Is Buying a House With Cash a Good Idea in Today’s Market?

In light of today's rising mortgage rates, the thought of saving money on a monthly mortgage payment by paying for a home in all cash may sound like a safe bet.

Moreover, home sellers swoon over all-cash offers, since it means there's no doubt that you've got the coin to close the deal. And a happy seller means the house will be yours that much faster.

But before you drop every dollar you have on buying a home, you should understand all of the expenses you'll have to cover, even if you plan on financing the house with cold, hard cash.

How to Buy a Home With Cash

You can use cash from a variety of sources to buy a house. This can include an inheritance, personal savings, or even a cash gift.

It's advised that you keep your homebuying funds in one account to ensure you can easily keep track of the money you’re going to need. Also, because bank transfers can have delays, you don’t want to be moving money around shortly before closing.

Additionally, you’ll need to provide the home seller with a copy of your bank statement as proof of funds when you submit your offer.

Staci Titsworth, regional manager of PNC Mortgage in Pittsburgh, recommends building an emergency fund that will cover living expenses for at least six months. And if you have extra cash after that, you'd be smart to funnel it into a retirement account, since a home alone should not constitute your entire nest egg.

How Much Are Closing Costs on a Cash Offer?

The purchase price is the biggest number you'll have to face when buying a house, but there are still closing costs that must be dealt with, says Realtor® Denise Shur, with 1:1 Realty in San Jose, CA. Sure, you won't have those loan-related fees, but there are a grab bag of others:

• Real estate transfer taxes (county/city fees)

• Title insurance fees

• Processing and filing fees for county records

• Appraisal and home inspection fees

• Home Inspection

  
  

Even if you’re buying a home with cash, the one-time closing costs, or fees you’ll have to pay during the closing process, can be as much as 3% of the purchase price, according to Lee Dworshak, a Realtor with Keller Williams LA Harbor Realty.

And even though you've paid for your home in cash and paid all closing costs, that doesn't mean you can get away with living for free in the years to come.

Even though your residence is "paid off," there are costs you'll incur down the line. Here are some ongoing costs you should be prepared for—by keeping some money in the kitty.

I Have the Cash to Buy a House. What Are the Pros and Cons?

The biggest pro to making a cash offer on a house is that it's the most attractive offer to sellers.

“All-cash can be an advantage when it comes to shorter escrow periods and eliminating some contingencies," says Annapolis, MD, real estate agent Greg Beckman.

Depending on your market, an all-cash offer can strengthen your negotiation stance and persuade sellers to accept less than their full asking price. However, “in today's low-inventory seller's market, don't expect to get a crazy-good deal because you're paying cash," says Beckman. "But if you’re not in a bidding war, you should be able to get the home for a little less."

As for the cons, the biggest drawback is ensuring you have enough money to pay for all the added dues that come with owning a house. These include:

Arizona-Specific Considerations:

Property taxes in Arizona: Arizona has relatively low property taxes compared to other states, but they still need to be factored into your long-term budget. Research the specific county rates before purchasing.

HOA fees: Many Arizona communities—especially in Scottsdale, Phoenix, and active adult communities—have mandatory HOA fees that contribute to amenities and maintenance.

Homeowners insurance in Arizona: Due to extreme heat and monsoons, Arizona homeowners should ensure their insurance policies cover potential weather-related damage.

Utilities in Arizona: Arizona's summer energy costs can be high due to air conditioning needs. Review past utility bills to gauge monthly costs before buying.

Home maintenance in Arizona: The desert climate can impact home systems such as HVAC, roofing, and landscaping. Be prepared for maintenance costs.

Are There Companies to Help With All-Cash House Offers?

Currently in the market, there are three leading companies that offer services to help homebuyers make all-cash offers: Flyhomes, Better, and Orchard.

No matter if you’re a first-time or an existing homebuyer, you need to meet traditional underwriting standards for creditworthiness with a good credit score (in most cases, a minimum of 620) and a healthy debt-to-income ratio (43% is usually the highest a lender will accept) in order to use these services.

“In today’s ultra-competitive housing market, it has become increasingly important for us to level the playing field for the average consumer, especially as the presence of iBuyers and institutional investors grows,” Flyhomes co-founder and CEO Tushar Garg told Forbes.

“Not everyone has the luxury of being able to make an all-cash offer on the home of their dreams. And yet, it has almost become a prerequisite for entering the homebuying market altogether. By eliminating the incremental closing costs associated with the Flyhomes Cash Offer, we’re able to bring our mission of making every buyer a cash buyer one step closer to reality.”

Ready to explore your homebuying options?

Whether you're considering an all-cash purchase or weighing your financing choices, I'm here to help! Contact me today at +1 480-298-5551 for a free consultation and expert guidance to make the best decision for your future home!