Cash Purchase of a Florida Home
In today’s real estate market, more and more buyers are purchasing homes with cash. The National Association of Realtors estimates that approximately 30% of U.S. buyers are purchasing homes with cash. This represents a large increase since 2008, when the estimate was only 15%.
Some of these cash buyers are people from other countries who have never before qualified for a United States mortgage and anticipate having difficulty doing so now. A cash purchase home option is appealing to them.
Others are investors hoping to turn a profit on properties in currently depressed markets. Florida, with its large number of foreclosures in recent years, has been such a market. Such investors also have trouble qualifying for mortgages and securing easy property title transfers.
Still, others are wealthy individuals for whom paying cash has always been an appealing option for buying property.
Finally, there are people who, though they may not have climbed to the ranks of the 1%, are old enough and have done well enough to save the money required to purchase a home for cash.
Even if you do not belong to one of these groups, you too may have sufficient cash to buy a home. If so, you should know that the cash purchase of a Florida home provides advantages to the buyer and seller alike. Our title closing company can help you navigate the ins and outs of how a cash purchase home set up works.
Are you in the process of refinancing your current home? Do you need help with home title services? If you have any questions or needs, contact our Attorneys to find out how we can help you easily navigate the real estate purchasing/mortgage process and how we can provide you with the peace of mind you deserve. True Title is a company setting a standard of excellence industry-wide. We at True Title have been committed to excellence in customer service since 1998.
Cash Purchase of a Florida Home: Advantages for the Buyer
LOWER COSTS
Many sellers like cash offers for the reasons explained below. In fact, they like them enough that they often provide a discount or accept a lower cash offer in preference to a higher one requiring financing. This can save the buyer considerable money and time when it comes to securing the property title transfer and the finalization of the purchasing terms with cash purchase home options.
LOWER CLOSING COSTS
Lower closing costs can save the cash buyer money, too. Among other savings, cash buyers do not have to: a) pay for a bank attorney or mortgage professional to process a mortgage; b) place real estate taxes in escrow up front; c) pay for mortgage applications; d) pay for mortgage loan origination fees; and/or e) pay for an appraisal.
Note, though, that an appraisal is almost always a good idea. It enables the buyer to be sure he/she knows the exact value of what he/she is purchasing. However, if a buyer has negotiated a truly excellent price, an appraisal may not seem absolutely necessary. In any case, the buyer avoids the multiple-appraisal requirement that is now a part of many loan application processes, especially ones involving areas where there have been many foreclosures and there are new non-distressed home sales for purposes of comparison.
The cash buyer also saves on title insurance. An Owner’s Title Insurance policy protects homeowners against problems with the chain of title (ownership) and/or liens and claims against the property. A cash buyer is not absolutely required to purchase an Owner’s Policy, but it is such a valuable protection that most real estate professionals highly recommend it. A Loan/Lender’s Policy protects the lender against problems with the chain of title (ownership) and/or superior liens, claims and/or other encumbrances against the property title. When purchasing a Florida home for cash, the Loan Policy is definitely not required.
ADDITIONAL BENEFITS
The cash buyer also saves money by not having to pay interest on a Florida mortgage loan. The homeowner does not have a mortgage payment to make at all, and the homeowner is 100% confident from the start that he/she owns the home outright. Thus the homeowner has the full equity of the home available in case of a financial emergency and he/she need not be concerned with fluctuations in the market. All of this affords peace of mind to the purchaser and is the reaon most people consider the cash purchase home route.
Additionally, the lack of a loan also means there are no restrictions if the homeowner wishes to transfer the property title down the road. This can make the title closing company a valuable ally in the process.
Another potential benefit is that REO (real estate owned) lenders sometimes have a lot of REO properties they would like to sell. REO properties are properties that remain in the lender’s possession after an unsuccessful foreclosure sale. As mentioned above, Florida has had many, many foreclosures since the real estate/mortgage market crash of the mid-2000s. Lenders often discount REO properties in the hope of attracting multiple offers, and when they get them, they often choose the cash offer.
Note that a buyer making a cash offer on an REO property or on any other property needs to include proof of funds with the offer. Otherwise, the seller cannot know for certain that the buyer actually has the money required to cover the sale and to secure the title transfer.
Florida Options for a Cash Purchase Home: Advantages for the Seller
Cash sales also offer benefits to the seller. One of the main benefits is that the transaction is more likely to be perfected (more likely to close). This is because the closing process is streamlined with fewer steps where things can go wrong. One major potential difficulty is the loan application, which is completely avoided when a cash sale/purchase is done with a title closing company.
AVOIDING PROBLEMS WITH THE TITLE CLOSING COMPANY LOAN APPLICATION
Such problems can arise in relation to the appraisal. Appraisers often use the comparable sales method to assess the value of a home. This method involves selecting several properties (generally, three to six), comparing their respective values to the home being sold, and adjusting up or down for missing features, new/updated features, damage to the home, improvements made to the home, among other things.
This is not an exact science, and when the appraisal is less than the purchase price and the buyer is seeking a loan with a down payment of 20% or less, the lender will not approve the loan unless the buyer increases the down payment or the seller decreases the price. There are ways for the real estate professionals involved in the transaction to address this, but if they do not work, the purchase/sale contract for that particular property’s title may be canceled.
Obtaining a loan to purchase the property may give rise to other difficulties as well. Sometimes the buyer’s qualifications change upon further examination. For example, he/she might not have held the same job for the past two years, or his or her financial situation may have changed due to some other relatively major purchase made before closing. It is possible the buyer was even an unknowing victim of identity theft. There are many other factors that may limit or hinder a purchaser’s ability to obtain a mortgage loan for the property they are looking at purchasing.
Obviously, by paying cash and circumventing the need to obtain a mortgage loan in the first place, the cash purchase of a Florida home avoids any such problems with securing the property from a title closing company.
FASTER CLOSING
Generally speaking, if the buyer needs to obtain a mortgage loan, the process of buying a house typically takes 30 to 45 days. If the buyer is making a cash purchase of a Florida home, the transaction may be perfected (closed) in a much shorter period of time, sometimes in as little as seven days, provided the buyer signs a Lead Disclosure Waiver. The Lead Disclosure Waiver releases the seller from the legal obligation to provide the buyer with a ten-day period in which to conduct a paint, dust and soil inspection or risk assessment for lead-based paint, dust and/or soil hazards as per the HUD (U.S. Department of Housing and Urban Development) Lead Disclosure Rule.
Finally, a faster closing means the seller receives his/her money sooner, and because there is typically a much shorter escrow period, the chances of many other problems arising are greatly reduced.
The title experts at True Title, your Florida title insurance company, are here to assist you with your cash sale/purchase. Give us a call now so we can get started with your property title services and help you with your cash purchase home arrangements – (877) 785-8792.
Are you in the process of refinancing your current home? Do you need help with home title services? If you have any questions or needs, contact our Attorneys to find out how we can help you easily navigate the real estate purchasing/mortgage process and how we can provide you with the peace of mind you deserve. True Title is a company setting a standard of excellence industry-wide. We at True Title have been committed to excellence in customer service since 1998.
