Buying a house WITHOUT a mortgage....anyone?

[frugalmama]

Has anyone done this recently, and if so can you tell me your experience?

 

We came into a windfall after my brother's death, and I really want to use it to buy a home free and clear so we no longer have a mortgage payment to worry about. I'm primarily looking at "investment" properties & fixer-uppers. I do not mind putting sweat equity into a home :D especially since that way I can hopefully make it more handicapped accessible for my mother. I have my eye on two different homes, but both are on the market for more than I have by about $10-$15k. Both have been on the market a LONG time though, so I'm hoping they might be willing to take less.

 

SO, anyone? Or even someone who flips houses, since really I'm flipping it to live in instead of sell.

[Jean in Newcastle]

We usually offer 10K less for a house. Often it is accepted. If they know it is a cash sale they often will be more inclined to accept the offer.

[Mama Geek]

We bought a foreclosed house about 1 1/2 years ago with cash. The bank did take less than their asking price. I don't remember by exactly how much. Things worked out really well. From what I understand the things we did were not normal for people paying cash in that we paid for the typical surveys and inspections. We had a realtor that had been doing a lot of short sales and foreclosures in our area so he knew the ropes pretty well.

[elegantlion]

Make sure you account for all expected expenses and leave enough for unexpected expenses, you will have them. Don't forget to factor closing costs, property taxes, utility fees, etc.

 

Flipping can be great, but you need a reputable contractor to go through and give you an estimate of repairs. Dh was a contractor for years, did numerous flips as a hired contractor and there are always unknown issues that come up. Electrical and plumbing issues are common. Mold behind tubs etc are common. AC, furnace, water heater heater issues. Termite damage, permit issues, flipping can be great and it can be a money pit.

 

I would not put all of my money into a house and be left with zero living expenses, and I know the appeal of owning free and clear.

[AdventureMoms]

Let them know it is a cash sale when you make the offer. Frequently offers fall through due to issues with the lender. They may be willing to accept a lower offer knowing that it's more of a sure thing (ie your bank won't turn you down)

[K&Rs Mom]

Let them know it is a cash sale when you make the offer. Frequently offers fall through due to issues with the lender. They may be willing to accept a lower offer knowing that it's more of a sure thing (ie your bank won't turn you down)

 

:iagree: My mom recently did this, and they took an offer almost 10K less than the listed price, because it was so easy for them as a cash sale. Definitely go through with appraisal/inspection even though you don't have a bank requiring it, just to minimize the surprises later.

[JennyD]

Let them know it is a cash sale when you make the offer. Frequently offers fall through due to issues with the lender. They may be willing to accept a lower offer knowing that it's more of a sure thing (ie your bank won't turn you down)

 

Our experience was the opposite, actually. We thought about offering cash but were advised against it and as it turned out, there were two bids and the seller chose ours apparently in substantial part because the other bid was a cash offer. DH and I both thought that was odd, although obviously we were happy to get the house, but according to the realtor it is not unusual -- there can be concerns that people offering cash may not actually be able to come up with it, or might walk away more easily. In any event, this was entirely counterintuitive to us, so it might be worth confirming the situation in your market with a local realtor.

[Ottakee]

I would contact an agent to work with you as a BUYERS agent. We bought our house with cash last summer. It was listed overnight. We saw it on the internet at 6am, called the realtor at 8am, had a showing at 11am, put in an offer at noon, and by 1pm had bought a house :-)

 

We though had been looking and knew what we wanted and what was a reasonable price.

 

I agree with making sure you consider closing costs, taxes, insurance, inspections, and any repairs/updates you need to make when buying. Our house was 20 years old and built well but needed all new flooring and paint. The furnace will likely need replacing soon and we added AC. We also had to put on a new roof (which we knew about) and put in a new well pump (which we broke soon after we bought the place).

[Catwoman]

Personally, if those houses need work, have been for sale for a long time, and you have cash to pay for them, I would offer quite a bit less than $10-15k below the asking prices.

 

You don't want to end up cash-poor, and if the homes are fixer-uppers, plan on having a lot more repairs to make than you can see when you walk around the house. Don't think your home inspector will uncover more than a small percentage of the actual problems with the house. Until you start opening walls, etc., you won't be able to be sure if things like wiring and plumbing are up to code, and you could also find all kinds of other unexpected damage.

 

If a home is in good shape, but needs cosmetic updates, that's a better bet than a home that has obviously been neglected.

[frugalmama]

Thanks for the replies, keep them coming :D

 

We intend on getting the home inspected prior to making an official offer - learned that lesson with this house :glare: I have an excellent Realtor to work with who we used to buy this home. We are hoping to hold back enough cash to do any urgent repairs, and then work on the cosmetic stuff as we can since we will have more free income without our current mortgage payment. We are lucky enough to have a Habitat Restore a block away for getting low cost home rehab needs.

 

Both the homes I'm looking at are short sales. One is a short sale & estate situation - from what I gather the gentleman who owned it passed away in early 2010 and it was already pending for foreclosure. Now because it's the estate the bank has agreed to do a short sale as they can't foreclose, and the estate can't settle until the home is sold. SO I think they should be motivated to sell even though they haven't dropped the price at all in the 80 days it's been listed on MLS. And it's only about 6 blocks from where we live currently :D so moving will be easier. But they are asking about $50k, and I would like to pay about half that or just slightly more than that so I'm not sure they will come down that far.

[Pippen]

I had a friend who made a low offer on a home that had been on the market for a long time. I can't remember the exact amount but I think it was $12000 less at a time when homes weren't nearly as expensive as they are now. The owner accepted their offer even though it was lower than two previous offers.

[ChandlerMom]

I'd definitely find a good buyers agent -- it's no cost to you (paid out of the seller's commissions). Cash offers do usually get preference, but that's only when you provide proof of funds (same as providing proof of ability to get a loan) -- you can't just say "I'll come up with it" and expect them to be happy. You can also strengthen your offer by putting a good amount down as earnest money, but not excessive. You need to have money left over to pay for incidentals and repairs, so don't stretch yourself too far.

 

As to 10K less...it's more a %age thing, so if you are looking at houses for $50K, that's asking for a 20% reduction which may not be reasonable. You need to know what the comparable sales for those homes are since that's what the bank is going to be looking at when deciding if it will accept the offer.

 

Good luck!

[acurtis75]

Since they have been on the market for a while and you have cash you might be able to offer even a lower amount. It is so hard to get deals done these day that cash buyers are a huge deal to both the listing agent and the seller. We have been in "underwriting" for 60 days and probably won't actually close for another week or two. I know the seller is frustrated and a cash deal can close much faster.

[kokotg]

We do have a mortgage, but my father in law is our bank :), so, as far as the seller was concerned, we were a cash sale. Our house was a foreclosure, and we were surprised at how little leverage being a cash buyer gave us with the bank. They only seemed interested in numbers; it didn't seem like they were willing to come down at all because we could pay cash. Had it been a real person instead of a bank, it probably would have mattered more.

 

We had to submit proof of funds (i.e. bank statements) before they would even look at our offer.

 

We also just sold our old house to someone making a cash offer, and we did take less than we would have otherwise....although not a lot less. We settled on $3000 less than what we had said was our absolute lowest, and I'm pretty sure we wouldn't have taken that if they hadn't paid cash. At least as important for us as the lack of a finance contingency was the fact that they could close very quickly (just over 2 weeks after we accepted their offer). We'd already moved, so we were paying two mortgages (although, again, to my FIL, so he helped us out a lot and was letting us pay interest only until we sold) AND we'd already had one sale fall through; it was worth quite a bit to us not to have a contract hanging over our heads for 45 or 60 days.