The Risks and Rewards of an All Cash Offer on a Home
May 29, 2018 |
First and foremost, the closing process will be much faster when you pay all cash. You can close in under two weeks while a buyer using 3rdparty financing will take at least 30 days.
Secondly, a cash buyer has the benefit of removing any 3rd party financing contingencies. Since their contract is not subject to a lender's appraisal, credit approval, or lender-mandated
repairs, this gives the seller some assurances that there will not be any hiccups in the process.
Lastly, cash buyers have the advantage of buying any property they want because they aren’t held back by the strict guidelines of 3rdparty lenders. Lenders will want to see what condition the property is in and know that there won’t be any major repairs. For buyers, you’ll have an interest rate of 0% and a monthly payment of $0 – can’t beat that! In summary, a shorter process with
fewer hiccups is advantageous to both you and the seller.
If you are a cash buyer you will not be able to take advantage of the tax write-offs from financing. You will lose a lot of liquidity when you put all of your cash into a home, so only do so if you have some cushion money left over after the purchase.
We advise you talk to a finance professional about what would be the best investment for you. All financial situations are different, some people may be better off leveraging their financing and using tax deductions, others would benefit more from paying
outright and not incurring any mortgage payments.