Buying homes with cash more common – Part 1
The rate of people buying homes with cash is on the rise. The proposition is already attractive from the buyer’s point of view, saving them the expense and headache of securing a mortgage. On top of that, sellers are often willing to take a reduction in asking prices for a faster and less risky closure. However, the trend is causing problems for some first-time buyers.
Benefits of buying homes with cash
According to the National Association of Realtors, as of December, 2011, about 30 percent of homes were bought with cash. That is double what it was in 2008, before the bubble burst on the housing market.
Most home buyers do not have the cash to buy a home outright. But those who have the discipline to save it up, or those who stumble upon an unexpected windfall, will find many advantages. The most attractive is no doubt that they often end up paying considerably less.
Cash buyers will often win out when there are multiple offers on the table, even if the offer is below asking price.
Tracie Hamersley, a senior vice president at Citi Habitats Realty in New York told Forbes:
“Until recently I’d say sellers didn’t care that the buyer was coming in all cash or financed, they just wanted the highest number. Now the game has changed. While banks are lending again, it is much more onerous, and there are many hoops to jump through. So someone who can close in cash can in most cases qualify for somewhat of a price discount based on that sureness of a sale.”
Cash buyers don’t have to worry about getting a home inspection (although its probably still a good idea to know what you’re getting into), there is no mortgage payment to worry about each month, they receive instant equity as protection against unforeseen future emergencies, and there are none of the title transfer restrictions connected with home loans.
Benefits of cash sales for seller
Cash purchases close faster — in as little as a week, compared to the 45-day average with mortgages — and there are less paper hoops to jump through. It is often more attractive to have cash in hand than the promise of it down the road. Things can happen over time, and the reduction of risks seems to add value for many sellers.
So buying a home for cash can be an attractive proposition for both the seller and the buyer. However, not many first-time buyers have the assets to do so. As we will see in part two, the increasing popularity of the trend is making it more difficult for young buyers to close a deal.