Ins and Outs of Real Estate - What are the Advantages of Having a Cash Buyer?

This time, let's look at cash buyers from the perspective of the seller.

Sooo...you have a buyer who is offering cash for your home. Should it make any difference to you? Well, it might...and it might not.

With a cash buyer, you won't have to accept a loan contingency, which requires you to return the buyer's earnest money deposit if they cannot get the loan. Most cash buyers do not ask for a cash contingency, so if the cash "disappears" and the sale falls through, you get to keep the deposit money.

More than likely, the closing can take place sooner because you won't face the delays involved with a loan application, appraisal, credit issues and other loan-related time consumers. Verifying that the buyer actually has the cash takes a lot less time than waiting to see if a loan goes through.

You might be able to give the buyer a better deal, since the entire process is less complex and less time-consuming. If this results in your landing a good sale, it's a win-win for you and the buyer.

Let's say a cash transaction makes it possible for you to have a quicker closing, but the buyer turns out to be unable to close. At least, you haven't had your house off the market as long as if you were waiting for a loan. As a result, costly "downtime" is shorter and you can quickly get your listing back up and running.

Some sellers consider cash from a loan just as attractive as cash from the buyer. As a seller, you can weigh this against the quicker and less complex nature of the cash purchase and choose what best fits your own comfort zone.

There are plusses and minuses to having a cash buyer for your home. I encourage you to discuss these with your real estate agent and attorney before making a commitment!

Ins and Outs of Real Estate-What Are the Advantages of Being a Cash Buyer?

Sooo...you can pay cash for a home...what's the benefit to you for using your cash for a home rather than using it for something else?

(1). You might have more leverage with the seller. "Might" is the operative word...some sellers prefer cash offers because they think a cash offer is stronger. If that's the case with your offer, you might be able to negotiate a better price and terms than your competition, if they need to borrow to buy.

But, a word of caution...it's usually advisable not to presume that, just because you can pay cash, you can lowball your offer and demand unrealistic terms. Many sellers have the viewpoint that money is money, whether it's your own cash or cash from a loan.

(2). If you pay cash, you don't have to bear the rigors of the loan process with all of its paperwork and documentation demands. For some buyers, this is a major advantage, especially with the newly-tightened loan and credit score requirements!

(3). If you pay cash, you won't need an appraisal, unless you want one. However, to avoid overpaying, you might want to go ahead and invest in an appraisal...or, at least ask an experienced real estate agent to do a market value analysis for you.

(4). You won't have a loan contingency...however, for your own protection, you might want to have an attorney draft a "cash contingency" as part of your offer, so that, if your cash situation changes and you are not able to close on the purchase, you can get your earnest money deposit back.

(5). You won't have a monthly mortgage payment hanging over your head. This, of course, must be weighed against the fact that you will also not have the liquid cash at your disposal, should you want or need it for something else.

There are both benefits and drawbacks to purchasing a home with cash. Run your plans by your real estate agent and accountant or attorney before making a commitment!

Next post, we'll view cash buyers from the perspective of the seller.

Ins and Outs of Real Estate...So You Got an Offer on Your House...Now What?

OK...now, what do you do? You'd like more, but don't want to lose the buyer, either.

Should you counter? Reject it? Take it and run?

Counter...here's why.

1. You never know how much the buyer is willing to negotiate.

2. Presented with tact, your counter will almost never kill the deal.

3. This one, most home sellers don't think about...if you don't counter, you'll never know what you might have gotten. But, just as important, the buyers will always wonder if they paid too much. This situation can create an obstacle to having an ongoing positive working relationship between you and the buyers...because there will be a cloud hanging over the other issues that must be worked out during the time between signing the contract and sitting at the closing table.

Contract negotiation is an art. A good negotiator, working on your behalf, can get you a great deal while still allowing for the buyers to feel like they got a good deal, too.

Are you an experienced negotiator? If not, consider having an experienced and professional real estate agent represent you.

My advice...let a professional do the negotiating for you.

Ins and Outs of Real Estate - $8,000 "First-Time" Home Buyer Tax Credit (Part 2)

There's more to the Tax Credit than just a tax reduction (see my 6/17 post).

You may apply the incentive funds to increase your down payment from the minimum down payment of 3.5%.

And, that's not all...you may also use it to buy down your interest rate.

There's more...the credit may be employed to apply to closing costs.

Ohhh...by the way, this tax credit does NOT have to be repaid, as have some incentives in the past.

If you qualify, this is a great deal!


(by the way, be sure to consult you accountant about this incentive and how it might apply to you)

Ins and Outs of Real Estate - So, What's the Big Deal with the $8,000 "First-Time" Homebuyer Tax Credit

Okay...what really is this credit and how does it work?

First off, let's be clear on what it really is.

This break is a tax credit...not a tax deduction. There is a big difference.

As a tax credit, the amount of taxes you owe is reduced by $8,000. If it were a tax deduction, it would only reduce your income by $8,000. So, the true tax break would only be a percentage of the $8,000. For example, if you are in a 35% tax bracket, the reduction would be $2,800.

So, how do you know if you are eligible for this break? How long has it been since you owned a home? If it has been more than 3 years, you may qualify for the credit, if you meet the income requirements.

Well, what if you qualify but your tax bill is less than $8,000? That's easy. You will get a refund for the difference between what you owe and the $8,000. Say you owe $5,000 in taxes. You would get a $3,000 tax refund.

In order to qualify for this tax incentive, you must purchase a home between January 1st and December 1st of this year. However, the tax credit can be claimed on either your 2008 or 2009 tax return.

There are a couple of other neat features of the tax credit that I'll cover in the next post. These features make the tax deduction even more attractive!

Stay tuned!

(Be sure to consult your accountant about this tax credit and other tax-related issues)

Pondering Real Estate Today

Real Estate Dude here...my first blog!

We are in for some fun as we explore all sorts of topics and issues about real estate.

How about the new $8K tax credit for first-time home buyers...or
buying vs. renting...or
do I need a home inspector...or
should we counter on an offer...or
how is a home's market value determined...or
does my roof need replaced...or
how long will my heating and air conditioning system last...or
is our home in a flood hazard area...or
what facts must we disclose when we sell our home...???

You'll probably think of some topics, too.

I'm looking forward to it!