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.
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