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Advantages

Paying for a property in cash has a lot of advantages. In this 2nd part of the article, we will focus on the pros and cons for paying for a property purchase in full. Both the buyer and the seller can greatly benefit from a cash transaction.

Most sellers prefer cash buyers.

As a cash buyer, you are on top of the sellers list. Every seller prefers smooth transactions that only cash buyers can provide. Cash buyers have a greater leverage and negotiating power when it comes to the price, turn-over date, repairs, and so on. On top of that, most sellers are willing to lower their prices in favor of cash buyers. 

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You avoid the risk of low appraisal for your housing loan.

As a buyer, you are at the mercy of the appraisal based on the comparative sales within the market area of your chosen property and the condition of the property that you are buying. A low appraisal means a higher equity/down-payment is required to be paid to the seller. 


Avoid the risk of a disapproved housing loan.

Lets face it, every loan application goes thru a very strict process on determining if the risk for the bank is acceptable in granting you a loan. If a person’s credit score is not favorable then there is a very big chance that your loan will not be approved. If this happens then you need to find another source to fund your purchase or risk losing your reservation or even the paid up equity in favor of the seller.

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You save on time, money and effort.

A 30 year housing loan mortgage can add up to twice or three times the price of the original purchase due to interest. Aside from that, you need to pay additional bank charges such as appraisal costs and loan application fee. As a cash buyer, you save valuable time in closing the deal thereby eliminating the hassle of gathering the required documents, applying for a bank loan, going back and forth to follow up. As a cash buyer, you only meet with the seller up to a maximum of 2 appointments. 


Disadvantages

Less liquidity

Paying for a real estate purchase in cash requires a lot and you are trading liquidity for long term gains. Always remember that it takes a while to sell a property and should the need arises, you cannot immediately trade your property for cash unless you sell at a loss.

Giving up on other opportunities

There is a bigger chance that you might deplete your cash reserves when you commit to an all out cash purchase.

Price depreciation


There is also a chance that the value of your property depreciates after a cash purchase if it is located on a depressed area.

To sum of the pros and cons, it is always best to consult with your financial planner / advisor and to weigh in your options. This will vary depending on the type and the use of the property that you are planning to purchase. 

Have you read Part 1 of the Article?Should I pay in cash when buying a property? Part 1

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The Author
Joel Dennis is a mixture of Tyrion Lannister's brain with a the looks and brawn of John Snow and Khal Drogo and a secret admirer of Daenerys Targaryen, the First of Her Name, Queen of Meereen, Queen of the Andals and the Rhoynar and the First Men, Lord of the Seven Kingdoms, Protector of the Realm, Khaleesi of the Great Grass Sea, called Daenerys Stormborn, the Unburnt, Mother of Dragons.... whatever...   

Email me at broker@joeldennismuyco.com

 


Comments

08/24/2016 7:25pm

All of these are great tips. It did actually help me last week in thinking of purchasing the property in cash or loan that is why I'm back to say thanks. I decided to go for a loan and I think it is the best way for me. In my opinion loaning will save me from getting to zero money and have myself selling the property to buy food. I think with a loan, we could all have the time to earn monthly and thus having no problem throughout the whole payment years.

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08/31/2016 6:58pm

It's good to know that I was able to help you in choosing the best mode of payment for your purchase. Should you need any of my services, please do not hesitate to send me a message.

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09/22/2016 2:52pm

During foreclosure auctions, potential home buyers are also given the opportunity to choose from a wider array of asset and homes for sale. Thus, they are given the free hand to decide and choose the particular type and style they want and prefer.

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Your article was so useful for me! I have had to solve all that problems you had rised here!

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02/16/2017 2:52am

Purchasing a property in cash has always a great advantage. Loan applicants often face problems for loan sanction. Always take advice from real estate agencies. Feel free to contact us at http://www.biesterbos.nl

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02/16/2017 1:38pm

I love to read the interesting and informative articles on the internet. I also read the article that you have posted. Keep doing the great work up.

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As it has both advantages and disadvantages, I ( from arborfinancialgroup.net) would suggest that paying by cash should not be your first choice because you don’t want to get into a situation where you are forced to sell the house or other investments at the worst time possible.

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04/25/2017 2:18pm

Cash buyers are always on top of the seller's list. Cash buyers get many advantages. Taking loan always need many formalities. However, if you are looking for good homes then www.biesterbos.nl is your perfect destination. We have all that it takes to be a good developer. We are based in Holland and provide some of the most beautiful homes at unbelieving prices. We understand all the requirements of a customer and work on varieties of projects to satisfy the needs of each and every customer who approaches us. Our expertise and experience is one of a kind which you are sure to find nowhere.

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07/31/2017 3:42pm

There are always pros and cons. But I personally, I prefer to buy property in cash. I agree, the transaction will be easier and we may get a cheaper price than offered before. But not all may have enough cash to buy a property. So the choice is to buy with a loan. Whatever it is always there are advantages and disadvantages. Most importantly you can have your dream home as per budget. If you are interested or planning to have a dream home, you can consult and find at www.biesterbos.nl, they provide various types of homes at an affordable price. Not only that their quality is guaranteed. Customer satisfaction is always their priority.

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    Joel Dennis is a Geek, Web, IT Professional, Broker and a Mentor on investment matters. If you want to talk about some cool ideas then feel free to send me a message at Broker@JoelDennisMuyco.com

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