Is Cash Still King?
While it may feel powerful to have that all-cash ace up your sleeve as you look for the perfect property, thinking home sellers swoon over all-cash offers (which they do), it’s wise to go into a purchase of this kind with your eyes wide open. Why? because You’ve got the luxury of options.
Think it’s only millionaires that have enough money lying around to make an all-cash offer? Think again, because these deals are surprisingly common. According to a recent report from ATTOM Data Solutions, all-cash offers made up 29% of single-family home and condo sales in 2017, and most of them are not on behalf of the filthy rich.
To some, an all-cash offer looks like a no-brainer because of its lack of risk to the seller and even to you, as long as you are not using every dime they have for the house. Even those buyers with a loan pre-approval in hand still run the risk of having a last minute smudge surface on their credit, a job loss or change happening mid-stream and no one could foresee a cloud on the title or anything else that could affect the final approval. When the lender feels secure in the investments and the home's appraisal meets the negotiated selling price the sale can move forward. All these what-ifs are eliminated with an all-cash offer unless a buyer’s verified funds suddenly disappear before the close of escrow.
So the question remains: is it a wise decision to make an all-cash offer if you can? Below are a few pros and cons that could cause you to think twice about an all-cash offer.
An all-cash offer, then, can help eliminate the competition and catapult your offer to the top of the list. It can also speed up escrow periods by eliminating a number of contingencies.
All-cash offers can strengthen your negotiation stance and persuade sellers to accept less than their full asking price because of the sure-deal aspect of it. However, Just because you have cash don't expect to get a crazy-good deal just because you're paying cash. Inventory is low and savvy sellers know this. Laying out the dough/money means less paperwork and no delays. It can also offer sellers the option of a quicker close since there is basically little-to-nothing to hold up the deal.
With a cash sale, there are no worries about a foreclosure, you save money on fees such as closing costs, title insurance, etc. The most obvious advantage is, of course, that the home is yours from day one and not a bank.
On the minus side, you could miss out on a good-sized tax deductions and you could be tying up a lot of money in one asset instead of diversifying your financial portfolio — Of course if your one of the lucky ones who have tons of money to spare, that means limiting your liquidity. New Tax Laws say if your home’s value is under $750K you will give up a good -sized tax deduction. Just something to think about. Those are the biggies, and they are nothing to ignore. It may be wise to think about how even taking out a modest mortgage and keeping up payments for ten years or so gives you options. If emergency situations arise in your life, you could have more ready cash. You also have the option of paying off the loan at any time and in many instances no penalties, which can offer you and your family a real sense of security.
Prove you’ve got it. You can’t expect to beat out other offers on a home saying you’ll be paying cash unless you provide the home seller with a copy of your bank statement as proof of funds when you submit your offer.
Sweat the small stuff. There are other home-buying expenses in play here. You’ll still have to budget for the costs that come with any home purchase, including the property taxes, homeowner’s insurance, condo or association fees, if applicable, and a professional home inspection.
Make sure you build an emergency fund that will cover living expenses for at least six months, including one for future property taxes, because they are something that will never go away. Financial advisors agree that if you have extra cash after that, you'd be smart to funnel it into a retirement account since a home alone should not constitute your entire nest egg.
Well that's it. If you have other question on this subject give me a call or text me at 318-488-1760- Sheri' Griffin
* Realtor in the State of Louisiana * KELLER WILLIAMS PARISHWIDE REALTY, 1390 Hudson Lane, Monroe, LA 71201 Office 318+812-SOLD
Source: TBWS Published Date 4/20/2018