Purchasing a new home up front with cash involves the same basic steps as buying one that's mortgaged, except you don't have to go through the procedure of getting a loan. As a result, the whole process is considerably easier and offers a number of key benefits. Outlined below is the basic procedure you'll follow and some of the advantages you'll most likely see when buying a new property with cash.
1. Submit an Offer
Once you've identified a good property, contact the owner or builder. Say that you'd like to purchase the home in cash, and then make an offer. While you can also make an offer that's less than the asking price for a financed home, a reduced offer is much more likely to be taken seriously if you announce that you'll be paying upfront in cash.
Cash is most sellers' payment method of choice because the sale doesn't depend on an outside loan that might or might not be approved. You might be able to leverage this image as a serious and dependable buyer to get a favourable deal on your home of choice. Even if you offer the full asking price, you might still receive a good discount from the seller simply because they know they'll be getting their money immediately, without having to deal with competing bidders or lengthy mortgage approvals.
2. Inspect the Property
Once you and the seller have agreed on a price, your next step is to have the home inspected. You'll want to hire a licensed inspector with a good track record in order to confidently determine the exact condition of the house and its lot. Once your inspector has okayed the property, you can be reasonably sure that it's been properly built and move forward.
If any major design flaws are detected during the inspection, you're free to walk away from the purchase, as long as your purchase agreement permits cancellation in the event of a failed inspection. If minor issues are found but you're still interested in buying the property, you may seek to revise the terms of your contract with the seller to make an allowance for repairs.
3. Get an Appraisal
Similar to inspections, appraisals are usually included as contingencies in your price agreement. Whenever a buyer seeks to finance a new home, the mortgage provider generally demands an appraisal in order to ensure the home's value is more than the loan amount. When you're paying in cash, you still need an appraisal to make sure the property is worth the price.
Appraisals typically cost a few hundred dollars, but they can save you thousands in the long run. An experienced appraiser will consider the size and overall state of the entire property and see how it measures up to other nearby properties in order to evaluate it.
4. Insure and Close the Sale
After the inspection and appraisal are finished, you're ready to set up homeowner's insurance and put all the finishing touches on your documentation, like the title search. Then you'll be all set to go to closing.
Another advantage to paying upfront with cash is that you have more freedom with respect to choosing your close date since you don't have to wait for a mortgage provider to schedule it. In any case, you and the seller will have already established a preliminary close date when you agreed upon on the purchase price. On the day of closing, you'll just need to sign some paperwork and provide your payment in the form of a bank draft.
Other Benefits of Paying in Cash
Along with the benefits already mentioned, there are additional perks associated with buying a home in cash. For one thing, you won't have to pay interest on a mortgage, so you'll significantly lower the total cost of your new home.
You also won’t have to go through all the hoops and hurdles of applying for a mortgage and, of course, you won't have to worry about making a monthly mortgage payment if, for example, your income situation changes.
In the end, buying a new home with cash is highly safe and economical, as long as you protect yourself by following the correct procedures. And yes, these are the same basic steps you'd follow if you were financing a home, minus the mortgage screening, so the procedure is streamlined and already very familiar if you've ever bought a home before. So with that in mind, if you've got the funds on-hand, go for it! Pick out your dream home and reap the benefits of an all-cash home purchase.