Is Cash Always King When Buying A House?
I’m planning to buy a house in the ridiculous Bay Area/San Francisco market soon and am considering a loan vs. all cash option. I’m fortunate to have this option due to basically being lucky years ago.
I’ve heard it’s always better to go all cash but would like to hear others thoughts. If I do pay all cash, what about getting a collateralized loan afterwards on the home’s value so that I can go ahead and invest that money? (Though that might be risky…)
Buying with cash: It’s an option, it can be a good option, but not ALWAYS the best option. Conventional, FHA, VA, Hard money, and a myriad of other loan products are also options. Everyone’s situation is different, almost every market is different. Here are three professionals that I would recommend you engage and develop a relationship with to figure out where you are at on these spectrums.
(1) CPA and/or Financial advisor: Talk to a CPA and/or a Financial advisor for advise on how this could affect your finances and/or investment portfolio. If you’re buying in the bay area, I’m guessing your offer will be around seven figures. Make sure that the funds are in fact liquid, and you won’t incur penalties for moving these funds. Seek out advise on the tax implications across your portfolio, and how this would play into your refinancing if you chose to do so.
(2) Mortgage lender: Get all of your options on the table — you will have to get a hard credit pull to get there. Once you get these figures, you can become more informed on what would play out better for your financials in the long run. Also, while you’re getting these figures, let them know about your option to buy cash and refinance later — they would play an instrumental role in this, get on the same page together earlier rather than later.
(3) Real estate agent: Before this comes into play, I recommend you figure out (1) & (2) above. Cash is king — this allows you as the buyer to be as flexible with an offer as possible. When you involve a 3rd party financier, you agree to abide by their rules (e.g. appraisal, certificate of occupancy, etc.) A cash offer allows you, under close advisement, to waive contingencies which could ultimately be more attractive to a seller. This is not always the case, but in my opinion this is ultimately where the strength lies.
Long story short: Last weekend we submitted an ‘as-is’ offer, conventional 10% over asking price, and were closing in 10 days. We were outbid by an all cash offer that was waiving all contingencies and closing in eight days.
It’s not JUST due to the cash, but also the flexibility that comes along with it.
Best of luck on your search, work with those who earn your trust and always protect yourself.
Source: The opinion of this licensed real estate broker in Denver, CO
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