Buying a house for cash

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Buying a house for cash

Postby HomerJ » Tue Jul 16, 2013 12:44 pm

So my wife and I put in an offer for a lake house 3 days ago...

And they accepted. :shock:

We're paying cash, but we've never done that before... Before we always had a mortgage company involved.

Anything different we need to do to make sure everything is done correctly?

Working with a realtor, and a title company she recommended.
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Re: Buying a house for cash

Postby Gnirk » Tue Jul 16, 2013 12:52 pm

Congrats on your lake house!
There shouldn't be any issues, as long as you have the property inspected, and work with a title company who does their due diligence. We purchased our snowbird home with cash, and the only difference is that it takes less time to close on the purchase than if you have to go through the steps of getting a loan.
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Re: Buying a house for cash

Postby BestWishes » Tue Jul 16, 2013 12:58 pm

+1 for Gnirk's post

We bought a house a year ago with cash. Not a lot of differnce other than less documents to sign (most documents are for the mortgage lender) and close much sooner. I think we closed in about 15 days. The process is the same as getting the mortgage except without the mortgage. Just make sure you do your due diligence as Gnirk suggested since the bank is not there to do it.
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Re: Buying a house for cash

Postby Abe » Tue Jul 16, 2013 1:23 pm

Much simpler and cheaper when you pay cash. Most of the closing cost involves loan processing which you will not have. All you really need is for the sellers to provide you with a warranty deed and owners title insurance. Whoever handles the closing (lawyer or title company) will charge a closing fee. That's about all I can think of.
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Re: Buying a house for cash

Postby FNK » Tue Jul 16, 2013 2:01 pm

I think you can only expect a quitclaim deed, not a warranty deed. Maybe different things in different states...
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Re: Buying a house for cash

Postby Abe » Tue Jul 16, 2013 2:17 pm

FNK wrote:I think you can only expect a quitclaim deed, not a warranty deed. Maybe different things in different states...


The fact that they are paying cash should not have anything to do with what kind of deed they use to transfer title. There is no reason why they should not expect a warranty deed.
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Re: Buying a house for cash

Postby Random Poster » Tue Jul 16, 2013 2:35 pm

Abe wrote:
FNK wrote:I think you can only expect a quitclaim deed, not a warranty deed. Maybe different things in different states...


The fact that they are paying cash should not have anything to do with what kind of deed they use to transfer title. There is no reason why they should not expect a warranty deed.


A seller would love to be able to give a quitclaim deed; a buyer would love to get a general warranty deed. Getting a special warranty deed should make everyone satisfied.

In some states, as I recall, a QCD in the chain of title for the surface estate can be a deal-killer depending upon the value of the deal in question, since the existence of the QCD has title insurance implications.
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Re: Buying a house for cash

Postby travellight » Tue Jul 16, 2013 2:47 pm

I have bought several homes in cash and it is a very simple quick process as the others have described. On one transaction, we had dissolved the deal/negotiations because my inspection turned up several issues that would have required a lower price. I didn't even want to ask for that lower price because it seemed like an insult to the seller so I walked away from the deal (they were informed of the price and that I didn't even want to insult them by asking for it). Right at about Christmas (a few weeks later), I got a call saying they would give me my price if I could do cash and must close by 12/31 (I had 5-7 days) so he could claim the loss in that year's taxes. It was done, very quickly. Win/win for both parties, I hope.
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Re: Buying a house for cash

Postby HomerJ » Tue Jul 16, 2013 3:30 pm

Thanks all... I really appreciate this site and your helpful responses.
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Re: Buying a house for cash

Postby cheese_breath » Tue Jul 16, 2013 6:22 pm

I would have a real estate lawyer represent me at the closing 'just in case'.
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Re: Buying a house for cash

Postby inbox788 » Tue Jul 16, 2013 8:01 pm

Abe wrote:Much simpler and cheaper when you pay cash. Most of the closing cost involves loan processing which you will not have. All you really need is for the sellers to provide you with a warranty deed and owners title insurance. Whoever handles the closing (lawyer or title company) will charge a closing fee. That's about all I can think of.

Who's owner title, old or new? I don't think that's even required, but you should get it. You won't need a lenders title insurance, and homeowner insurance is also not a requirement anymore, but again, you should also get it.
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Re: Buying a house for cash

Postby aquifer » Tue Jul 16, 2013 8:20 pm

Get an owners title insurance policy for the purchase price of the house in case a title issue arises down the line. It's rare but it does happen. A title policy at least protects your investment and pays off the claimant.
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Re: Buying a house for cash

Postby Abe » Tue Jul 16, 2013 8:27 pm

inbox788 wrote:
Abe wrote:Much simpler and cheaper when you pay cash. Most of the closing cost involves loan processing which you will not have. All you really need is for the sellers to provide you with a warranty deed and owners title insurance. Whoever handles the closing (lawyer or title company) will charge a closing fee. That's about all I can think of.

Who's owner title, old or new? I don't think that's even required, but you should get it. You won't need a lenders title insurance, and homeowner insurance is also not a requirement anymore, but again, you should also get it.


I was referring to the new owners (the buyer) title insurance which protects them from problems with the title that occurred before the date of the policy. No it is not required, but the buyer should get it to protect them. There is no lender since the buyer is paying cash so there is no need for lenders title insurance. Lenders require insurance (fire and extended coverage) showing them as loss payee, but again in this case there is no lender. Of course, the new owner would want to get this to protect their interest.
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Re: Buying a house for cash

Postby Watty » Tue Jul 16, 2013 8:31 pm

cheese_breath wrote:I would have a real estate lawyer represent me at the closing 'just in case'.


+1

But it is a bit late not that the contracts have been signed.
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Re: Buying a house for cash

Postby feh » Thu Jul 18, 2013 12:42 pm

cheese_breath wrote:I would have a real estate lawyer represent me at the closing 'just in case'.


I agree. We paid cash for our current house and we had a lawyer with us for a flat fee.
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Re: Buying a house for cash

Postby Honobob » Thu Jul 18, 2013 12:55 pm

Are you familiar with the property and the area? Is this new construction? If not the mortgage process can prevent you from making a major a mistake. Are you sure you will be able to purchase insurance on a waterfront property? You are giving up a lot of protections that the mortgage process provide before AND after the sale.
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Re: Buying a house for cash

Postby Random Poster » Thu Jul 18, 2013 1:20 pm

Honobob wrote:Are you familiar with the property and the area? Is this new construction? If not the mortgage process can prevent you from making a major a mistake. Are you sure you will be able to purchase insurance on a waterfront property? You are giving up a lot of protections that the mortgage process provide before AND after the sale.


Could you elaborate on what these mortgage process protections are?
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Re: Buying a house for cash

Postby Honobob » Thu Jul 18, 2013 4:00 pm

Random Poster wrote:
Honobob wrote:Are you familiar with the property and the area? Is this new construction? If not the mortgage process can prevent you from making a major a mistake. Are you sure you will be able to purchase insurance on a waterfront property? You are giving up a lot of protections that the mortgage process provide before AND after the sale.


Could you elaborate on what these mortgage process protections are?

Just think of all the protections the Bank is looking for and they are in for only 80%. Those same things protect you also. Look at the people that are now suing for builder defects from shoddy construction during the last boom. Most people would rather NOT have all that money into the builder when they are suing them. I know people that had no mortgage/no insurance, oops!
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Re: Buying a house for cash

Postby HomerJ » Thu Jul 18, 2013 4:07 pm

Honobob wrote:
Random Poster wrote:
Honobob wrote:Are you familiar with the property and the area? Is this new construction? If not the mortgage process can prevent you from making a major a mistake. Are you sure you will be able to purchase insurance on a waterfront property? You are giving up a lot of protections that the mortgage process provide before AND after the sale.


Could you elaborate on what these mortgage process protections are?

Just think of all the protections the Bank is looking for and they are in for only 80%. Those same things protect you also. Look at the people that are now suing for builder defects from shoddy construction during the last boom. Most people would rather NOT have all that money into the builder when they are suing them. I know people that had no mortgage/no insurance, oops!


The main thing I'm concerned about is a clean title, and the title company should handle that...

This is not brand-new construction. It's a resale of a 6-year old condo in Building #2 (There are currently 4 buildings). The builder is currently building Building #5, and there are plans for Building #6.
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Re: Buying a house for cash

Postby Random Poster » Thu Jul 18, 2013 4:18 pm

Honobob wrote:
Random Poster wrote:
Honobob wrote:Are you familiar with the property and the area? Is this new construction? If not the mortgage process can prevent you from making a major a mistake. Are you sure you will be able to purchase insurance on a waterfront property? You are giving up a lot of protections that the mortgage process provide before AND after the sale.


Could you elaborate on what these mortgage process protections are?

Just think of all the protections the Bank is looking for and they are in for only 80%. Those same things protect you also. Look at the people that are now suing for builder defects from shoddy construction during the last boom. Most people would rather NOT have all that money into the builder when they are suing them. I know people that had no mortgage/no insurance, oops!


Well, not being a homeowner and not yet having gone through the homebuying process, I'm not sure what "all the protections the Bank is looking for," nor do I understand how the mortgage process can "prevent you from making a major mistake." Can you be more specific?
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Re: Buying a house for cash

Postby freebeer » Thu Jul 18, 2013 4:42 pm

Random Poster wrote:
Honobob wrote:
Random Poster wrote:
Honobob wrote:Are you familiar with the property and the area? Is this new construction? If not the mortgage process can prevent you from making a major a mistake. Are you sure you will be able to purchase insurance on a waterfront property? You are giving up a lot of protections that the mortgage process provide before AND after the sale.


Could you elaborate on what these mortgage process protections are?

Just think of all the protections the Bank is looking for and they are in for only 80%. Those same things protect you also. Look at the people that are now suing for builder defects from shoddy construction during the last boom. Most people would rather NOT have all that money into the builder when they are suing them. I know people that had no mortgage/no insurance, oops!


Well, not being a homeowner and not yet having gone through the homebuying process, I'm not sure what "all the protections the Bank is looking for," nor do I understand how the mortgage process can "prevent you from making a major mistake." Can you be more specific?


We bought our last two home for cash, so I'll take a stab at two specific points (without trying to put words in Honobob's mouth):

1. A property might be unfinanceable, completely or at the agreed purchase price. For example a bank may have a policy about loaning on a flood plain or next to a to-be-constructed sewage treatment plant. Or a home or condo may have defects making it a tear-down. The appraisal/inspection and loan approval process of a bank loan also provides some checking about value, and the typical financing contingency in a purchase and sale agreement gives the buyer an "out" in case there are problems and some buyers use that contingency as a way to get an "out" for convenience (since it's pretty easy, generally, to fail in the process of obtaining a loan and hard to prove that you did so intentionally, and the Realtor doesn't want to get stuck in the middle of a dispute, so usually you will get your deposit back).

2. The leverage of having 80% of the value secured via a (depending on your state) potentially no-recourse loan means that if there is some horrible problem your downside may be limited.

I don't think these are showstopper problems - again we bought for cash, twice. But they are IMO real considerations, that we took into account.
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Re: Buying a house for cash

Postby Honobob » Thu Jul 18, 2013 5:23 pm

Random Poster wrote:
Well, not being a homeowner and not yet having gone through the homebuying process, I'm not sure what "all the protections the Bank is looking for," nor do I understand how the mortgage process can "prevent you from making a major mistake." Can you be more specific?

Freebeer covered the main points pretty good. The building could also have limited financing because of the owner occupied ratio. How about pending lawsuits against the association? "Lake house" would give me pause, but it sounds like an established development with ongoing building so I would not be worrying about insurance or restrictions on use because of the water. I would be concerned about the new buildings as they will be your competition if/when you decide/need to resale. Are the older buildings better situated? The new units will always be newer than yours but a better site will trump that.

I paid cash for my last purchase but I have been familiar with the building since 1977 (built in 1959). I also knew a board member/owner and was aware of the financing possibilities and all liabilities against the building. I would also get 3-6 months of association minutes and a look at the last reserves study.
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Re: Buying a house for cash

Postby ourbrooks » Thu Jul 18, 2013 5:52 pm

Actually, as a home owner, you can be even more diligent than the bank; a lot of times, the bank is much more interested in you than in the property and can just not bother to gather information about the property. Banks can get pretty sloppy at times; at one of our closings, a large national bank failed to file a claim for a home equity loan we had against the property and we could have just sat on the money until they found out.

After all, if something goes wrong, you're the first person the bank will go after, not the previous owner; it doesn't matter if the property is unsaleable; you still own the money. Here are some additional things to do:

1. Go to your county/city documents department and get any development plans, zoning restrictions, easements, etc. related to the property.
2. Check for open building permits.
3. Get an updated survey done.
4. Search the newspapers for any announcements of major public projects anywhere nearby.
5. Have your own lawyer look at the condominium documents.
6. Building inspector, building inspector, building inspector. A lot of the problems they find aren't major problems but it's nice to know.
7. Get home insurance. Sometimes, the insurance agent will raise issues you didn't know about.
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Re: Buying a house for cash

Postby Abe » Fri Jul 19, 2013 10:27 am

HomerJ wrote:
Honobob wrote:
Random Poster wrote:
Honobob wrote:Are you familiar with the property and the area? Is this new construction? If not the mortgage process can prevent you from making a major a mistake. Are you sure you will be able to purchase insurance on a waterfront property? You are giving up a lot of protections that the mortgage process provide before AND after the sale.


Could you elaborate on what these mortgage process protections are?

Just think of all the protections the Bank is looking for and they are in for only 80%. Those same things protect you also. Look at the people that are now suing for builder defects from shoddy construction during the last boom. Most people would rather NOT have all that money into the builder when they are suing them. I know people that had no mortgage/no insurance, oops!


The main thing I'm concerned about is a clean title, and the title company should handle that...

This is not brand-new construction. It's a resale of a 6-year old condo in Building #2 (There are currently 4 buildings). The builder is currently building Building #5, and there are plans for Building #6.


HomerJ:
As I said in a previous post, the owners title insurance will cover any problems with the title that may appear later (cloud on title,etc.). You should get it. I have been through this so many times that I don't use a lawyer to represent me at closing, but as others here have said, you might pay a flat fee to have one if it will make you more comfortable. This sounds like a relatively simple transaction. You should not have any problems.
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