Paying all cash for a home has its perks. You don’t have to worry about mortgage rates, there are fewer fees to pay, and you may be able to close quickly.
For some buyers, it’s a smart way to save money and stand out in a competitive market. But it’s not always the best move for everyone. Locking up a large chunk of your savings in one asset can limit your financial flexibility.
“The right strategy for a cash buyer will depend on the goal they are trying to achieve,” said Eva Melgarejo, a loan consultant with New American Funding based in Long Beach, Calif. “Is it to buy the house because it is the perfect fit for you and your family? Or is it to get a deal?”
Buyers may not need to have big bank accounts or investments they can tap into to purchase a home with cash. Some companies, like NAF Cash, will purchase homes for buyers in cash and then rent the property back to them while they get a mortgage.
“Cash most of the time equals no drama or last-minute haggling,” said Ryan David, the owner and lead investor at We Buy Houses in Pennsylvania. “The peace of mind alone is worth any discount provided.”
Here’s what to consider when deciding if buying a home with all cash is the right move for you.
Cash offers often win bidding wars
Buying with all cash doesn’t just make the process faster, it can also make your offer more attractive to sellers. In a competitive market, that can help you stand out from the crowd and lead to a winning offer.
Sellers often prefer cash offers because they believe these buyers are the most likely to close. They also don’t have to worry about the home not appraising or dealing with the hassle of making repairs to fulfill certain loan requirements.
“By eliminating the financing contingency from a deal, a cash buyer gives themselves a huge advantage,” said Chris Reis, a Seattle-based real estate broker with Pacific Northwest Residences, Compass.
Cash buyers may get a lower sale price
One of the nice surprises about paying all cash for a home is that sellers might be willing to take a little off the list price.
“Off-market sellers, especially other investors and flippers, will usually discount a house being purchased with cash,” said David. “There's absolutely no reliance on appraisals or bank contingencies that would risk destroying the deal at the last minute.”
Cash buyers often close faster
A major perk of paying all cash is the ability to close quickly.
With no loan process or underwriting delays, cash buyers are often able to close quicker than buyers who need a mortgage.
For sellers, a quick and easy closing can be just as important as the price. For some sellers, it’s even more important.
What to consider before purchasing a home in cash
Paying all cash for a home can feel like a smart, secure move, but it also means locking up a big chunk of your money in one place. That’s cash you won’t have available for other opportunities, like investing or building up your emergency fund.
Buyers may want to consider working with a lender so that they can make a cash offer and then get a mortgage to cover the amount. This way they still have money on hand in case of an emergency or to invest.
Another thing to consider is that if you buy in cash, you won’t be eligible for the mortgage interest tax deduction. For some buyers, it could mean paying more in taxes each year.
Buying in cash is often a smart move, as long as it doesn’t leave you with nothing left in the bank. Sometimes, easing in with a mortgage first, or partnering with a lender to make a cash offer, is the wiser way to build long-term success.
Eva Melgarejo NMLS # 1525876
