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If you’re shopping for a home, especially in a hot market like this one, you might hear about people making all-cash offers to buy properties in your area. There are many benefits to buying a house with cash, including making your offer more appealing to sellers. But obviously, not everyone can afford that kind of large upfront payment without the need for financing.
Yes, it is possible and perfectly legal to purchase a home with cash. If someone is selling a property for $250,000, for example, and you have more than that in your bank account, there’s no reason you couldn’t offer to simply write them a check then and there.
It’s important to note, though, that a cash home purchase doesn’t literally mean a mountain of hundred dollar bills. It just means you’re paying in full, upfront, with no financing. While you could buy a home with physical cash, carrying that many paper bills and dealing with IRS reporting requirements for such large cash transactions make it not very realistic.
There are several things that make buying a home with cash appealing, but the most basic is peace of mind. If you pay for a home in full, you own it outright. That means no need for financing from a bank or other lender, no debt and no mortgage bill each and every month. You will always have a place to live, and there’s no risk of missed payments or foreclosure.
Offering to pay with cash also makes your offer more appealing to home sellers, because they get paid faster, with no chance of a mortgage falling through or not being approved. In addition, eliminating the lender speeds up the closing process considerably.
There are both advantages and drawbacks to paying cash compared to getting a mortgage.
A cash deal means you’re skipping the mortgage process. It doesn’t mean that you should skip out on all of the due diligence involved in buying a home. Yes, even if you’re paying for a home with cash, it’s a good idea to get a home inspection. And even if you waive the inspection, you should never, ever skip the final walk-through. Your real estate agent can help you set up both.
For the benefits of making a cash offer without having to tie up all of your money in your home, delayed financing might be an appealing choice.
In effect, you pay cash for a property, then get a mortgage after completing the purchase. It’s similar to completing a cash-out refinance after you purchase the home. You turn some of the equity into cash you can use for other purposes and make monthly payments on the balance.
You still need to have enough cash upfront to pay for the home, which is a drawback. However, this strategy lets you keep your offer appealing but avoid tying up all of your financial resources in an illiquid asset.
No, buying a home with cash is typically not considered suspicious. It’s relatively common, especially in very hot markets or for real estate investors buying distressed properties. Buying a multi-million dollar estate with cash may raise some eyebrows, of course, but it is not illegal.
Buying a home for cash means tying up your money in an illiquid asset. It also means missing out on potentially higher returns from investing in other areas, and potentially not having enough money on-hand to handle repairs or other essential expenses.
Buying a home with cash makes closing faster and easier, because you don’t have to deal with the lending process. It also makes your offer more appealing to sellers, meaning you have a better chance of winning with your bid. Plus it gives you the peace of mind of owning your home outright.
There’s nothing stopping you from paying for a home with physical paper money. However, getting that many bills at once and moving them securely would be difficult. The IRS also has reporting requirements for large cash transactions, so it’s typically not worth the hassle.
Buying a home with cash can speed up the closing process and make your offer more appealing to sellers, which is a big plus in a hot seller’s market. However, keep in mind that you’re tying your money up in an illiquid asset, so it isn’t always a good idea.
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