Hi, It’s Ben from BenBuysIndyHouses with an informative post today that will teach you everything you need to know about buying a house with cash. The truth is, there’s a lot of houses on the market available at cash prices much cheaper than mortgages. Consumers have caught on to this, and the rate for all-cash home sales in January of 2017 was nearly 24 percent of the homes sold.
If you’ve been curious about the process of buying a home for cash, this guide will tell you all you need to know.
Everything You Need to Know About Buying a House With Cash
What Does it Mean to Purchase a House With Cash?
The cash-home purchase process means the buyer does not take out any mortgage or loan for
the value of the house. This has some advantages as well as some stipulations you should be aware of. This YouTube Video goes over some of the advantages of conducting a cash-sale home purchase:
The process isn’t that different from purchasing a house with a mortgage, except that there is no bank involved in the process. If you find a house and decide that you want to make a cash offer, you must have an attorney draw up an offer. You will need to go through the seller’s representative to make an official offer.
If they are planning on paying cash, sometimes buyers can get a better price on the home. This depends on how motivated and flexible the sellers are. The fact that the sale wouldn’t be contingent on a bank approval is may be enough to entice the seller into negotiation. Always be sure to include any contingencies on your offer that you will need.
A contingency legally allows the buyer to walk away from the deal for reasons listed in the offer. A standard contingency is that the offer is only valid if the house passes inspection. Other common contingencies are a sale price close to the appraisal value or the allowance for repairs on noted defects in the home (within a reasonable expense range).
If your offer is filed and accepted, you will be required to place a percentage of the offer in an earnest money trust. Be sure to review the rules on this carefully. Sometimes no earnest money can be returned if the sale doesn’t happen. In some cases, the buyer is entitled to receive a refund if the house doesn’t pass inspection or the seller backs out. In either case, the earnest money should be applied to the offer once the sale is approved.
Having a Home Inspection
Once this is done, it’s time to pay for a home inspection. It’s vital that you hire a licensed, professional inspection service. One of the differences between a cash and mortgaged sale is in the instance of bank financing. An inspection will be required. The bank has a vested interest in ensuring the money they lend will be put into a sound property.
Cash buyers don’t have a third party vested in protecting their own interests. Therefore they won’t be required to complete a home inspection. Cash home buyers should always have a house inspection; after all, you want to protect your money as much as a bank would want to protect theirs. If the seller won’t allow an inspection, think very carefully about how much you want to make this deal. If you want the house, but the inspection reveals expensive defects, you may be able to negotiate a lower price.
You should pay for an appraisal of the property if the house passes inspection. For the same reasons a buyer would want to ensure there are no major defects in the home, a cash buyer should check the value of the home.
Lastly, a cash buyer should always check the tax records of the home and do a search at the local title office to ensure that the house is free and clear of all liens. A lien occurs when the owner defaults on a loan that has the house listed as collateral. The buyer runs the risk of not being able to get an owner title if these are not paid.
With a mortgaged property, the bank will attend to these concerns. As a cash-home buyer, you have to do the legwork to protect yourself.
Closing on Your New Home
If everything comes back clear, you’re ready to purchase your new home. The process is called closing. Cash-purchases can be scheduled almost immediately after the paperwork has been completed. Buyers aren’t dependant on the lender to schedule a representative to assist. The closing process for cash buyers is essentially signing agreement paperwork to the terms of the sale, acknowledgment of all the paperwork, and providing a cashier’s check for the agreed price of the home.
It’s really just that easy. By following these steps, anyone can be a cash-home buyer. Avoid the repayment inflation that occurs through mortgage interest payments. Be sure to stop by my blog at BenBuysIndyHouses.com for more helpful tips on all your home buying or selling concerns.