Buying a Home with Cash

Pros and Cons of Cash Buying

All-cash home purchases hit a record in the first quarter of 2014, reaching 43 percent, according to RealtyTrac, which has been tracking cash-buying trends since 2011. This latest figure represents a 19 percent rise from last year—a number industry watchers attribute to stricter mortgage qualification standards coupled with high buyer demand and competition. If you're thinking about buying your next home with cash, you might be wondering how this option stacks up against a mortgage—not to mention, how you'll come up with the money.

Why Cash? Pros & Cons

On the pro side, using cash lets you sidestep mortgage loan qualifications and much of the paperwork and administrative fees. This accelerates the buying process and makes you more attractive to sellers who are eager to close. You have better odds of out-competing other buyers and better leverage to negotiate a lower price. Finally, the prospect of not having to pay monthly mortgage obligations and interest is appealing.

On the other hand, the cash you tie up in your house won't be as readily available for emergency spending. This could place you in a position of needing to sell or mortgage your home in the event of an emergency, and convincing lenders to extend a mortgage or equity loan could be difficult if you lack a steady income, a situation many retirees face. One way to address this issue is opening a home-equity line of credit after you buy your home to make sure you have emergency funds available. A reverse mortgage can also help in a pinch.

Another issue is whether the amount you save on mortgage interest might be better invested. Buying a house with cash amounts to investing in a bond with an interest rate equivalent to what you would pay with a mortgage. Compare this interest rate with other investment options to evaluate how buying your home with cash affects your long-term savings.

Finding Funds

If you want to pay for your home with cash but don't have a lump sum handy, how do you find the money? Options include:

• Realtor suggests a few strategies, including investing in a long-term CD, a method that can be combined with CD laddering if you don't want to lock up all your cash.
• For current home owners, another option is refinancing your existing mortgage into a larger one, known as "cash-out refinancing." Zillow recommends weighing this option against others, such as home equity loans and lines of credit.
• If you're receiving regular payments from an annuity or structured settlement, you may be able to sell all or a portion of your future payments to a financial services firm and put the money toward your home purchase.

What About Taxes?

Paying for your home in cash precludes the tax breaks you would get from your mortgage interest payments. Use the calculator at Mortgage101 to estimate the potential tax benefits of a mortgage so you can weigh this against buying with cash.

Why It is a Good Idea to Choose a WI Realtor®

Why It is a Good Idea to Choose an Evansville, Wisconsin Realtor®

While there are a lot of licensed real estate agents in most locations, the industry is quite tough.  A large number of people who apply for their license end up leaving the industry in a short time.  This means that there is a small number of Realtors® with licenses who have the experience and knowledge to truly help a person buy a home.

The NAR (National Association of Realtors®) shows that sales people with the Realtor® designation are sworn to uphold a set of Ethics.  They also participate in various training sessions each year and have access to information about the local community and other houses for sale.  Members of the NAR are normally visible participants of their community.  They usually have a membership in PTA, volunteer for neighborhood organizations and/or participate in local government boards.  This type of involvement helps Realtors® stay in touch with the area and keep tabs on improvements and changes.

Realtors® Help Clear up the Confusion

It could seem that browsing through a few internet sites aimed at real estate listings could be enough to help a person find their next home.  However, every home is unique.  Homes are like snowflakes in that way.  Even homes that seem similar on the outside and were built by the same contractor will have different features.

In addition to the differences in the home, each transaction is unique.  Home purchase contracts, closing costs, mortgage loans and inspection requirements will vary from home to home.  This complex assortment of loans, contracts, legal forms, pricing, negotiations and inspections can be quite overwhelming.  That is why so many people seek out the advice of a professional Realtor® who is established in the community and has a track record of helping people buy homes.

Picking a Realtor®

Since the real estate market normally has a large numbers of Realtors® there is quite a bit of competition among agents. That is why it is a good idea to speak to other people that have used a Realtor® and get recommendations.  Using an experienced Realtor® with a successful track record of finding homes that meet the buyer’s needs and makes the buyer happy should ensure that you are using a Realtor® that can do the same for you.

What the Realtor® Can Do for You

After you have asked around to some friends and read over testimonies from happy clients, it is a good idea to set up a meeting with the Realtor® for a first consultation.  Establishing the right relationship with the Realtor® is important to help your home purchase, or sale, go smoothly.

The Realtor® will explain to you their method for marketing homes and finding homes for buyers and also disclose the agency’s rules.  This basically establishes the contract between you and the Realtor®.

Once you have established your contract with the agent the Realtor® can begin to inform you of the current conditions of the market as well as prevalent lending options that are currently available.