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Message
Buying house with cash instead of taking a mortage
Posted on 3/10/11 at 7:05 pm
Posted on 3/10/11 at 7:05 pm
Couple questions regarding topic above.
1.) Can anyone give me any other cons in an all cash purchase other than:
- interest rates so low, once the mortgage interest is written off the money could be invested at a greater return
- tying up liquidity
????
2.) How much off asking price (percent wise) should one expect to knock off by offering cash?
Im sure it is a case by case depending on area, market, etc. But all guesses are welcome, educated or not.
TIA
1.) Can anyone give me any other cons in an all cash purchase other than:
- interest rates so low, once the mortgage interest is written off the money could be invested at a greater return
- tying up liquidity
????
2.) How much off asking price (percent wise) should one expect to knock off by offering cash?
Im sure it is a case by case depending on area, market, etc. But all guesses are welcome, educated or not.
TIA
7
Posted on 3/10/11 at 7:12 pm to smoke4life
You must be an O-T poster with that kinda dough lying around
Posted on 3/10/11 at 7:12 pm to smoke4life
quote:+ tax deductibility.
1.) Can anyone give me any other cons in an all cash purchase other than:
- interest rates so low, once the mortgage interest is written off the money could be invested at a greater return
- tying up liquidity
quote:Zero.
2.) How much off asking price (percent wise) should one expect to knock off by offering cash?
Seller does not care where his cash-money comes from.
Posted on 3/10/11 at 7:18 pm to NC_Tigah
quote:
Zero.
Seller does not care where his cash-money comes from.
very true, but i have heard from several Realtors that cash speeds up the process and eliminates offers from falling through. Guess it is just like any other situation its all dependent on the sellers motivation.
Posted on 3/10/11 at 7:32 pm to smoke4life
I sold my last house to a cash buyer. It makes closing alot quicker, and you have more piece of mind (not worrying about the deal falling through). I was moving out of state, and didn't have any competing offers, but i'd say the quick closing (saving a mortgage payment) and peace of mind is probably worth about 1% of sale price.
Posted on 3/10/11 at 9:12 pm to smoke4life
Interest rates are at a low that once they rise may not be seen again for a long time. I wouldn't tie up all of your money in a house upfront...but then again I do have to say, there would be some serious peace of mind not having a house note.
Posted on 3/10/11 at 9:39 pm to smoke4life
1) Peace of mind.
2) The money could be invested at a loss too.
3) The longer the house has been on the market, the greater discount you'll get by paying cash. La. economy is better than most states, so the discount here will not be as great as Fl.
I have heard many stories about people selling a house, but the buyer couldn't qualify for a loan.
Ig you look at a house in which 2 or 3 'sells' fell through because the buyer couldn't get a loan, you'll get a big discount for paying cash.
'Big' is relative to the economy.
4) Make sure you have enough cash in an emergency fund. Rule of thumb was 3 months expenses, then it went to 6 months, now you might want 12-24 months. If you have no car note or house note, then expenses should be low, so emergency fund for 24 months should be about $50 grand.
2) The money could be invested at a loss too.
3) The longer the house has been on the market, the greater discount you'll get by paying cash. La. economy is better than most states, so the discount here will not be as great as Fl.
I have heard many stories about people selling a house, but the buyer couldn't qualify for a loan.
Ig you look at a house in which 2 or 3 'sells' fell through because the buyer couldn't get a loan, you'll get a big discount for paying cash.
'Big' is relative to the economy.
4) Make sure you have enough cash in an emergency fund. Rule of thumb was 3 months expenses, then it went to 6 months, now you might want 12-24 months. If you have no car note or house note, then expenses should be low, so emergency fund for 24 months should be about $50 grand.
Posted on 3/10/11 at 9:52 pm to NC_Tigah
quote:
Zero.
Seller does not care where his cash-money comes from.
+1. They are all cash sales.
That being said, in a market like this, a motivated seller may knock a bit off to assure there are no hang-ups.
Posted on 3/10/11 at 11:47 pm to TigerDeBaiter
LINK
With markets depressed and loans being difficult to get, sellers are giving discounts for cash.
With markets depressed and loans being difficult to get, sellers are giving discounts for cash.
Posted on 3/11/11 at 12:34 am to JWS3
JW - Not really sure what your getting from that article. Other than a foreclosed property that may not appraise, I don't see cash being that big of a factor...maybe a point or two, but that is a pretty typical negotiation amount.
I think microbe's advice is good. Check to see what has been on the market the longest and/or has had a couple offers fall through. Also, keep tabs on any current pending offers that could potentially fall through, though playing that game could be a little disheartening.
I think microbe's advice is good. Check to see what has been on the market the longest and/or has had a couple offers fall through. Also, keep tabs on any current pending offers that could potentially fall through, though playing that game could be a little disheartening.
Posted on 3/11/11 at 6:35 am to smoke4life
It really doesn't make any difference to the seller but it does make closing a breeze, took about 15 minutes. My closing cost were about $200.
Posted on 3/11/11 at 6:59 am to NC_Tigah
quote:
2.) How much off asking price (percent wise) should one expect to knock off by offering cash?
Zero.
Seller does not care where his cash-money comes from.
A cash buyer trumps a buyer who needs to finance every day of the week. If you've ever tried to sell a home and the financing falls through you'd appreciate this even more.
Cash buyers can close quicker. The offer isn't contigent on bank finance approval. With everything else being equal, a cash buyer will get a better deal.
Posted on 3/11/11 at 7:40 am to Ric Flair
quote:Which piece of your mind? Front? Back?
you have more piece of mind
Posted on 3/11/11 at 4:00 pm to kaaj24
quote:My goodness.
A cash buyer trumps a buyer who needs to finance every day of the week. If you've ever tried to sell a home and the financing falls through you'd appreciate this even more.
Perhaps you were answering a different question than I was?
Because the question I answered had nothing to do with two equal offers, 1 cash and 1 financed.
The question I answered had to do with whether or not a cash transaction would bring a discounted price.
Do you believe a cash transaction will bring a discounted price?
If so, why not simply respond to the OP with the suggested amount he should discount his cash offer.
Frankly, if you have some experience with it, I'd be interested in your information on cash discounts for real estate purchase too.
This post was edited on 3/11/11 at 4:02 pm
Posted on 3/11/11 at 5:12 pm to smoke4life
Do mean "cash" cash or writing a check or money order?
Posted on 3/11/11 at 6:54 pm to kaaj24
quote:
A cash buyer trumps a buyer who needs to finance every day of the week.
You must be talking about a buyer who hasn't gotten pre-approved yet. Yes, I can see it then but if you're serious about making a purchase you get that taken care of ahead of time.
There shouldn't be any difference for a pre-approved buyer/borrower.
Posted on 3/11/11 at 9:34 pm to foshizzle
I'm watching the baseball game and don't feel like doing all the math. But what are your expectations for inflation over the next few years?
Having the bank eat the cost of inflation on the mortgage (if you believe it will be significant), getting a historically low rate which is tax deductible and the interest you could potentially get on that money in some other investment could be significant.
Or you could act like Charlie Sheen for a year and go through enough blow and hookers that you just die at the end and don't really care...
Having the bank eat the cost of inflation on the mortgage (if you believe it will be significant), getting a historically low rate which is tax deductible and the interest you could potentially get on that money in some other investment could be significant.
Or you could act like Charlie Sheen for a year and go through enough blow and hookers that you just die at the end and don't really care...
Posted on 3/11/11 at 9:47 pm to CobaltTugger
There are a few advantages in a cash deal for the seller. Since there is no lender, the buyer may not choose to do an inspection. If they were to do an inspection, many lenders require everything to be fixed. Also, as others stated, if the buyer is in a rush, you can push a cash sale through within a week.
If I was a buyer, I would still get an inspection either way. As a seller, I wouldn't give much off extra for a cash sale, maybe 1%.
If I was a buyer, I would still get an inspection either way. As a seller, I wouldn't give much off extra for a cash sale, maybe 1%.
Posted on 3/11/11 at 11:19 pm to LSU1018
I pay $1000 in interest every single month. If you have an investment better than that, then take out a loan. Otherwise pay cash for it.
Posted on 3/12/11 at 2:38 am to tenderfoot tigah
quote:
I pay $1000 in interest every single month. If you have an investment better than that, then take out a loan.
Unless there's a cash flow problem the dollar amount means nothing. What matters is your interest rate, taking taxes into account both with the mortgage and with prospective investments.
For example, if the house cost 50K then your interest payments are horrible (like credit card rates) and the mortgage needs to be paid off ASAP. If the house cost 5 million and the bill is only $1K monthly you should pay it off as slowly as possible and invest instead.
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