Just curious - is it hard to buy a house for cash?

[eleighj416]

My wife and I bought a house in the town where I grew up in order to settle my mother's estate. We were originally going to buy my sister out and keep my mother's house and use it when we came to town. Let's just say that wasn't going to work with my sister! So we said we will buy our own instead. We made an offer on March 9, 2021 and closed on 04/01/2021. Our realtor asked if we had a proof of funds letter. I told that the funds were in a money market fund at Vanguard and if they wanted a letter from our bank, I would transfer the funds that day and provide a letter in a day or so. It never came up again.

 

[FLJim]

Our neighbor recently passed away so the kids sold off the property. Buyer paid in cash. They didn't bring a cashier's check to the closing, they brought cash. $1.7M in cash, all inside a metal briefcase.

That's a red flag for sure. Taking that briefcase to the bank would lead to a LOT of questions from the bank, and even more from the KGB, i mean the IRS.

 

[Chuckanut]

That's a red flag for sure. Taking that briefcase to the bank would lead to a LOT of questions from the bank, and even more from the KGB, i mean the IRS.

Don't banks have to report cash transactions over $10,000 to the Feds?

 

[FLJim]

Curious why, with these historically low interest rates,
anyone would want to pay cash for a house?

Because some people who have had no debt whatsoever for the last 50 years get a warm fuzzy feeling not owing anyone. It's not a math decision, it's a personal decision.

 

[ExFlyBoy5]

Don't banks have to report cash transactions over $10,000 to the Feds?

Yep..it's call a CTR. Also I don't think many home sales (cash or otherwise) are normally consummated "at the bank"...more common in title or attorney's offices.

https://www.fdic.gov/news/financial-institution-letters/2021/fil21012c.pdf

https://www.investopedia.com/terms/c/ctr.asp

 

[ivinsfan]

Yep..it's call a CTR. Also I don't think many home sales (cash or otherwise) are normally consummated "at the bank"...more common in title or attorney's offices.

https://www.fdic.gov/news/financial-institution-letters/2021/fil21012c.pdf

https://www.investopedia.com/terms/c/ctr.asp

Well the money ends up in the bank eventually.

 

[ExFlyBoy5]

Well the money ends up in the bank eventually.

Of course, however when it's done through a title office or attorney's office it is an exempt transaction not subject to reporting to the feds. This is not the case if you give someone a big wad of cash and that is then deposited to the bank.

 

[ivinsfan]

Of course, however when it's done through a title office or attorney's office it is an exempt transaction not subject to reporting to the feds. This is not the case if you give someone a big wad of cash and that is then deposited to the bank.

Do you need paperwork when you go to the bank then? No wonder the wife in Ozark had a real estate office!

 

[ExFlyBoy5]

Do you need paperwork when you go to the bank then? No wonder the wife in Ozark had a real estate office!

If you go to deposit more than 10K, the bank is required to verify who you are...and it doesn't matter if they "know" you. The doc I shared shows the procedures banks are required to follow including the documentation they must sent to the feds. Ah, Ozark...I am ready for the next season!

 

[RetiredHappy]

We are actually about to close on a cash purchase. My husband wanted to amend the contract and take advantage of the low interest rates but the seller would not agree, even after showing him our A+ credit and offering to pay all fees. We felt he was being unreasonable which is why I posed the question.
We haven’t had a mortgage for 30 years. We are in our mid 60s so I’m a bit leary. I love this forum and really appreciate reading all the ideas people pose!

What were you trying to amend? Loan approval contingency? Delay closing? Both of these are unfavorable new terms that a typical seller would not accept. I know I would not accept these changes if my buyers changed the terms.

 

[Aerides]

We are actually about to close on a cash purchase. My husband wanted to amend the contract and take advantage of the low interest rates but the seller would not agree, even after showing him our A+ credit and offering to pay all fees. We felt he was being unreasonable which is why I posed the question.
We haven’t had a mortgage for 30 years. We are in our mid 60s so I’m a bit leary. I love this forum and really appreciate reading all the ideas people pose!

Right now it is 100% a seller's market. He probably turned down other cash offers to take yours. He want none of the extra hassle of a mortgage - and a bank - involved with the sale, appraisal, inspection, possible delays.

He can relist the house tomorrow and get another cash buyer for probably $15k or more than you have already agreed to. If you want the house, stick to cash. It's not about fees or your credit, it's about a smooth fast sale with no chance of a hiccup.

 

[MC Rider]

Trying to deposit $1.7 Mil in a metal suitcase at your bank would likely trigger a SAR at minimum. Suspicious Activity Report. A wire transfer would be better. LOL.

 

[2177V]

Of course, however when it's done through a title office or attorney's office it is an exempt transaction not subject to reporting to the feds. This is not the case if you give someone a big wad of cash and that is then deposited to the bank.

The buyer with the cash simply transfer the money into escrow. Escrow company gives a check to the buyer after recording the buyer's name on the title at the County records office.

The transaction is reported to the government 3 ways: (1) Recording at the county office (County government) (2) Escrow company provides Form 1099S form reporting the gross proceeds (federal government) (3) In the State of California, escrow office may withhold state taxes from the proceeds. (state government)

The buyer does not have to worry about the government except making sure the county office records the deed. The buyer gets that verification from the county and gets a county property tax bill.

In California, the seller may have state and federal income taxes to report.

Ref:

https://www.clta.org/page/Consumer10

 

[ivinsfan]

Right I'm not really believing the 1 million plus in the sliver briefcase.

 

[MC Rider]

Right I'm not really believing the 1 million plus in the sliver briefcase.

What if it was handcuffed to their wrist?

 

[NateW]

No, it was easy. Our realtor showed us houses without proof of cash. The proof was required when we made our offer. A quick phone call to my bank netted our "proof of funds" on bank letterhead that listed the accounts and balances (I blanked out the account numbers). This letter was submitted with our offer.

Although I did show our realtor a screen shot of our bank CD balances to let her know we were serious about buying. But what was funny was right after our realtor showed us the first house, she asked "Have you been pre-qualified". I simply answered "No, I see no need for pre-qualification." She gave me this puzzled look and then proceeded to explain to us why pre-qualification was important. I interrupted her and said, "It's a cash sale." She then smiled and said, Correct, you don't need pre-qualification."

Paying for cash is a lot simpler too. You forgo the property appraisal and can forgo ordering the survey, although we got one and also purchased buyer title insurance.

At closing we signed no more than 5 times and were done in 15 minutes.