What You Should Know Before Making a Cash Offer on a Home

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In a seller's market, homebuyers must bring their "A" game when presenting a purchase offer. Areas with high demand and low housing inventory give buyers no choice but to submit offers that separate them from the crowd. An all-cash purchase offer can do exactly that. Sellers may even accept less than asking price for an all-cash offer since a real estate transaction untethered to lender financing typically means a quick closing. 

Before you step up to the plate and make an all-cash offer on your dream home, review these tips to help you hit it out of the park.

Be prepared to show proof of funding. Your cash offer won't be accepted unless you can prove you have the full amount available to purchase the home. Documentation could take the form of original or online bank statements, a line of credit approval notice, certified financial statements, or a proof of funds letter confirming that cash is readily accessible. If money is held in multiple accounts, ensure the total equals the amount submitted in your purchase offer.

Partner with a professional. While submitting an all-cash offer removes the need to work with a mortgage lender, it doesn't mean you won't need a real estate professional to draft a solid purchase offer or agreement. For example, an experienced agent can let you know whether to include a good-faith deposit or anything else that might make your offer more attractive to the seller. They might even negotiate a better deal, allowing you to keep more cash in your bank account. 

Say "Yes" to the optional home inspection and appraisal. If you finance a home with a mortgage loan, a home inspection and appraisal are a necessary part of the process. Although an all-cash purchase doesn't require either to close the deal, it's ill-advised to skip these steps.

Just like a lender who wants to make sure the home isn't hiding any unwanted surprises and is worth the amount financed, you'll want confirmation of both before you head to the closing table. Plus, it might be possible to use the results of the inspection to negotiate a lower sales price. 

Remember, no down payment isn't the same as no closing costs. Even without a mortgage loan, cash buyers must still be prepared to bring cash to closing. Pre-paid property taxes, title insurance, and escrow fees are just a few of the costs you'll need to cover at the time of closing. The escrow company should provide a detailed breakdown of the total amount needed shortly before the closing date. Since these expenses could affect the cash you have available to purchase the home, plan accordingly.

Include a housing expense category in your monthly budget. Owning a home free and clear doesn't mean you won't have other monthly or annual expenses. Just like buyers who use a mortgage to purchase their home, you must budget for homeowner's insurance, property taxes, and any homeowner association fees. Since these costs will not be part of a regular house payment, setting money aside on a regular basis can help you pay them by the due date.

When your purchase offer is accepted, it's time to celebrate your home run! But if you need more cash than expected to compete in your local market, a Credit Union of Colorado Personal Loan could give you the short-term funds you need. Get pre-qualified for a Personal Loan today and increase the amount available for an all-cash offer tomorrow.