Profile picture for user28241259

Buying with cash? is there any advantages?

Hi 

I just moved recently to united states in California. I'm looking to buy a condo in irvine but since my stay in california is going to be about 4 years, I'm looking for it as an investment. I've no clue what the buying process in here? and also is there any advantage for me as a cash buyer? and is foreclosure a choice?

your help is much appreciated.
Thank you all.
  • September 23 2013 - Irvine
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Answers (15)

"Cash is king."  There are definite advantages to cash; you can often make a lower offer, for example.  Since your purchase wouldn't be contingent on financing, it would be a stronger offer than a similar offer based on financing.  Foreclosures are an option but definitely consider your strategy there; will you fix it up (if needed)?  Pay someone to do so?  How will that affect your bottom line, considering you know you're going to sell in four years?
  • September 23 2013
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Profile picture for bluecoastrealty
Rob is right: cash is king. Another benefit to being a cash buyer is that you can save on a lot of lenders fees (not just interest), which can easily amount in the thousands.
  • September 23 2013
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Profile picture for SteveNash1
Buying with cash helps on many levels. First it allows you the power of a quick closing.  Second the closing costs will be much less on a cash deal as compared to financing costs of a getting a long. Third more often then not your offer will get top billing due to there being less red tape.  A local expert in your area will be able to help you more with the pros and cons of that market place.
  • September 23 2013
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Profile picture for Neeraj Jassal
As with any scenario, there are pros and cons to consider here.

Pros to buying with cash:  You may be able to secure a better deal by offering a lower amount and a quick close.  Most sellers would consider you a stronger buyer than one that needs to secure financing.  

Con to buying with cash:  There really is only one - depending on how much you would need to borrow to finance the property, the money being lended to you is (relatively speaking) cheaper to borrow in a historical sense.  The question you need to ask you need to ask yourself is what can you do with that money that might yield a higher margin during the time you plan on keeping the property?  
  • September 24 2013
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Regarding the buying process here in the states, Zillow has a buyer's guide which you may find helpful. Click on the link below to read through the information provided. I would contact a couple of Realtors who specialize in selling homes in your target community. After an introductory meeting with each, you will have a better understanding of the buying process and you will be able to determine which Realtor has a business style that best fits your needs.

Zillow Buying Guide

Best of luck!
  • September 24 2013
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We are based in Irvine, and purchasing a condo here is definitely a good investment. While cash may make it easier for the seller- as a buyer, you may be better off obtaining financing for a portion of the sales price- and reserve some of your funds for home improvement or repairs. Generally speaking, there are lending programs with local, non conventional lenders that will finance 65% -70% of the purchase, depending on your situation. This may also help you establish credit in the United States.
  • September 25 2013
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Profile picture for user28241259
Thank you all for your very informative comments. Much appreciate it.
  • September 25 2013
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Profile picture for JamieTian
Hi,

Thanks for contacting us here on Zillow.

There is definitely an advantage when purchasing with cash, it gives you more negotiating power and it is easier to get an offer accepted in a multiple offer situation.

I would be happy to answer any additional questions you have about Irvine, or the home buying process. I grew up in Irvine so I know everything about the area and I specialize in helping foreign homebuyers.

Foreclosures are an option, although there are very few available, especially in Irvine in the current market.

Please feel free to contact me directly.

Best,

Jamie Tian
Rodeo Realty
  • October 01 2013
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Profile picture for John Reeves1
Cash buyers often get a discount and closing costs are lower with cash.

J. Reeves
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  • October 01 2013
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There are many benefits to cash but the #1 benefit today is that you will be chosen as the offer they go with. Today, any home that is considered a 'deal' will go in the first 1-4 days on market with multiple offers. Cash deals are always put to the top of the list.  Be sure to have either a letter from your financial institution noting that you have 'funds available in excess of' whatever the purchase price is. Round up a little more to a whole number as you will have closing costs as well.
With that in mind, closing costs are much lower with cash buyer. The majority of closing costs come from the lending end of things including but not limited to lenders title insurance and origination fees (what they charge you for lending).  
One trick to taking advantage of the cash situation when negotiating is to not have an appraisal contingency attached. You should do a 7-10 day right to terminate if possible and get your appraisal during that period as part of your due diligence.
POSITIVES TO YOU PERSONALLY, NOT NECESSARILY FOR NEGOTIATION:
Another positive is that you can pay your own taxes therefore you get the interest accrued on having it in your account. Many banks hold your taxes and pay them for you in escrow.
Things to not forget that in a cash deal, the lender requires and without one, you may not remember. Make sure to have your insurance either paid prior to paid at closing (can be on the statement and sent by attorney to company) as well as you have an optional owner's title insurance that any realtor or attorney will recommend you paying. This is a one time payment at closing to be sure you have no issues down the road with a past lien or someone claiming an interest in the property.
Good luck to you!
Jenny Doyle
  • October 01 2013
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As an international buyer you can form an LLC and use the Tax ID number to purchase a foreclosure with cash.  This structure provides asset protection advantages, and may allow you to refinance once your LLC has built a Dunn & Bradstreet Credit Rating.  If you don't have a social security number, this may be the only way to buy a Fannie Mae or HUD home, which will often be your best bet for buying foreclosures for investment. Part of the reason these sources should be considered more than other bank owned REO properties is that they allow a first look period where owner occupants are the only parties allowed to offer.  In a highly competitive market with many institutional buyers buying residential foreclosures, this gives you a large advantage in your likelihood of winning the property. 

This strategy allows you to be a cash offer which will beat out financed offers most of the time, but it also allows you to be an owner occupant which will automatically trump investor cash offers, often even if they are higher!  

Most likely if the situation described above is accurate of your circumstances, you may not have established a personal credit score with the three US credit bureaus.  This would make it nearly impossible for you to get a loan.  However, there are some very good sources for Private Money Loans that don't require a credit score at all and require 50% down, with Peak Management in Lenexa, Kansas.  The interest rate will be a little higher, and there will be closing costs and other fees that make this a more expensive option than cash.  However, Peak works with international buyers and offers 30 year financing loaning at 8% interest rate. This is a non-recourse loan (where they can't come after your personal assets, and you don't have to have a credit score) can be a very attractive loan!  This is especially true if the cash you would be using to purchase the home can earn higher than 8% in other investments.  It also may provide some tax shelter in some circumstances (please see tax professional for more detailed advice).

Programs like Peak may also loan the money for renovation which can be nice.  All together I would say you have to weigh the pro's and con's, but if a lender like Peak can close in 2 weeks, it may be almost the same as cash, but even if you decide the cash route is the best for you, it's nice to know that using some of these strategies, you may be able to do a cash out refinance and get a large portion of your money back to invest in other ventures by having these options! 
  • October 01 2013
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A return in your investment is always the goal in Real Estate. The buying process in this market is favoring Sellers. With the low interest rates and the short supply in homes, this creates a "Seller's Market."  Depending on the circumtances or seller's net profit, a seller may consider a financed offer rather than a cash offer simply because the financed offer will be higher than the cash offer. Paying cash for a property may make sense if you are trying to avoid paying loan fees and settlement costs. You need to evaluate your personal circumstances before purchasing for cash. Do you have funds set aside for retirement, cash in savings accounts or other liquid assets, and sufficient health, life and disability insurance? Most financial planners suggest at least six months of financial padding in liquid assets. Paying cash for a property may drastically limit your liquidity. This can be especially critical if you'll send kids to college soon or need to assist an elderly relative with living costs.
If you are close to retirement, buying a home for cash will cut monthly mortgage expenses. Just make sure you have enough income from other sources to live comfortably, including paying rising property taxes, insurance, and maintenance on the home.
Also, evaluate how important interest deductions are to your tax picture? A home without a mortgage is a home without a major tax deduction (even though paying interest is never better than paying none!) It may make more sense to use your cash to pay off non-deductible credit obligations than to put cash into a home.
With this said, in your case with a 4 year time span you can consider buying a much-needed-repair home cash and rehabbed it during your stay and then sell it for profit when the time comes. Of course with the right Realtor, going over expenses and commission to be put back on the market must be calculated for an ideal seller's net. 
Good Luck user28241259!
  • October 01 2013
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Cash is normally a first choice for bank owned properties. Many times a lower cash offer will be accepted on these..However, there are rules for owner occupant waiting periods many times.
Good luck with your search!
  • October 01 2013
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The advantage is your offer will most likely be picked over financed offers that are in the ballpark of yours, even lower ones, because you can close quickly and your offer is not contingent on obtaining financing.  I would leverage your money though.  Instead of buying one property all cash, put 20% down (to avoid MI payments) on 2-4 properties and your wealth will go exponentially more than just owning one investment property.  That's what I would do.
  • October 01 2013
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Hi There, I am specialized in helping new immigrants purchasing their first home in the U.S. I would suggest you to interview few different real estate agents, and the best will be someone who can speak your language, so it will be easier to for he or she explain the process and every documents you will sign. 
Cash is powerful, and since you don't have much credit history here, it will be harder to get a loan here ( there are two months waiting period that you have to "park" the money in the account) If you can afford to buy in cash now, then DO IT!  Holiday season is the best time to negotiate. Then you can get up to 60% of your purchase money back with a new loan. Ask me how :-)
  • November 25 2013
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