Cash is King...Not Always

 

Most of us have heard the statement "cash is king", when referring to a real estate purchase.  Listed below are the advantages of paying all cash to purchase a home. Be sure to read further, though, to see why this may not always be the case.

 

• The seller may reduce the price for those who pay in full up front.

 

• All-cash purchases streamline the home-buying process: No loans means less paperwork and no delays for mortgage approval.

 

• Cash buyers can save money on closing costs, bank appraisals, mortgage applications and fees, title insurance, and so on.

 

• Cash purchases eliminate the risk of loan denial.

 

• Cash buyers pay much less for their homes in the long run: No loans means no interest.

 

• Cash buyers never have to worry about losing their homes because they can’t afford to repay their mortgage loans.

 

• Cash buyers gain full, immediate equity in their home.

 

• Financially and emotionally, paying with cash benefits the home buyer.

 

• Sellers often show preference to cash buyers

Home sellers generally prefer quick, smooth sales. They know that even buyers who have been pre-approved for mortgages might be denied by the lender later on. Sellers are often willing to reduce the house’s price for cash buyers.

 

•  Cash purchases avoid the risk of low appraisals

 

 

 

Home appraisals are notoriously fickle. Lenders determine a home’s worth by weighing it against comparable sales — other homes in the neighborhood that may have sold at low prices for unknown reasons. A low appraisal could lead the lender to reduce the amount of the loan offer, even after seller and buyer have agreed on a price. If the loan amount comes up short, the buyer often cannot afford to buy the home. All-cash buyers sidestep mortgage applications, avoiding the need for a potentially deal-breaking home appraisal.

Cash is a powerful tool when buying real estate, however, cash buyers should know that making an all cash offer does not guarantee it will be accepted or that the seller will work with you.



One reason that an all cash offer would be rejected in favor of a financed offer would be if the seller receives a cash offer that is significantly lower than the asking price, the seller will often choose a higher offer even though it involves financing in this case.  Many homeowners need every dollar that they will net from the sale of the home and if they feel that the difference between the cash offer and the financed offer is worth the risk, they will often go with the financed offer.



Nancy Puder is a real estate broker in Arroyo Grande, CA. with Nancy Puder & Associates. If you have any questions or concerns regarding your own property, contact Nancy at (805)710-2415 or email Nancy@NancyPuder.com.  You may also go to Facebook.com/Nancy Puder Realtor and "like" her page to access other real estate related articles.