Can You Buy a Home Cheaper With a Cash?

cash-purchase-home-austinThe assumption that a cash sale is more attractive to real estate sellers, no matter what the actual amount, is erroneous. Offering cash only becomes attractive if there is no possibility of a loan or mortgage to buy the property. No matter how much you borrow to buy a house, the seller receives the total amount right away, the same as they would with an all cash sale. This gives the cash buyer no advantage, unless they are also offering more money for the same property. Sellers will pick whichever buyer will give them the most for their home.

In general, offering cash will not increase your chances of beating out other interested parties for a specific property.

There are, however, some exceptions. Some real estate deals require cash, although it is rare. In these cases, any buyer who has ready cash on hand has a much greater chance at getting property for a low price. In most cases, these properties need extensive work or updating that makes them unattractive or unsaleable on the actual market.

These rehab properties require the buyer to have cash on hand. The houses usually need structural repairs such as foundations, new roofs or structural work to make them habitable. When the seller will not or cannot make the repairs before selling his property, the banks are much less likely to offer anyone a loan to buy the house. The term is ‘unwarrantable’ and it means that anyone who wishes to buy must come up with the cash on their own.

If you are interested in rebuilding or rehabbing houses in poor condition, and have the cash to pay upfront, you can get some great deals in real estate. However, this does not mean you will get the property for virtually nothing. In most cases, the property will sell well below future, good condition, market value. If the house is bank owned, remember that banks still exist to make money and very low offers will probably not be accepted.

Overall, cash can help you with almost any real estate transaction. While it may not get you a better deal upfront, being able to make a larger cash down payment can reduce interest rates and avoid Private Mortgage Insurance requirements. It becomes more important for particular types of transactions, such as those for rehab or quick sale properties. For normal home purchases, the amount of cash will not influence the purchase price.

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