I am in the market for a home and will be moving in the next six months. Its highly likely that with my divorce settlement I will need to buy a house with cash b/c I am currently a sahm and looking for some form of home employment after being home for 6 years raising kids. Its tough -- even though I have a MBA in marketing, having not worked for so long, I am struggling to find something.
My question is -- given today's market conditions, what is a reasonable OFFER to offer a builder for a house. How much less of the offer should I offer the builder. Builder clearly has profit built into his price. Clearly, I am not going in with the offer to buy based on their list price. And I am not sure what "cash" value has, if any.
Are there any realtors out there can give me some advice here. The home I am currently considering is in Frisco, TX (if that helps).
Also, this home is a new development.
Also, when you buy (I can't remember when I bought my last home); do you pay your property taxes up front at settlement?
Thanks a lot for your input.
I bought both my houses cash. the price doesnt change because of the method of buying, the seller gets the same money whether or not the bank is involved or not
There's no difference to the builder if you buy with cash. Either way, when you get the house they get a check. It's just either from you or from the bank. They will be pleased to work with you, because without a mortgage contingency there's less of a chance that you'll back out, but I don't think that benefit will translate into any substantial cost savings.
Sorry about that. I agree with Riley, though - do check with a real estate attorney to get all your ducks in a row.
Because of the tax break that you get with a mortgage I'd strongly recommend having your divorce attorney recommend a financial attorney/adviser to you. Because if you can arrange to pay x % down, and hold onto the rest for the mortgage to be paid out monthly or quarterly, it usually makes better sense not to buy outright, even when you're more than capable of it. An accountant or adviser can even hold the funds in an account that gets paid by them, so you don't even have to think about it. As a matter of fact, in our wills, there is specific wording that provides that all house payments (and all other bills) will be paid out of x account by y person for z number of months so that the surviving spouse has time to grieve. It's revokable, meaning that the surviving spouse can take back control at any time... but until they do... it's all "taken care of".
Legal matters are extremely tricky... I know a little about banking and a little about law... enough to say : hire an expert. You may well be able to get a *stellar* loan with no income since you have enough to buy it outright. But a professional would be able to help you navigate those waters / negotiate on your behalf so that you got the best/smartest deal for you.
Also, you may or may NOT get any kind of break buying outright. Unless the builder is also financing the homes... they get the full amount whether it's paid by the bank or paid by the buyer.
Then again... in your particular situation... it may be best/smartest to buy outright. Considering the amount of money involved... attorney, attorney, attorney.
Paying cash might give the builder a bit of an incentive to accept a lower price because that means that you can close within a 2 week time frame instead of the standard 4-6 weeks.
As for the price to offer, it would depend on some things. Especially in this market. 1) time on the market. 2) age of the house. If the house is newer, and hasn't been on the market long I would probably offer $5000 - $10,000 less as a first offer. It shows them that you are serious yet its a respectful offer. If its been on the market for a while, I might offer $10 - $20,000 less as an initial offer. They may be at the point where they just want out of the house.
While I think paying cash for a house is great if you can afford it, keep in mind that you will also still have monthly home owner's insurance and county taxes so it might be worth it to may 90% cash and take a 10% loan. That would give you some interest, but that can be written off on taxes, your insurances and taxes can be attached to that, and if you want you can pay that smaller amount off within a few years. As part of your closing costs, you usually have to pay the a part of the insurance and 3m of the county taxes for escrow, but if you don't have a mortgage they will probably ask for those full amounts up front. A local realtor would be able to answer that over the phone. I've bought 3 houses over the years and we've usually had to bring around $5000 in closing costs for the insurance, taxes, title search. A $400 appraisal might not be needed if you're paying cash.
I'd also check the interest rates at some of the Credit Unions. They tend to have amazing rates and you only need a $25 account with them to get it.
Another thing to consider with a new development is if the builder has any 'comp' houses. Instead of a house that is brand new to your specs, there may be houses that the builder went ahead and finished even though there wasn't a buyer. This happens alot with townhouses. They'll sell 3 of 5 in a set and go ahead and finish out the other 2. These houses are usually available sooner and you can get some discounts incentives for them. You could also check to see if there are any houses that are complete or near complete where the deals fell threw. Builders will work with you so that they can get those houses off there books too.
Good luck.
M.
Pay the $400 to have a home inspection, even if it is brand new. You need someone with knowlege to check out your home and you want to catch any problems before you buy. The only way you could get a break is if the builder has too many homes and is needing to move them. You need a realtor to represent you and your interests. She will know what freebies the builder offers. Mulched grass planting can be worth $600 a large yard. Sprinkler systems vary. You want someone to show you what price was recently paid per square foot for similar homes in your area.
Definitely get a realtor to assist. It will be free for you! The seller pays the commission not the buyer. Property taxes for the current year are prorated and paid at closing. If you do pay cash for the house, you will owe property taxes each year in January. If you get a mortgage, you can elect to escrow and you can have the taxes included in ur mortgage pymt each month so you don't have to worry about it. The bank will pay the bill and charge you accordingly.
Cash will make you a ready buyer, not subject to you getting loan approvals or getting the house to pass certain inspections or valuations. But I don't know the value of that to a builder or developer unless it would be that you could set a closing date now and they would not have to "carry the note" for a few months til your financing or paperwork came through. A lot may depend of the builder and his need to move the property. Some may be more motivated than others. Good luck.
time to seek legal counsel! You need backup to make sure every single line of the transaction is legal, above-board, & to your advantage. Good Luck!
Taxes in our county are paid in closing, if there are any due. They are pro rated between the buyer & seller and normally two installments are paid.
I agree, pay a professional. It's a big purchase.
I'm not a Realtor, but we used a VERY good one! We purchased a home last year and he was just awesome. He worked so hard, to get us the best purchase, at the best cost. I strongly suggest him!! He works in our metroplex. Good luck :)
I am a Realtor and work in the Collin County area - specifically Frisco, McKinney and Allen. I'd be more than happy to discuss the options you have as a cash buyer. Feel free to contact me directly at ____@____.com or ###-###-####.
Hi K.,
Being a cash buyer makes you less of a threat to the seller, obviously. My best advice is stay away from the Builders. The new homes have experienced the largest drop in value over the last 6 years. Think of it like you are buying a new car - the second you drive off the lot, it's worth less than what you paid. Buying a new build is the same thing. Your home is immediately "used" and if you were to try to re-sell, you'll be the one who loses money because you're competing with the Builder offering the exact same home "new". It's one thing to lose the Mortgage Bank's money, and entirely another to lose your cash.
I would suggest looking in the neighborhood you're interested in for the "used" homes, likely the Builder is still in construction, and you'll be able to get a better deal and help out some poor seller who has to get out (and bought new), because that seller is competing with the Builder and willing to accept a lower price just to move the home. Also, since you have some time to wait, that seller may be in need of a Short Sale, and you could buy the home at a deeper discount.
If you have questions, let me know. I am a licensed Mortgage Loan Originator for over 12 years and my husband and I also own our own firm in mortgage loss mitigation and litigation of mortgage loans. Many Realtors do not have the expertise we have in the Short Sale arena (even though it has become more popular in recent years). We collaborate with, and provide continuing education to Attorneys all over the U.S. in ongoing mortgage litigation regarding Short Sale, Loan modification and foreclosure.
Best of luck,
C.
____@____.com
