Among the myriad of financing options available to home buyers, paying with cash is the simplest and fastest way to complete a purchase. There is no need to get several months of paper-work in order to satisfy lenders. How much one earns is also irrelevant, as qualifying for a loan is unnecessary and even credit scores don’t matter.
If you are in the position to pay cash for a property, the purchase will undoubtedly be easier, but there are still several steps you will need to take in order to complete the deal. You will need to create copies of bank statements that show where the money is located and that the funds can be easily accessed. It isn’t enough to show that you own stocks that can be liquidated. The funds need to be readily available and the proof needs to be conveyed to the seller to show your purchasing power.
Many buyers falsely assume that since they are paying cash, they can buy at steep discounts. In most cases, little if any leverage is wielded by cash offers and it is best to understand this before making offers on properties you’re interest in. Offending a seller is a real possibility and even if you are willing to come up from your initial offer, the seller may decide they no longer want to deal with you. You don’t have to offer full price on a property, but remember; if there are other buyers bidding on the same house, a seller is likely to go with the highest offer, regardless of a loan contingency. When the deal closes, it is cash to the seller no matter how the funds were produced.
Other than paying cash for the property, all other parts of the real estate purchase remain the same as financed deals. Buyers should still do their due diligence and have any inspections that are relevant and the seller still needs to make any disclosures as to the condition of the home. Title insurance will need to be purchased to protect the buyer and their investment.
Typically, a lender will require buyers to insure a home against fire. Even though it is not required on a cash purchase, it would be fool-hardy not to insure the home you paid cash for. You could literally see your investment go up in smoke and have no way to get that money back. Financed or not, protecting a property from damage or destruction is the only sensible option. Regional problems, such as earthquake and flood-zones, should also be weighed when considering the type(s) of insurance that best suits your particular needs.
When you purchase a home with cash, take the same precautions you would if you were financing it. Use common sense, have necessary inspections and protect your investment with appropriate insurance.
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