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

[ExFlyBoy5]

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

I would expect that you would get the same varied answers as if you asked "why would you finance a home."

For me, I am not a fan of interest payments of any kind. Have we lost a significant amount of investment income by having a lot of money tied up in our house? Yes. But, as we all know...you can't really bet on the markets but I sleep very well at night knowing that WE own our home, not a bank.

And as others have mentioned, having cash in hand is a very persuasive tool when it comes to buying.

 

[meleana]

When we paid off our first home, we decided that we’d never have a mortgage again for our primary home. That way, we’d always have a roof over our head should my job (at the time) or the markets fail. We’ve contemplated a second home a few times, including the possibility of a mortgage. In this environment, I would be more likely to get a mortgage on a second home than ever before. But, alas, I’m getting old, and I don’t know that I want a second home or vacation home anymore. DW does…time will tell, since we are currently building a new primary home.

We bought a small new construction vacation cottage as our primary home! Just the one house. So retired and living here it’s like being on vacation every day!

 

[Dtail]

Bought our house for cash while retired.
Had to show the funds were there.

 

[meleana]

Because that’s the only way seller would do business. My condo went on sale Friday and I made an offer on Sunday, they verbally accepted but then got a cash offer on Monday morning for above the list price. Since they verbally accepted, they would stand by it if I did a cash deal and up my down payment, so I did.
I looked at a few houses before this that sold above listed price and were cash. It’s just nuts out there. I don’t know why the sellers care, but they do.

Sellers care because it gets a third party- the bank- out of the way in terms of mortgage approvals, appraisals, insurance, inspections, etc.

 

[steelyman]

Sellers care because it gets a third party- the bank- out of the way in terms of mortgage approvals, appraisals, insurance, inspections, etc.

And the fees associated with those (for buyers too, although inspections are good).

 

[Rambler]

We bought a small new construction vacation cottage as our primary home! Just the one house. So retired and living here it’s like being on vacation every day!

Its just the two of us, so I’d be happy to downsize. In fact, our new home under construction is a downsize of sorts…5463sqft to just around 4300. I’d be happy to downsize further, but DW wants to make sure the grandkids will want to come visit, and thinks that a big house is key to that. I don’t necessarily agree, but you know how the saying goes…”If mama ain’t happy,…”. OTOH, if we were to move to Hawaii, we’d of necessity be in a smaller house or condo, AND I’m sure the kids would be around to visit A LOT.

 

[RunningBum]

I wonder why it is okay to buy for cash but renting income is harder to prove. . .

Buying a house is a one-time transaction. There's no real benefit to faking the amount of cash and not being able to close. One the house closes, the seller never has to deal with the buyer again. Sure, it would

Renting is a transaction every month. If one shows enough assets to get the lease, but actually has other needs for the cash and can't continue making rent payments, it's a hassle to get them evicted.

 

[iloveyoga]

My Mom and my sis both bought their townhomes for cash. No issues, in fact I assume it was faster and cleaner as no loan process was needed.

 

[ERD50]

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

Sellers care because it gets a third party- the bank- out of the way in terms of mortgage approvals, appraisals, insurance, inspections, etc.

And the fees associated with those (for buyers too, although inspections are good).

Right. I paid cash (funded by a Line of Credit against our portfolio) to get a leg up in this market. Sellers don't have to worry about the appraisal, mortgage approval, etc - which could all sink the deal (though we still had an inspection).

But - I plan to take out a mortgage soon, have held and refinanced in the past, extending our mortgage at attractive rates, because I like these historically low interest rates. If someone doesn't feel comfortable with this historically safe and productive arbitrage, that's up to them. But many of the reasons given against a mortgage simply don't hold water.

-ERD50

 

[iRent2u]

Hard to buy a house with cash

No

 

[2177V]

I recently purchased two houses in California of 1/2 million plus each with 100% cash. I had a real estate license (now expired) so I knew what the procedure is in California. My cash offer beat numerous other offers that were about $15K higher than mine. This is because the other offers involved a bank loan which means closing escrow takes 3 to 4 weeks longer than a cash offer and there is no guarantee that the bank will come up with the money.

Also, since I represented myself, the selling real estate agent did not have to split the 6% commission with a buyer real estate agent. If the seller balked at paying less than the highest offer, I knew the seller agent would agree to accept perhaps 4% commission instead of 6% in their contract in order to sweeten the deal. This is because a split is usually 3% for the seller's agent and 3% for the buyer's agent, if a buyer agent was involved.

I am happy since I got the house lower than the higher bidder, the seller's agent is happy since she got a higher commission and the seller is happy because escrow closed in about 7 days.

It takes a week for the escrow office to do a title search to verify that the seller is indeed the true owner and that the title is clean. The escrow office then issue title issurance for me. I pay the escrow office the 1/2 million plus by certified check, we sign the documents and the deal is done. Please note that I waive the roof inspection, termite inspection and house inspection because I was familiar with those inspections so I did those inspections myself and I was satisfied that the house does not have a physical defect problem.

I am now working on buying my third house to pay with 100% cash. In answer to your question: it is super easy to buy a house with 100% cash for both the buyer and seller.

In Real Estate, Cash is king.

 

[jazz4cash]

Curious why, with these historically low interest rates,

anyone would want to pay cash for a house?

In my case I’ve looked at a few investment properties and a cash offer would be attractive and enable a quicker close. It removes the financing contingency and whatever could go wrong. With multiple offers above asking price, a cash offer might be an edge. I could always get a mortgage after closing.

 

[teetee]

Curious why, with these historically low interest rates,

anyone would want to pay cash for a house?

Cash transaction has no risks and cheaper for both the sellers and the buyers.

Using mortgage only works when you don't care about risks or commit to risk it since you don't have the cash to pay it full, which by itself is a risky way to grow wealth. Some were lucky and some werent. The lucky ones stand by leveraging debt when the unlucky ones have their homes foreclosed. It is pretty straightforward. Also if you pay by cash, there is no way you can buy more house than you can afford (unless you lose income and can't afford the property tax after taking ownership of the house).

 

[2177V]

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

No hassle with a bank, no monthly mortgage to pay, no bank application fee, no credit check fee, no mortgage insurance fee, no points to pay, no providing tax returns to the bank, no income reporting to the bank, no appraisal fees, no proof of home insurance prior to closing, no termite inspection, no roof inspection, no pre-paid mortgage payments, etc, etc

You will be surprised at the extra cost and hassle of getting a mortgage loan.

If you do pay cash, you can always borrow money from the bank at a later time as a "cash-out" re-fi loan. Some people would borrow money from friends and relatives, pay the house in cash and pay back the friends and relatives with a re-fi loan. You come out ahead since family and friends normally do not charge any fees.

 

[Dot57]

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!

 

[Tracer]

I bought 2 condos for cash. The last one already had a contract on it for cash, but hadn't showed proof of funds yet. I made an offer and showed proof of funds immediately. The seller accepted which nullified the first contract from the original buyer. You snooze.. You loose.

 

[RobbieB]

But I'd want the green paper money counted by a bank, deposited to my account, and the bank handing me a receipt before I'd consider the transaction closed. What if there were some counterfeit bills in there, ones just in circulation, not purposely by the buyer? The bank's counting machine might catch those, and I think they confiscate them, and you lose.

-ERD50

Me thinks anyone with 37 pounds of cnotes in a briefcase had them all in neat little 10 grand bank wrapped bundles.

I'd be more worried about the guys waiting back at the car with the shotguns.

 

[37andhappy]

I was wondering about this because I see people asking about proving income when they are using assets to qualify to rent.

Wasn't sure if a real estate agent would be skeptical of your ability to pay and I am sure many here have downsized and run into it.

Just curious. You don't need to tell me its not the best move as it is not a possibility anyway.

Many people who have no "salary income" by houses with cash. I have had friends buy houses with Bitcoin also (which can sometimes be more "tax effective") in that the house is essentially "gifted" officially, with the BTC exchanging hands off-shore.

 

[street]

I will be paying in cash when my land deal finally happens. Still waiting for a legal description of the land. I don't want a loan and paying cash saves me money.

 

[Old Microbiologist]

I sold a house once and the buyer paid cash. I had expected it to take months because the market was very weak at the time. My wife had moved to Europe on military Assignment to Paris and took all the furniture with her so I was sleeping on one sofa that was left. I was doing my PhD at the time. The buyer wanted to take possession in 2 days so I had to scramble to find a place to live and ended up in a commune for 3 years which was interesting but cheap as I only paid $70 a month for my room (which as a doctoral candidate student you rarely are in for anything other than sleeping).

Also, the idea of mortgages is more or less an American thing. Here in Hungary everyone pays cash or gets a loan from the government. They tried the mortgage experiment after the collapse of the Soviet Union and joining the EU but the banks were Swiss or Japanese and the loans were made in their respective currencies. In 2007-2009 when the Hungarian forint collapsed it made everyone's mortgages more than double so the default rate went to 100%. The government implemented a moratorium on evictions (sounds familiar?) and then ordered the banks to accept payment in the original amount but in Hungarian forints at the rate in the day the mortgage was made forcing the banks to take a massive haircut. This story is repeated all over the EU so the mortgage experiment is more or less over as may happen in the US as well when the chickens come home to roost. People here also pay cash for autos as well and there is no such concept as leasing. Banks here do not own the government as they do in the US at least not yet.

 

[NgineER]

Also, the idea of mortgages is more or less an American thing. Here in Hungary everyone pays cash or gets a loan from the government.

I think this statement is incorrect. It might very well hold true for less stable former Soviet Union countries, but the mortgage lending looks alive and well in Western Europe. The top three countries on the list have over a trillion dollars worth of mortgage debt from non-government banks. Hungary on the bottom of the list only had $13.4 billions of mortgage debt

https://www.statista.com/statistics...sidential-mortgage-lending-europe-by-country/

 

[Old Microbiologist]

NgineER I think that is commercial real estate which is another issue. I have friends in Germany and they have mortgages but usually for a smaller amount than is typical in the US. I agree that Western Europe is more risk-averse as regards mortgages compared to the US but far more liberal than former Soviet countries (or souther European ones as well). But, nothing like in the US. When I lived in Germany I tried to get a mortgage and there were several requirements. First I had to have a minimum of 50% down (more would be better), then they required a banking history at that specific bank of 10 years, plus proof of income etc. So, we didn't qualify of course, probably wouldn't anyway being Americans. We are second-class citizens within the EU and no better than being from Nigeria. This is because the way the US treats potential immigrants and is on a tit-for-tat basis. It is also because the US basically refuses all international treaties (such as driver's license etc.). We like to use the treaties we never signed against other nations but we are exceptional. It comes back to haunt ex-pats trying to live outside the US. We are also treated as enemies by our own embassies. It takes some getting used to.

I have a good friend (German/Hungarian) that just purchased an apartment near Munich and has a pension of $3000 a month. He put 75% down and his son had to cosign the loan putting himself at risk (not much as he inherits everything). It was for an 850,000 Euro 2 room apartment at an assisted living facility as he is getting senile slowly and decided to return to Germany for the end from Hungary. I think that is typical. My next-door neighbors are French and inherited their house here but are real estate developers in Paris. Mortgages are really only for the wealthy there. I know of no one here in Hungary that has a mortgage. I have been involved in several building projects here and as an investor, you put your cash on the line to get the apartments built and they are then sold prior to construction and must be free and clear before anything starts other than acquiring the property. The return on investment is pretty good if you don't get cheated by the contractor and being an American this is always a risk. It is impossible to get a court date for lawsuits so that is not a real option and basically never happens. We have been cheated twice with no effective legal recourse. The companies went bankrupt (not in reality but in legal terms usually cheating their subcontractors as well), renamed themselves, and continued on as though nothing happened. We won't do it again.

 

[2177V]

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!

Paying in cash is the right decision because you avoid bank mortgage fees. After the house closes, you can always apply for a HELOC or Home Equity Line of Credit to take advantage of the low interest rates. The fees are zero or considerably less although the interest rates may be slightly higher than a 30 years mortgage loan. However, if you do not use it, you pay no interest at all. I paid 2 houses with cash and I have a HELOC to take care of any unexpected expenses or if I need money to buy a car. The interest rates for a HELOC are way lower than credit cards or other personal or automotive bank loans. I usually pay back my HELOC quickly as possible so HELOC are very convenient.

 

[NgineER]

In Sweden, there is no amortization requirement if you have 80% equity. So people are borrowing as much as they can, 90%+. They are forced to amortize on a 60 year loan until they get 20% equity, which usually happens in a few years due to appreciating assets.
Thanks Real estate prices are crazy in part due to the fact that your interest only payment is so low.

The link I shared was for residential mortgages.

 

[ExFlyBoy5]

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!

Well, you wanted to change the terms of the contract...and it was unfavorable to the seller. This would have raised a red flag if I was the seller and with so many markets favoring sellers, then I would have tossed your amendment in the trash. Nothing personal, just how it goes.