If you’re looking to beat out other offers in a competitive real estate market, then paying all cash can be a great option. There are many ways that homebuyers could find themselves with enough cash to make this feasible. Perhaps you’ve been saving, you’ve inherited a sizable amount of money, or you’ve won a big prize. If you’re in a position to buy a home with cash, then here’s what you should consider.
Your offer will be taken seriously
When you make an all-cash offer on a home, the seller will take your offer seriously. When a home seller knows the buyer won’t need to apply for financing, it can make the deal so much easier. They won’t have to worry your loan won’t close, and the closing process can take much less time. Cash can really work to your advantage when you know the competition will be stiff.
You could save money
If you’re willing to pay for a home with cash, then a seller may be more likely to offer you a better deal on the home. Paying with cash gives you great bargaining power. When sellers know that they’ll get their money sooner and with less hassle with a cash offer, they may be much more open to negotiating on the price.
You’ll save time and stress
Applying for a mortgage takes time and can cause a lot of stress for many homebuyers. When you pay with cash, you eliminate the need to apply for a home loan. These days, underwriters require an enormous amount of paperwork to complete the loan process. In other cases, a homebuyer may have trouble securing a home loan. This could be because of poor credit, unreliable income, or already having an existing mortgage on a home.
You won’t take on more debt
Knowing that you won’t have a monthly mortgage payment can bring you enormous peace of mind. Paying the mortgage is one of the most stressful aspects of owning a home. Eliminating that payment can make life much easier, especially as you approach retirement age.
Your money will be tied to one asset
On the flipside, you should also consider that buying a home with cash ties up a large part of your money in one asset. Many financial advisors recommend diversifying your assets, which can be more difficult when most of your savings are being spent on a home. Understand that your home is a place to live as opposed to just an investment.
You’ll lose liquidity
Liquidity refers to how quickly you can get cash from your investment. When you invest all your money in a home, your assets are not as liquid. If can take several months to sell a home and recoup your money. However, you may be able to take out a home equity loan by borrowing against your equity. Just be sure to research interest rates and fees to understand the financial ramifications.
Your home could decline in value
Finally, it’s important to remember that the value of your home could depreciate over time. Though home prices continue to remain high, there is always the chance that the market could slow. You must consider your own financial situation to determine if you should take on that risk.