Anyone purchase houses with cash?

[PaunchyPirate]

It makes me laugh (or cry) when someone mentions purchasing a house for $150K. My daughter is currently looking for a house up to $1M. It's virtually impossible to get. One came on the market a few days ago for $900K. Within days there were 25 offers is it's going to sell for $1.1m. The house is old, small and in a barely middle class neighborhood.

Have her move to Erie, Pennsylvania. She can buy all the $150,000 houses she could possibly want. Tell her to bring a snow shovel.

That $150,000 house had just been renovated by a property flipper. It was in seemingly good shape with mid-grade kitchen appliances and countertop. Nothing special.

The house I eventually bought was in a smaller city between Erie and Pittsburgh. I paid $167,500 for a nicely updated mid-size ranch house in excellent condition that I absolutely love. It's a nicer house than the one I lost out on for $150,000. This is my retirement house until I die unless I decide to leave for other reasons (which I might!). Nothing is cast in stone.

 

[RE2Boys]

Remember that most of the requirements for closing are there to protect the interests of the mortgage company (though the also provide some protection for you also). Things like inspections, surveys, title insurance, title search, credit checks. Sometimes the charges for these items are based on the mortgage amount (hint, they don't care at all about your investment in the property). Without a bank involved, you need to make so of the decisions regarding these items.

When I purchased my first house in 1983, I was assuming an existing mortgage and putting down 70% down. I think the only thing I had to do for closing was to have a termite inspection required by state law.

My second home was a cash purchase of empty lot so no bank involved. Later contracted for a house to be built, I paid the builder in cash (1996) and controlled all progress payments.

Next house was to purchase my Mom's house. Again, no bank involved.

Heck, I've never went through the process of applying for a mortgage.

 

[ShokWaveRider]

Yes, Our Last 2 were cash [-]sales[/-] purchases.

 

[ExFlyBoy5]

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?

Our last two houses...while we weren't asked, we included a funds availability letter in the offer. There wasn't ever any question from the sellers.

Our last house (bought in 2018) we used Ally for the funds verification and I didn't have any issue getting it. If I recall, there was an option on the website and it was generated/delivered within 24 hours. No issues at all.

 

[Teacher Terry]

8 years ago we bought a bank owned foreclosure. It had to be a cash sale with no conditions. We outbid 5 others. My husband is a professional licensed engineer so felt safe with no inspection.

 

[FIREd]

I bought my current home cash. A previous attempt to sell had fallen through because the buyer couldn't secure financing. So when I made a cash offer, the seller jumped on it. The closing attorney mentioned that it is rare here (France) for people to buy a home without a mortgage. In fact, the seller apparently remained quite doubtful of my capacity to pay cash until the money was wired into the escrow account.

 

[Jerry1]

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?

Yes, I was asked to provide a verification for the amount I was offering. Mine required a combination of two statements, our credit union account and one of my investment accounts.

As others have said, the hassle factor is greatly diminished when the word “cash” is on the table.

 

[RE2Boys]

Have her move to Erie, Pennsylvania. She can buy all the $150,000 houses she could possibly want. Tell her to bring a snow shovel.

That $150,000 house had just been renovated by a property flipper. It was in seemingly good shape with mid-grade kitchen appliances and countertop. Nothing special.

The house I eventually bought was in a smaller city between Erie and Pittsburgh. I paid $167,500 for a nicely updated mid-size ranch house in excellent condition that I absolutely love. It's a nicer house than the one I lost out on for $150,000. T

Hey, I resemble that remark!! Erie had a dusting of snow a few days ago. My current house is a 1960 ranch, 2200 sq ft brick, market price around $200K. A block from schools, 1 mile to shopping centers, 3 miles to major hospitals.

 

[Music Lover]

It makes me laugh (or cry) when someone mentions purchasing a house for $150K. My daughter is currently looking for a house up to $1M. It's virtually impossible to get. One came on the market a few days ago for $900K. Within days there were 25 offers is it's going to sell for $1.1m. The house is old, small and in a barely middle class neighborhood.

Houses like that are only impossible to get in a few select/overpriced areas.

 

[Time2]

We paid cash for the house I live in 26 years ago. The price was $83,000. 14 years before that my first house was $33,000 and I had to have PMI with only a 10% downpayment.

 

[Mark1]

In 2017, we bought a house with cash after moving to Grand Junction. At the time, I actually had cash split between Barclay, Ally, CIT, and Fido checking account. Because we had no local bank account, we just paid with a wire transfer on the day of closing via Ally (Ally was by far the easiest of the four options at the time). Also, our house was near $700,000 so I only moved funds to Ally 8 days prior to closing to minimize the time with a balance over $500,000 (limit of FDIC insurance on joint account).

 

[calmloki]

When we were buying we mostly bought places that wouldn't have passed any kind of bank inspection. We bought them for cash by borrowing, repeatedly, against a place we had done a total rebuild on that was easy to borrow against.

When we started lending to some flippers they borrowed from us so they could easily offer cash on places that banks had no desire to loan on. We were happy to lend because we were lending against the properties, not on the ability of the borrowers to repay, and the flippers were turning up places we would happily "buy" if we had to foreclose.

A couple times went with bank loans - the first time was back in the 80's and the bank we were buying from went through several name changes as the banks were failing left and right. We had to show our financial ability and I said, along with other things, we were going to show up at closing with part of the payment being $6000 in cash - not held in a bank account. Little junior banker Jeffy in his too big Sears suit asked how they could be sure we had that; Gal said because we said we did, Jeffy laughed, and Gal about went over the table to take his throat out. She takes things personally. I pointed out that if we showed for closing without the $6000 then the bank wouldn't sell, so no risk to them. Ultimately I fanned out bills on a copier at the local hardware store and sent a picture and went in to closing and they took our money.

 

[523HRR]

Yep. Paid off our mortgage upon retiring. Then paid cash for new build in Florida. In hindsight, we would be better off financially if we had a mortgage and left the money in the stock market. But I just feel better having zero payments in retirement.

 

[molly312]

Paid cash also. Never regretted it one day. I don't care about the interest rate scenario. I sleep better at night.

 

[P.S.]

I will go through all the necessary steps (hire a RE agent, pay for house title insurance, etc...

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!

 

[P.S.]

Yikes, sorry didn’t realize it was so long.

 

[ExFlyBoy5]

One other note on the POF (proof of funds) that I just remembered.

*IF* you are submitting the POF with your offer, do NOT send over something that is much more than what you are offering. Example: You submit offer for $200K on house listed at $220K. DO NOT SEND a POF that shows that you have $250K in the account! Reduce as needed to show the price you want to pay plus 1-2% for closing costs/etc.

 

[grasshopper]

Yea, buying a house for cash is quicker than buying a car for cash. The sellers of my home gave us the keys when we made/accepted the offer. They were fast to get out of dodge before we noticed the home was built on a rattlesnake den.

 

[WhenIsItTime]

I’ve done that, but not until my home equity (asset) was about 15% of my portfolio. I really have enjoyed getting rid of monthly payment for piece of mind.

I did this in 2014. S&P 500 is up over 50% since then so clearly a mortgage would have yielded better return. I have no regrets given total AA, but point it out for those who still need to build net worth.

 

[WhenIsItTime]

It makes me laugh (or cry) when someone mentions purchasing a house for $150K. My daughter is currently looking for a house up to $1M. It's virtually impossible to get. One came on the market a few days ago for $900K. Within days there were 25 offers is it's going to sell for $1.1m. The house is old, small and in a barely middle class neighborhood.

Well that depends on where you live. In Michigan, you can easily have a nice 3,500 sq ft house in town and a lake house for $1.1m.

 

[WhenIsItTime]

Our realtor has pressured us to not pay with cash because if we want to back out of a deal he says there's always some way to "blow up" a mortgage application. I don't agree and plan to pay cash if we ever find a house we like.

We made a cash offer last year on a house which we lost because another offer was even higher over the asking price than ours was. I had a hard time getting an asset verification letter from Ally Bank. They took their sweet time issuing it and if our offer had been accepted that might have been a wrench in the gears. We saw another possibility earlier this year and I asked for another letter which never did come. Good thing we didn't actually make an offer on that one.

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?

I’ve bought 2 houses this way, although in Midwest where they are reasonable and was never asked for verification. Just showed up with check in hand at closing. I asked for home inspection, but not appraisal. I do think it helped provide seller comfort deal could close without issues. This was in sellers market, but not hot enough for multiple concurrent offers.

 

[ziggy29]

Paid cash also. Never regretted it one day. I don't care about the interest rate scenario. I sleep better at night.

Normally I would be there with you, but we when we moved to Oregon a couple of years ago, because of the clergy housing allowance exemption, it made a lot of sense for us to take on a mortgage because that allows us to exclude housing costs from federal income tax. We just reworked our mortgage to reset the rate from 3.875% to 2.25% (our CU is awesome), 10 year loan with 8 years left.

If not for the clergy housing allowance, we would have paid all cash, but as it was we still put over 2/3 down. If we paid all cash, we would be paying a lot more in income tax.

 

[freedomatlast]

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 paid cash for the last two houses we bought.

The first one we bought at an auction and that transaction required no verification of assets. Just a personal check for 10% of the purchase price the day of the auction and the balance via a personal check in 45 days or less.

The second house we bought was listed by a realtor and they did ask for account statements (with the account numbers blacked out) showing that the funds were available.

 

[teetee]

The sellers of my home gave us the keys when we made/accepted the offer. They were fast to get out of dodge before we noticed the home was built on a rattlesnake den.

Sorry for the bad luck but it was just too funny. I hope you did manage to get rid of the den with minimal effort/money. I would definitely hire a competent inspector before making a contingent offer for my first purchase.

 

[Dash man]

We’ve bought five homes with cash. They all went smoothly with relatively quick closings. We’ve sold two of those, with one paying cash and one with a mortgage. A big difference in days to closing.