12 Tips to Buy School

Buy School Buying a house with cash has many benefits over trying to obtain a mortgage. For starters, you don’t have to worry about credit checks or the extensive and intrusive mortgage approval process.

However, buying a house for cash isn’t as simple as knocking on a door and offering the owners a suitcase full of bills.

You still have to complete the necessary inspections and closing procedures.

You’ll also want to make sure you leave enough to cover the additional expenses of owning a home.

Including homeowner’s insurance and property taxes.

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Buy School

1. Determine how much money you want to spend.

Whether you’ve been saving for awhile.

Or are budgeting to save now and buy a home in the future, setting a target is crucial.

Research homes available to find out average prices for the type of home you want to buy.

• If you’re saving in the future, keep in mind how the housing market is moving.
• While these things can be difficult to predict, if it’s going to take you 10 years to save up for your home, you can bet that $300,000 won’t buy the same house in 10 years that it would buy now.
• Look at your living budget when deciding how much you can spend, especially if you have money saved up. You don’t want to deplete your savings entirely and have no money left for basic living expenses or in the event of an emergency.

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2. Account for closing costs, taxes, and additional expenses.

Even though you’re buying a house for cash.

There are still numerous costs associated with buying and owning a home.

These costs can add up, especially if you didn’t figure them into your budget from the beginning.

• Expect closing costs to be about 3 percent of your purchase price, even if you’re buying with cash. So for example, if you want to buy a $300,000 house, you should have at least an additional $9,000 for closing costs.
• While homeowner’s insurance isn’t necessarily required if you’re buying a house with cash, you’ll still want to have it to protect your investment. This typically involves paying a monthly premium. The amount will vary depending on the location and size of the house, your deductible, and the types of coverage you want. Homeowner’s insurance may be required if you’re buying a condo or a house in a planned community governed by a homeowner’s association.
• Property taxes vary depending on the size of the property and the location of your house. You can check with your county tax assessor’s office to get a general idea of property tax rates in areas where you plan to look for a house.

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Buy School

3. Move your house-buying funds to a separate account.

Once you’ve determined your source of funding and the amount you want to spend on a house.

Take that money and set it aside.

Your simplest option is a basic savings account that you can quickly.

And easily access to get the money once you find the house you want to buy.

• If you’re ready to buy a house within the next 2 to 3 months.
• Don’t put your house-buying funds in an investment account that may require time to liquidate.

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4. Document your source of funding.

Although buying a house for cash may seem simple.

You do have to be able to demonstrate where the money came from.

Large cash transactions are subject to a number of federal laws that are put in place.

To protect against money laundering and other crimes.

• If you’ve been saving up money regularly, these transactions will appear in your bank statements. If you’ve recently received a large amount of cash, such as an inheritance or a lawsuit settlement, keep the legal documentation showing you came by that money legitimately.
• If you’ve been saving up cash (whether in a piggy bank or under your mattress), get that money into a bank account as soon as possible. After you deposit a large sum in a bank account, expect to wait 60 to 90 days before you buy a house. Don’t withdraw any money from the account in the meantime, or use it to pay bills or other expenses.

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5. Evaluate the housing market in different neighborhoods.

You may already have your heart set on a particular neighborhood.

Even if you do, it’s worth looking at neighboring areas to see where the best deals can be found.

• When evaluating neighborhoods, look at proximity to schools, ease of access, and the general amenities and upkeep of the houses and commercial areas around the neighborhood.
• Neighborhoods that look run-down and neglected may be a good investment opportunity.
• But they also may come with risks, including increased crime rates.
• Use real estate websites to find out what homes in different areas are selling for, as well as what comparable homes sold for in the past. This can help you determine if homes in the area are increasing or decreasing in value.

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Buy School

6. Make a list of features you want.

Start with 2 categories: features you must have, and features that would be nice to have.

You might also include a third category of “dream” features that you don’t really expect to find, but that you would love.

• Unless you’re building your custom dream home from the ground up, it’s unlikely that you’ll be able to find a home on the market that has every feature you want and is within your budget.
• Consider how those features interact with each other. For example, you may be willing to forego a front porch if the property has a large back deck. Or you may be willing to exchange a garage for a carport.
• Some features may also be things you could consider adding on yourself, if you found a house without them at a lower price.

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7. Talk to a real estate agent.

A real estate agent with experience buying and selling homes in the neighborhoods.

You like will be best suited to help you find the home you want.

Even if you’re buying for cash, an initial consultation with a real estate agent.

Can help you narrow down your search.

• A real estate agent will also be able to tell you if some of the features you want are unrealistic, either for your budget or in the neighborhood you like. The same agent might also be able to point you towards other, similar neighborhoods where you’d be more likely to find the house you want.
• Real estate agents also have access to listings before the general public does. In a hot market, these properties may be under contract before the listing even appears on real estate websites or in listing magazines.

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Buy School

8. Visit the school in person.

While you can search, put in an offer, and even buy a house in many markets sight unseen.

If you’re buying a home near where you currently live.

There’s no excuse not to go look at the home in person.

Photos will never tell you the whole story about a house’s appearance and condition.

• When in the home, open every door and cabinet.
• Walk through every room in the house and test every light, faucet, window, ceiling fan, and any other appliance or feature that will come with the house.
• If the seller’s real estate agent is walking through the property with you.
• Ask them as many questions as you can think of about the property.
• However, keep in mind that their job is to sell you the property.
• You can expect them to be honest, but you should still take their answers with a grain of salt unless they can provide proof to back up their statements.

9. Be honest about your skills and knowledge.

A cheap fixer-upper in a neighborhood you like may be tempting.

But the problems with such a house are likely more extensive than they appear at first glance.

Before you sink your life’s savings into a home, make sure the required repairs aren’t beyond you.

• If you will need to hire an expert, such as a general contractor or roofer, to repair the house before it is livable, talk to several and get estimates before you put down an offer.
• Even if you think you can do something yourself, it’s still a good idea to talk to an expert and make sure you know what you’re getting into beforehand.
• Also take time into consideration. You may be able to complete a project, but it might also take you a week to do it. If you don’t have that kind of time to invest, you would want to either hire a professional or look for another house without such extensive necessary repairs.

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Buy School

10. Verify your funds before making the offer.

A suitcase full of cash is going to arouse suspicions, and may cause the deal to fall through.

If you want to buy a house for cash, you need to have that money in a bank account.

And be able to explain how you acquired the funds.

• Generally, a bank statement showing the total balance is all that you’ll need.
• However, you may be asked to document how you acquired that money.
• This may be obvious if you show regular deposits over several years.
• But a single large deposit may require further explanation.
• In the mortgage industry, you may hear this referred to as “sourcing” and “seasoning” your money.
• All it means is that the lender wants to know where you got the money from, and that it’s been in the bank for at least 60 days.

11. Send the seller a purchase agreement.

Once you’ve decided to buy a house.

You’ll generally draw up a purchase agreement that outlines the terms of your offer.

You can find forms online that you can use to format this document.

• If you use a form, make sure it’s legally valid in your state.
• Some states require particular information to be included on any form used in real estate transactions.
• If you get your form from an established legal forms provider.
• Such as Rocket Lawyer or Nolo, you can provide the name of the state where the agreement will be used.
• If you hired a real estate agent, they likely have their own purchase agreement that they use.
• With a cash-only offer, you usually attach a document verifying your funds (such as a bank statement) to the purchase agreement.

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Buy School

12. Negotiate with the seller if necessary.

Even though most sellers are quick to favor an all-cash offer because of the simplicity of the transaction.

They may still want a higher price, especially if your initial offer was a low-ball.

• Don’t be afraid to walk away if the seller wants more than you’re willing to pay, or more than the house is worth.
• Sellers may be attached to a home for sentimental reasons, and that may affect their objectivity.

13. Affirm the seller’s acceptance of your offer.

If the seller accepts your offer, they’ll send over a sales agreement.

Which will have to be merged with your purchase agreement.

All this typically involves is signing the two agreements.

• Once the seller has accepted your offer, you’re typically expected to put down a percentage of the purchase price as an earnest money deposit. At this point, the house is considered to be “under contract.”
• While there are still reasons a deal for a house under contract could fall through, failure to obtain financing is one reason you won’t have to worry about since you’re buying with cash.

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14. Complete inspections of the house.

A lender would require an inspection before agreeing to finance your purchase of the house.

If you’re buying a house for cash, there’s no requirement that you have an inspection done.

However, it is usually worth it for the peace of mind.

• If the seller has recently had an inspection done, look it over before hiring your own inspector.
• If you’re satisfied with the seller’s inspection, you may not feel the need to do one yourself.
• Just make sure it’s been done within the past year.
• Expect to pay between $200 and $800 for the inspection.
• Depending on where the house is located and how large the property is.

Buy School

15. Renegotiate the price if necessary.

Inspection may turn up repairs that need to be made to the house before you move in.

The seller may agree to make these repairs before you move in.

Or they may lower the price to account for the additional expense.

• Many houses sold as “fixer-uppers” may be sold as-is.
• Meaning that any repairs are solely the responsibility of the buyer.
• It’s still worth getting an inspection so you know exactly what you’re getting into.

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16. Contact a title company.

If you have a mortgage lender, they’ll typically take care of conducting a title search.

To make sure the sellers are the rightful owners of the property.

However, if you’re buying a house for cash, this is your responsibility.

• You can do a title search on the home yourself, but this can get complicated.
• It can also be very time-consuming.
• Don’t attempt a title search on your own unless you’ve done one before and know what you’re doing.
• Another benefit of using a title company is that the completed title search typically comes with title insurance. If a flaw in the title history for the property is later discovered, your ownership right will be protected.
• Title insurance typically costs around $1,000. However, this is a one-time fee. You don’t have to pay continuing premiums each year like you do for other types of insurance. The title search itself usually runs between $100 and $250.

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17. Get a cashier’s check or initiate a bank transfer.

As daring and romantic as it may sound.

Showing up at closing with a briefcase full of hundred-dollar bills is not how you buy a house with cash.

Typically your bank can transfer the money electronically into the seller’s bank account.

And this may be the easiest way to do it.

• If you get a cashier’s check, you’ll likely have to pay a fee for the bank to issue the check.
• The seller also may have issues with their bank.
• For example, the bank may hold the funds for 24 to 48 hours since it is such a large transaction.

Buy School

18. Attend the closing on the house.

With check or transfer information in hand.

Sign the paperwork to transfer ownership of the property from the seller to you.

When you hand them the money, the house is yours.

• While you can do a closing on your own, it’s generally better to hire an attorney if you’ve never done one before. There are a number of documents that must be signed to complete the transaction, even if you’re simply buying the house for cash.
• Expect to pay between $400 and $1,000 for an attorney.
• Some title insurance companies will complete the closing for you at a lower rate than an attorney would charge for the same service.

Conclusion