Anyone purchase houses with cash?

[teetee]

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?

 

[audreyh1]

Yes. Just wrote a check. Don’t know about mistakes as I wasn’t a first home buyer.

Our last home sale the buyer bought for cash and we had no mortgage. Closing was just 10 days.

 

[DayDreaming]

Yes, I did too.
Some friends said I was crazy because I'd miss out on the mortgage interest deduction, I thought they were crazy for thinking that!

 

[Car-Guy]

I haven't bought a lot of houses in my life but the last two were for cash. For the down payment (earnest money) I wrote a personal check but the for the balance they required a cashiers check at the closing... There was still a ton of paper work even when paying cash. The closing seemed to come pretty quick and I don't recall any problems before or after.

 

[erkevin]

I just did it (paid cash) in August. Was so simple, took less than a month to close. However, selling the existing home was a nightmare due to the buyer getting an FHA loan. Took two+ months to close. Inspections, appraisals, mortgage delays.

 

[Montecfo]

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?

You can close more quickly that is for sure. That MAY translate into a better deal if seller is under pressure to close quickly. But usually not. I have bought 10-15 homes for cash over the past few years.

But by not taking a mortgage, the cash used to avoid the mortgage generates a 2-3 percent effective return. Does that fit into your financial plan?

I have never been big on debt, but since rates moved down to these levels (last 10-15 years) I no longer pay down the mortgage. Keeping funds for long-term investing seems more fruitful and the numbers reflect that.

Where are those funds now and what can they be expected to earn?

 

[PaunchyPirate]

If you're in a competitive market, an all-cash deal will likely get you closer to the front of the line from similar bids. Unless there are more than one all-cash bids. Cash deals close faster and are less risk to the seller because the buyer doesn't have to go through all the hoops of a mortgage requirement.

3 years ago I put in an offer on a $150,000 home. I was going to put $50,000 down payment and mortgage the rest. I lost the deal because someone else offered $150,000 cash. I'm now glad I lost the deal since I found a better home more to my liking shortly afterwards.

I paid off my mortgage 6 months after buying my current house when my other house sold and freed up some cash. It's a wonderful feeling to not have a mortgage.

 

[WyomingLife]

Later in life we purchased our homes with cash, "as is", as we like to renovate old homes. YMMV, of course, and every property is different. In our experience, there are several advantages to buying with cash beyond the obvious one of saving interest costs over the life of the mortgage:

(1) We generally got a better deal (at least we think we did), as we could close quickly and without bank-related contingencies; and

(2) Specifically with respect to fewer contingencies: (a) no home inspection (again, because we like old homes and know there will be problems; unless you are comfortable with fixing home problems, you should likely get a home inspection though); and (b) no contingency based on sale of a prior home.

 

[Ole Red 29]

We have paid cash for our last couple of homes. We still paid for the inspection and appraisal (and made our offer contingent on there outcome).

 

[Souschef]

We bought a brand new home that DW had put a deposit on after her husband passed away. She had her house up for sale, but it fell out twice, at a time when home prices were falling.
Then I came into her life, and on our marriage cruise, we got word her house sold. We put the proceeds and my cash together and bought our new home.

 

[RunningBum]

I bought a condo a few years ago for a relative to live in for a few years. A cash offer is attractive to a seller but a pre-qualified loan is probably as strong, unless it's based on selling an existing home.

If you're confident that the price is reasonable you can skip the appraisal, but I'd wouldn't skip the inspection unless you really know how to evaluate all aspects of the house. Even if it's a wreck that you want to renovate, unless you are totally gutting it you want to know how things are that you aren't planning to touch, like maybe the roof, or the electrical system. Are there moisture issues that need to be corrected. Termites. And so on. And you still want a contingency that you can back out if you or your inspector find unacceptable issues.

Mine was a HUD foreclosure so there was still a lot of paperwork to sign, IIRC.

 

[Surewhitey]

We did the past 2 homes. Closing is a breeze and we definitely beat the competition.

2015 we saw a pre-show ING (on MLS, pre-public). Home was bigger than what we were wanting, but we offered a competitive price and he took it. We would have paid slightly less for much smaller home. 2 years later we sold it and pocketed $100k after all remodel expenses & realtor fees.

2018 got what we wanted 2 streets over. The gentleman died and we got into contact with the niece (he had no kids) and she liked us apparently. We paid less than the builders were offering apparently as he asked it not be sold to a builder, so we got it. Closings are super fast and takes 10 minutes to do paperwork. No regrets and likely saved nice $ for no loan closings.

 

[ExFlyBoy5]

A cash offer is attractive to a seller but a pre-qualified loan is probably as strong, unless it's based on selling an existing home.

I will disagree a bit here. My DW has been in the RE world for a number of years and we have bought/sold several homes over the years and for the most part...for equal offers, cash is king.

The process is much easier both as a buyer and a seller.

To the OP's question...when you pay cash, there aren't nearly as many people with an interest in the transaction. Getting rid of the lender alone saves about 75% of the paperwork. Title insurance is cheaper since you aren't having to pay for the lender's insurance on top of your own. The number of government mandated forms is next to nothing. If I recall, our last house purchase took about 10 minutes at the closing table and there were less than 10 pages of paper. Oh, and actual payment is usually done through wire these days...at least if you are using a title company (or closing attorney).

 

[frayne]

Yes, the last two homes were no more than a check writing task, one in 2003 and the last one in 2006. Both new homes and was able to negotiate decent prices with both builders.

 

[Ronstar]

We bought our snowbird condo with cash. Made the purchase very easy. Seller wanted to sell in a hurry. Cash sale made that possible. A home inspection, some title work, and we owned the place in a couple of weeks.

 

[GalaxyBoy]

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?

 

[JRon]

If you can buy with cash then do it. The only thing I can add is be aware you will owe property taxes at some point in the future so find out when they're due in your area and the payment process.

 

[jkern]

If you're in a competitive market, an all-cash deal will likely get you closer to the front of the line from similar bids. Unless there are more than one all-cash bids. Cash deals close faster and are less risk to the seller because the buyer doesn't have to go through all the hoops of a mortgage requirement.

3 years ago I put in an offer on a $150,000 home. I was going to put $50,000 down payment and mortgage the rest. I lost the deal because someone else offered $150,000 cash. I'm now glad I lost the deal since I found a better home more to my liking shortly afterwards.

I paid off my mortgage 6 months after buying my current house when my other house sold and freed up some cash. It's a wonderful feeling to not have a mortgage.

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.

 

[WyomingLife]

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've never been asked for a verification of assets; I'm not certain that I even know what that is.

We had to present a cashier's check at closing, which was held at the offices of a settlement agent. So financially speaking, the substance of the transaction was effectively between us and our bank, as opposed to us (as buyer) and the seller. The seller didn't even require a down payment. The time between signing the contract (which we did without a lawyer) and closing was a matter of days, so the seller really was never at much risk.

 

[ziggy29]

We've never been asked for a verification of assets; I'm not certain that I even know what that is.

Bank statements, brokerage statements, et cetera.

 

[MrsHaloFIRE]

We had to show a screenshot of a bank account (acct number redacted) showing funds instead of a mortgage pre approval. We closed fast. Had to drop off cashiers check a couple days early to verify they were good. Doooo get a reputable inspector. Do get a stucco inspection if its stucco. Do be present for both and scrutinize insides of cabinets, ceiling above water heaters, all the places you won't look at during a walkthrough. Look for concealeded cracks, sticking doors indicating foundation shifts. Make notes of things to double check if its furnished like flooring underneath area rugs and behind large art and furniture. We discovered an ugly built-in the day of close that was concealed behind a painting. Check the date on the plate on the HVAC unit

 

[RunningBum]

I will disagree a bit here. My DW has been in the RE world for a number of years and we have bought/sold several homes over the years and for the most part...for equal offers, cash is king.

The process is much easier both as a buyer and a seller.

I yield without hesitation to her experience.

 

[RunningBum]

I was queried for proof of assets too. I got them a Vanguard statement with the date shown along with the balances, to prove it was recent.

 

[marko]

We did just two weeks ago, after the sale of our other house. We're told it's a rarity around here, north of Boston where housing is quite high.

Here's an interesting side-line:
We never had had a mortgage in the past but considered a small mortgage to cover some upgrades, minor expenses etc. Went through the whole verification process etc.

You'd think that with zero debt, several $ mil in investments, a HNW and a 820 credit score that banks would be clamoring to stuff money in our pockets. NO!!

Our income is mostly from dividends. They get deposited into one holding account and we withdraw them to our checking on an 'as needed' basis, two or three times a year.

Because we do it that way, two mortgage companies said that it were 'uncomfortable' with us. What they both wanted to see were 'regular, formal and scheduled' withdrawals on a monthly or quarterly basis.

We decided it was just easier to pay cash for the house and for anything else we needed.

 

[W2R]

I bought my present "Dream Home" in cash. The way that is done here in New Orleans, is for the buyer (me) to arrive at closing with a cashier's check for a specified amount.

My realtor (who has since died, sadly) was a wonderful realtor who became my friend throughout the process of buying two homes in this area. The first was in 2002, perfect for accumulation phase, and right near work. Then in 2015 he helped me to buy my "Dream Home" where I now live, which is better for aging in place. Due to his excellent hardball negotiating skills (of which I have none), he saved me at least five figures on each of these two houses.

At some point in the process of buying my Dream Home, I showed him my Vanguard statement to verify that I had the funds. I felt that was the right thing to do since he was putting his reputation on the line by conveying my cash offer.