In addition, when buying a Santa Clarita home with cash closing costs become less expensive. (more about that later)
If you were to use cash to buy a home, you may be able to move in sooner than the typical escrow time. (more detailed later)
The home sellers may be more willing to offer additional items and be more motivated to be of better assistance to your home buying experience.
Some home sellers won’t care if you are using cash or financing their Santa Clarita real estate.
Cash can be King to some home sellers and all home buyers
Of course, if you one that has millions in cash and you don’t want to bother with financing real estate, you can use that money and your financial position as leverage.
If the home in the Santa Clarita you are buying, cash may be a way to get said home at a large discount.
This is often referred to as the “Cash Price”, and used in the following sentence, “What would be the cash price for that home?”
Remember, when all is said and done, the cash is going to go through most of the same channels as if a real estate transaction had been financed.
To finance a home, you may be able to write off the mortgage interest, if you are financing – that’s a singular benefit.
If you use cash, that may deplete the reserves that you have in your mutual fund, retirement account, in the bank and in other places.
Home sellers that want cash
When we experienced the last foreclosure and Real Estate Owned market, due to the condition of the homes that were being sold, most banks embraced the cash buyers.
They could close early, and in most cases, they gave up rights to do “inspections”. The Cash Home buyers also were willing to accept shorter escrow times which made the bank’s shareholders super happy.
Instead of a transaction that had financing, where inspections were being completed, where the home buyer had 17 days to back out for items discovered during the inspection time and 21 days to back out for reasons that financing did not work out, cash removed time which was the to the corporate seller’s benefit.
Other than the banks, and other than being in a distressed real estate market, you have to find those real estate listings where those sellers are going to embrace a cash offer and give it more honor than one which is going to be financed.
Vacant Santa Clarita homes where the home seller had already moved along and has a new mortgage at another residence is one such example.
There is a current mortgage in place that the homeowner is paying each and every month on the property they currently own. They are now paying a new mortgage on a home that they just bought and moved into. They possibly have homeowners association fee’s on both, the most assuredly have property taxes accumulating on both and they have “maintenance” fees and “utility” fees needing to be paid on both.
This could be the perfect storm where cash will be King in the home sellers eyes where the cash home buyer is able to have us negotiate a huge cash discount for them.
It will take finesse and it will take us being able to provide for the home sellers real numbers and advantages of accepting such an offer via the homeowners real estate agent.
Just in case you are under the impression that if you offer cash the homeowner will be able to decrease his tax profile, you’d be wrong.
There are no more of those “under the table” deals that involve partial cash payments at large discounts where remaining funds are traded during the hours of darkness via a handcuffed briefcase.
Higher End Homes may appreciate a cash offer over financing
If you want to buy real estate, and if you are going to need to get a loan to do so, you are going to have an appraisal completed on the home you are buying. The appraisal is not up to the buyer to hire, the appraiser will be up to your lender to hire, you will just be paying for that service.
The appraiser typically meets with the listing agent, that is the agent that the homeowner hired to sell their home. The listing agents used to talk a lot to the appraisers. Since the last fall of the real estate cycle back in 2006/2007, we don’t speak with the appraisers much. If they want additional comparables or if we believe they may not have access to the comparables we have, we will provide them.
However, at the end of the day, their appraisal report is going to be scrutinized by many different parties to the real estate transaction on the financing side.
The appraisal report is also able to be viewed by the home buyer, their real estate agent and their lender and lender’s staff.
The Homeowner and the Home Owners agent is not allowed to see the appraisal report without written permission. The only piece of information they are privy to is if the home appraised for the amount which was agreed upon.
The reason, as an aside, is if the home appraises for higher than the agreed upon price, some sellers retract and will not continue to play fairly with the buyer and their requests during the remaining escrow time period. They feel as if they were misled and as if they gave away their home at a discount which they did not agree to.
If you are buying a home with cash in the Santa Clarita Valley cities, you don’t have a loan that is going to need to have an appraiser hired, which may be something the seller would appreciate. It’s something that the seller won’t have to worry about, so hence them liking it.
Does that mean that you don’t hire an appraiser on your own? Of course not. You can hire as many inspectors as you desire to check all parts of the home. The same applies to the appraiser, you are buying a home with cash, you may want to know what that home is worth if unique, you’d find that out by hiring an appraiser.
It’s your choice as to whether you want to hire an appraiser and if you want to have that necessarily impact the transaction. You can make the home contingent on having the home appraise for the amount you agreed to pay. As would be the case with a person who was buying a home with a loan being necessary. As a Cash Buyer, you can also have your purchase of the home not be dependent on the home appraising for the amount you agreed to pay for it.
It’s up to you and will definitely be property specific. If I can wrangle up comparables that satisfy myself and my cash buyer as to what the value of the home truly it, then we should be good to go.
If the property is so unique that the custom Brazilian Mahogany wainscoting has to be counted by the square foot to obtain the value of the home, an appraiser would most likely need to be hired to give supportive evidence for the value and amount paid.
When representing cash buyers on homes in the Santa Clarita Valley and in the Greater Los Angeles areas like the Platnimum triangle, I would say we are about 50/50 on cash buyers wanting appraisers to appraise.
Most cash buyers look at buying multi-million dollar homes as an investment. Which is good. Therefore, they want an appraisal report so they can know where they stand at today’s value and what future returns will most likely be.
Costs of using a loan to buy a home versus cash
We are going to include Time as a cost. Time is money as they say, and as a cash buyer, you can appreciate that more than most.
Before I get into the “time” involved and how you save that when using cash to buy a home, I want to speak about “fees” associated with needing to have a loan involved.
The lender charges something called an “origination” fee to the home buyer that requires financing or a loan to buy real estate.
These fees can be absorbed by charging the home buyer a higher interest rate or they can be wrapped into the closing costs amount required to be paid by the home buyer. If that home buyer is able to have the home seller pay for their closing costs, or have them incorporate them into the price of the home, then all the better for them. Some home seller’s don’t want to do this because they are worried that the home may not appraise for the higher amount. Some home sellers can also reduce the amount of profit they will make with having the closing costs taken off of the amount paid for the home, not added to it.
Closing costs for a home buyer that is using cash to buy real estate are less for the escrow fee, the title fee and the lender fee is nonexistent.
Getting these numbers from escrow is important for a cash home buyer.
Time, as it relates to a home buyer using cash to buy real estate, equates to a faster closing. When buying real estate there is an inspection time frame. A time that the home buyer has to do all of their inspections on the home that is for sale. Home Inspection, Pool Inspection, Pest Inspection, Roof inspection, and more. Within the contract, it’s 17 days if that time has not been modified by mutual agreement by all parties. If the home buyer is getting a loan, there is a 21-day cap on the “loan approval” if the contract has not been modified and agreed upon by all parties.
Truth be told, there are times that when we are dealing with a cash home buyer we can have all the inspections completed in 7 days, then all that is left is negotiation and moving the money into escrow to close the transaction.
When a home buyer is using cash to buy a Santa Clarita and Valencia CA home, they have the ability to close quickly, much faster than the 45 days it can typically take with a financed home buyer. This makes a lot of sellers happy that are sitting on vacant properties that they are trying to get sold.
Some home sellers don’t care if cash or financed
This is something where education is really important and having a home seller that is educated by their real estate agents is paramount.
All factors have to be looked at by these home sellers with their trusted advisors. Does it make sense to accept cash in their present circumstances?
Are they worried that their home won’t appraise for the amount it’s being offered for?
Are they living in the home now? Do they have to close this home before they can buy another? Are they going to be renting after they sell this home? Are they going to need their next home close concurrently(at the same time) as this one, making this sale contingent on their finding a home of choice?
Have the homeowners already moved out and bought another home where they are making payments on both residences?
How are the sellers financially? Do they have time to wait or do they really need to get their home sold because of the financial impact it currently poses?
Questions like these need to be poised and spoken about. There is nothing that can be done about “other homes” entering the for sale market that may ‘grab’ your current home buyer and pull them away to buy them.
While there can be contractual issues in a home buyer jumping ship to buy something else, leaving the previous home seller to have to start the process all over, if done early enough the home seller may be powerless.
Some home sellers, those that are needing to find their home of choice, need to buy another and close their and the other one at the same time, don’t care if the transaction is financed. In fact, they may want to have a buyer that is needing to get a loan because they may be less apt to move along if something better hits the market for sale.
Cash is great, but in some cases, cash home buyers move very fast. If another home that suits them better, they may move along leaving the home seller to re-enter the for sale market.
As you have probably noticed, I speak from the hip. I’m not trying to influence any party one way or another. I have to explain both events and all factors to my home sellers when they first list their home for sale with me. I also give my home buyers a true crash course or briefing on buying real estate.
Everyone should know their rights when it comes to best protect themselves.
When you are ready, if wanting to buy a home in the Santa Clarita Valley – Valencia CA areas with cash or if you are using financing, I will be here for you. I have been representing buyers and sellers of real estate in Santa Clarita Valley since 1998. We are at the Top of Google’s search engine and we are proud to present our real estate blog which is made up of the best real estate content to help home buyers and sellers navigate real estate.
Call me and I’ll make it your best effort when it comes to buying or selling Santa Clarita real estate.