compelling than financed offers unless there were other factors at play. And in fact it could be a hindrance when you have a potential buyer who think a cash offer carries some sort of secret sauce that would cause a seller to take tens of thousands less for the house. Generally this is not the case, unless the seller is under tremendous pressure to sell or there are.not other well qualified offers.in hand or expected.

Why? It is just time.value of money.

Having said that, a cash purchase is easier for the buyer.

 

[Murph]

I am in my early 40s and am thinking not to take out mortgage for my first home purchase to avoid borrowing money and pay for the interest. I understand it is less paperwork and in most cases I can get a better deal using cash. I will go through all the necessary steps (hire a RE agent, pay for house title insurance, etc) and was wondering if anyone went through the process and may have noticed mistakes first home buyers can make?

Bought my last two homes with cash. Expedites the process. Use a highly rated realtor to avoid mistakes (although the title company will keep everything in order). Seller pays for the realtor.

 

[CardsFan]

This seems to be the tack of most sellers in my experience. Closings are virtually always for cash. As a seller of houses (when I was flipping) we did not find cash offers more compelling than financed offers unless there were other factors at play. And in fact it could be a hindrance when you have a potential buyer who think a cash offer carries some sort of secret sauce that would cause a seller to take tens of thousands less for the house. Generally this is not the case, unless the seller is under tremendous pressure to sell or there are.not other well qualified offers.in hand or expected.

Why? It is just time.value of money.

Having said that, a cash purchase is easier for the buyer.

This makes perfect sense to me. The seller really does not care were the money comes from, only that it is really coming.

DW was a realtor for many years. The biggest advantage of a cash buyer was no contingency upon sale. The cash had little to do with it.

FWIW, we bought our current condo the same way. Cash, no contingency. The no contingency was the point they liked (quick closing)

 

[Beachcomber]

We downsized from a waterfront home we lived in for 20 years to a new waterfront home. For what we owed in mortgage, we are now mortgage free!
I was thinking I could get a mortgage for 2 3/4% and then invest the rest in the market making 7 -10%, net 5% or so.

But then the mortgage company calls the shots on hurricane, flood, and other insurance requirements. That insurance is way cheaper now, so we do have it.

Anyhow, it is great not to have a mortgage, but I do think of the opportunity cost. We are 65 and 66 and only spend about 1/3 of our retirement income on living expenses.

 

[2177V]

My last two houses were purchased with 100% cash because I had a real estate license (now expired) and I can represent myself. My offers were $10,000 to $20,000 less than the highest bidder and I got both houses because the sellers had certainty of getting their money ASAP while he had to wait for the highest bidder to get his loan approved which may be a 2 month process and there is a possibility of disapproval.

Cash is king. People with the cash has full control over the transaction. People should also realize that the lender will charge fees (points, credit check, etc, etc) which all can be avoided. The lender's fees can be $3K to $7K. Also, since I represented myself, the seller's real estate agent will give me priority because he does not have to split the fee. Some agents will reduce his fee to get the seller to accept my offer. Example, if the typical agent fees are 3% for the seller's agent, 3% for the buyer's agent, the seller agent can get the entire 6% total since there is no buyer agent to pay. The agent can then tell the seller than he can contribute 2% of the 6% fee to close the deal. The agent will realize 4% fee (instead of 3%), the seller will get 2% of the fee to close the differences, and I get the house at a discounted price.

Pitfalls? (1) Make sure the selling agent is licensed, (2) verify the seller is indeed the owner by reviewing the property tax records and (3) you select the reputable escrow company with a good title insurance policy. Since there is no lender to protect the seller, you, as the buyer, are totally dependent on the escrow company.

 

[teejayevans]

Cash is only king if it’s not in an IRA, otherwise mortgage allows spending down IRA at a lower tax rate.
Of course trying to get a mortgage approval when retired is a challenge.

 

[Gearhead Jim]

We did cash, real money, when we bought our current house 40 years ago.

We had a balance due at closing of $20k+, which was a lot of money back then. We had taken the money from a different institution and placed it in a no-interest account at the local bank for what was supposed to have been a few days but turned out to be over a month.

When it finally came time for the closing, we went to the local bank and asked for a cashier's check for the amount. The teller told me there was a $25 fee for that. I nicely explained that they'd had the free use of our money for over a month, could they perhaps waive the fee? The teller, typical of the employees there, gave us a snooty reply that there were no exceptions to the policy and I should be happy. So I said. "OK, I'll take it in cash." She was shocked. She used up all of their hundreds, all of their fifties, and had to finish off with a bunch of twenties. It filled a big briefcase.

We went to the closing at the other bank and told the agents and lawyers what I had done, then opened the briefcase looking like a big drug deal. They all laughed and said my experience was typical for the other bank. We did the deal and went home, no problems.
The next day we switched all of our local accounts to the bank where we had the closing, and still bank there after 40 years.

Of course, an all-cash deal like that would get some questions today...

 

[2177V]

Cash is only king if it’s not in an IRA, otherwise mortgage allows spending down IRA at a lower tax rate.
Of course trying to get a mortgage approval when retired is a challenge.

Retirement should involve a three legged stool: (1) SS (2) IRA or pension (3) cash or house equity. You cannot use SS, IRA or a pension to buy a house so what is left is cash or house equity.

If you sell your house first, you now have sufficient cash.

In my case, I have numerous houses, I take out HELOC on them which is enough to buy a house with 100% cash. Owning more than one house and being a landlord has some advantages.

The biggest is having equity growth in multiple houses and then being independent of a bank to borrow money during retirement. However, this requires long term financial decision while you are young. I realized that the first two legs of the stool, you can do very little to increase your SS and your IRA due to limits of your contributions. I therefore focused on the third leg..which is cash or house equity. As you astutely pointed out, getting mortgage during retirement is a challenge. I solved that problem.

 

[djfiii]

With rates as low as they are, I don't know why you would pay cash for a home. You can lock a 30y fixed rate for like 3.5%? You can almost certainly average better returns than that with your cash over that long of a time horizon, and effectively arbitrage the difference.

Admittedly, I have a bias in favor of strategically using debt to grow my asset base more aggressively. I would probably edge toward eliminating debt once I'm close to done accumulating wealth, vs. consuming it. So I guess my opinion depends on where you are on that curve. Suffice it to say, I could pay off all of my mortgages today if I wanted to, but I intentionally do not.

 

[rrs26ja]

With interest rates for mortgages so low, why not get a mortgage and invest the cash in the market?

 

[folly]

Purchasing House for Cash

We purchased land and built a new home with cash. Interesting that there is very few public records on the value of our home. Property taxes have been assigned by what the neighborhood is and sq footage. Which is good and bad. Taxes are lower but when we go to sell that undervalued tax appraisal may make it difficult to justify our actual cost. IDK, maybe ..maybe not. I like the privacy it has offered, your life is on the internet thanks to public records. Recently our home insurance went up over $200.00 for the year. Having paid cash allows us to say no. We can insure at whatever level we want. I still have an issue with all the personal property they insist must be covered with a house value. Again, that seems weird. I just want fire and liability insurance, with no content, but can't find a policy like that. We sold our last home to a cash buyer. We both used real estate companies. I am glad we did because the buyer got upset when her remodel didn't go as she wanted and tried to blame us. We had to hire a lawyer to respond to her lawyer, blah..blah blah, ended with nothing happening except having to pay approx $500 in letter and phone call fees to lawyer. Using the RE company ensured all documents had been signed and inspection and disclosures had been offered.

 

[2177V]

With rates as low as they are, I don't know why you would pay cash for a home. You can lock a 30y fixed rate for like 3.5%? You can almost certainly average better returns than that with your cash over that long of a time horizon, and effectively arbitrage the difference.

Admittedly, I have a bias in favor of strategically using debt to grow my asset base more aggressively. I would probably edge toward eliminating debt once I'm close to done accumulating wealth, vs. consuming it. So I guess my opinion depends on where you are on that curve. Suffice it to say, I could pay off all of my mortgages today if I wanted to, but I intentionally do not.

I am paying only 1.74% on my HELOC because I have multiple houses with significant equity which lower the risk to the lender. I also get discounts because the houses are free and clear without a primary mortgage. I know how to use my equity on my properties to my advantage. Here is a link that states 90% of the millionaries become millionaires via real estate.

https://thecollegeinvestor.com/11300/90-percent-worlds-millionaires-do-this/

I do invest in the stock market with my IRA as part of my three legged stool. However, to diversify my investments, I also invest in real estate. This forem is about buying houses with 100% cash. The best way to do this during retirement is to invest in multiple houses before retirement while you are young and becoming a landlord.