The Benefits of Buying a House with Cash

The Benefits of Buying a House with Cash


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When buying a home, a buyer must consider the benefits of buying a house with cash as opposed to getting a loan. Buying a home for cash is not always an option for some first-time buyers or families on a set budget. However, if the opportunity ever presents itself and you can purchase a home for cash, you will most definitely save more money in the long run. Many investors who are actively purchasing property in this competitive housing market know cash will most definitely make their offer more attractive.

Below we will take a more in depth look at the benefits of buying a house with cash and how it will improve your chances of getting your offer accepted.

Priority in bidding wars

When a home comes on the market it has a list price that the seller wants to receive. A good offer will be as close to listing price as possible or at full asking price according to seller’s logic. In a high demand neighborhood or an area with a low housing inventory this will not always be the case. The perfect scenario for a seller is when they receive multiple offers on their property. This creates a bidding war and in a bidding war cash is KING. If there are multiple offers for a property then the seller will start considering the best offer and cash offers will take precedence over an offer with financing. In a bidding war the price can easily go above asking and a seller will be more inclined to go with an offer that doesn’t require additional approval and that is a cash offer. The downside to a bidding war for a non-cash paying buyer is if the home gets bid up higher than the appraisal value they may not get the loan. You have to be very careful and diligent because someone paying cash will not have to obtain any additional approval or wait for appraisals and sellers know this very important fact.

Discount on list price

Buyers who make an all cash offer on a home will usually make a substantially lower offer to see what the seller is willing to negotiate. They know by offering cash that it will be attractive to the seller and they know one of the benefits of buying a house with cash is a discount. Of course there are exceptions to every rule like we mentioned above in a bidding war and the seller will probably pick the higher offer. Still in most cases cash offers will be accepted for lower than asking because it will be cheaper and faster for the seller in the end. It is a widely known fact that cash is the preferred method of payment for sellers when looking for a buyer and cash buyers know they have bargaining power to use cash to their advantage to secure a discount on the property.

Closing costs are lower

When buying a home with a loan (mortgage) there are many costs associated with securing and closing the deal. These extra items add up very quickly not only monetarily speaking but are also time consuming too. A title company has extra fees that will be added to all bank financed deals and these fees are not applicable on cash deals. Some of the extra fees you pay for are:

  • mortgage application
  • loan origination fees
  • bank attorney fees (not applicable in all states)
  • appraisal fees
  • document fees and additional processing fees
  • survey fees
  • title insurance
  • upfront fees associated with taxes or HOA fees
  • homeowner insurance fees and year advance payment

You will pay extra for financing a home and this will cost you more money. By the time you pay these extra closing costs and the interest a bank charges you for a loan, you will have paid way more for the home than you initially offered. This is something to keep in mind for resale value.

Additional reasons and benefits to buying a house with cash are:

  • Instant equity
  • No red tape and approval process required from a bank
  • saves time for buyer and seller
  • less paperwork
  • own the home free and clear
  • no unexpected delays or denials from bank

There are some benefits to getting a mortgage on a home but in reality cash is always best when purchasing a home and will always be more attractive to a motivated seller. Cash closes faster, has better negotiating power and saves you money on the overall purchase price in the long run. A good cash offer is still the quickest way to close a real estate deal and both parties win.

 

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