Buying a house with cash

THINK OUTSIDE THE BOX:  Why wouldn’t you get a mortgage?

You’re selling your home and a buyer submits an “all cash offer.” What does this mean and what are the advantages or disadvantages of buying a house with cash?

When a buyer is not making his purchase of your home subject to obtaining a mortgage, they can use a no-financing clause or they can use an all-cash-offer clause. In both circumstances, it means the buyer isn’t putting the obtaining of a mortgage as a necessary part of finalizing the sale of the home—getting a mortgage—the buyer’s financing is not a condition of the sale of the home.

There are three reasons why buyers make all-cash offers:

  • You’re offer is more attractive to the buyer.
  • You can get a better deal.
  • Theoretically, you’re not going through the hassles of getting a mortgage.

However, as a buyer making an all-cash offer, there are some drawbacks:

  • You’ll be tying up a lot of money in one asset.
  • As such, you’ll lose the power of leverage that a mortgage provides.
  • You sacrifice liquidity on that invested money.

Still, in a hot market, all-cash offers are quite common, but it does mean the buyer needs to do his due diligence before making an offer on any property. This includes going through the process of getting approved (almost going through the complete mortgage process) for a mortgage, if a mortgage is required. If the buyer doesn’t do this, puts in an “all cash offer” on a home and then can’t get financing, the buyer will be legally liable for the purchase of that home. It’s at this point when messy court battles can start.

Romana King     MoneySense     August 1, 2015

 

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