Ep. 76: 5 Benefits Of Buying Real Estate Property With Cash

Ep. 76: 5 Benefits Of Buying Real Estate Property With Cash


Hello, everyone, and thank you for coming
to this week’s video blog here at California Realty Training. My name Robert Rico, so glad you made it. This week we have a pretty good topic. Again, as always, what we want to do is bring
some information to you, so you can take it to your real estate career. Those of you who are new in the career, hopefully
you become more comfortable and make things happen for yourself, for your families, and
make some magic happen. Hey, listen, today’s topic or question is:
Is it beneficial for a home buyer to purchase their property cash, if they have the cash? Now, that’s a pretty good question. For a realtor point-of-view, it’s a great
thing. When it comes to a realtor, if you have a
buyer who’s paying cash, typically it’s a slam dunk deal. The buyer comes in, has the cash, find a house,
put it in escrow, close the deal; done. We collect our commission; it’s a good day. What’s the benefit to the buyer, or are there
benefits of a buyer bringing tons of money in? I mean, this is a lot of money. Let’s assume they’re buying a house for $1
million. That’s a lot of money. You see, “You know what, we do want to pay
the $1 million purchase price, and we want to purchase it all cash.” Now, why in the heck would somebody want to
do that? Why would somebody want to fork over $1 million? There’s a whole bunch of reasons why a home
buyer would want to buy their house cash. I mean, let me just go over a few. One of the great reasons why a home buyer
would probably come in with cash is, of course, to avoid the closing costs. Now, I think you guys remember this. When it comes to a loan, when a buyer’s going
to get a loan, there typically is tons of closing costs. The bank just doesn’t give money and say,
“Here’s the money. Go buy a house.” The bank expects for the buyer to come in
with closing costs. Now the closing costs is typically … Now,
let’s do the math. The closing costs is typically 3% of a purchase
price. Let’s say I’m going to buy a house a million
bucks. 3% closing costs. Do the math. That’s $30,000. That’s a lot of money. If you pay cash, there is no lender. If there is no lender, there is no what? That’s right, closing costs. Right off the bat, you’re saving yourself
30,000 bucks on a $1 million house purchase, which is a great, great savings. You’re also going to save yourself some origination
fees, all kinds of little fees that they have with the bank; but the biggest cost of course
is closing costs. Another thing that the buyer is going to be
saving, of course, would be the appraisal fee. Now, that’s not such a big fee. It’s a small fee, but it’s still a fee in
general. Think about it. An appraisal typically costs, I don’t know,
anywhere from $400 to $600. Not much, but by doing this purchase, by buying
this home cash, you can avoid that appraisal. But let’s go here. Hold on, let’s go just one step deeper here. Alright, here we go. Does the buyer who is going to purchase their
home cash have the right to do an appraisal? That’s a whole different topic, but let’s
go into it just a little bit. Does the buyer who’s going to bring cash to
the deal have the right to get an appraisal done? Now, typically the appraisal is done to satisfy
the lender. Typically the appraisal is done to satisfy
the lender. In this case, there is no lender, so does
the buyer still have the right to do an appraisal on their purchase? The answer is, of course. They can keep that stipulation, they can keep
that contingency in the contract. Sure, they may say, “I’ll pay all cash. I’ll pay you a $1 million cash, but the house
still has to appraise at a $1 million.” Of course, the buyer can go ahead and hire
someone. It’ll cost him four or five or six hundred
dollars to go out there and make sure the house is worth a million bucks. In general, if they don’t want to, they don’t
have to. It is not required. Now, why isn’t it required? Because there is no lender. You got me? Good. They can save themselves some money by not
having to do an appraisal. Another benefit for the buyer, when they’re
buying a home cash, is there is no loan rejection. No bank. If there’s no bank involved, no loan, there’s
no bank saying, “Hey, sorry, you’re rejected.” That’s a good thing. Nobody wants to be rejected. If you’re buying cash, it is automatic you
will qualify; because you have that green bills there. You can do this. Nobody can tell you, “Sorry, it ain’t going
to happen.” If you’ve got cash, guess what, you can buy
yourself a house. Another reason why people buy cash, which
is probably the biggest benefit. This is probably the biggest benefit. It’s huge, and it’s tremendously, incredibly
attractive for a home buyer, if they’ve got the cash, is when there’s no loan, there’s
no interest. Now, think about that. When there’s no loan, you’re not paying any
interest. Now, you think, “Well, how much interest can
there be when you do get a home loan?” Tons. Check this out. Just to give you an example. If you get a home loan for $1 million … Let’s
just do the math. Get a home loan for $1 million, $1 million
for a home loan. Especially if you’re going to buy here in
Los Angeles, $1 million will get you something, I don’t know, decent. $1 million home loan. You’ve got to pay your closing costs if you
get a loan, all that good stuff. Now, if you get a home loan for 30 years,
which is a typical home loan duration. A 30-year loan of a million bucks, take a
guess as to how much interest you’ll be paying over the life of the loan. Take a guess. Yeah, you’d be paying over $700,000 of interest. You’d be paying over $700,000 of interest
if you were to get a home loan of $1 million. That’s a lot of money. Buy the house cash, no interest; you’re saving
yourself over $700,000. Now, this is on the 30-year loan, $1 million,
at 4% interest rate, which is today’s interest rate, give or take. That’s a huge savings. Now, that’s the biggest reason why most people
buy cash. They don’t want to have to pay anybody else
any money, any interest. This is my house, I paid it with cash, nobody
else is involved but me. That’s the best benefit. Last but not least, when it comes to buying
a house cash, the great benefit also is you can close quickly. No loan, no need to have an appraisal done,
no need to do any verification of employment, no need to do any verification of income,
no need to do any verification of anything; all they’ve got to do is verify you’ve got
the money. That’s called proof of funds. All you’ve got to do is show them that you
have proof that you have the money, proof of funds, and you’re in. With cash, you can close the deal in as little
as five days. You can close it quickly. That’s great for the buyer, who wants to move
in quickly. That’s great for the realtor, who would like
to close this deal quickly to get that commission. That’s great for everybody, so it can be done
quickly. In a nutshell, what are the benefits for buying
a house with all cash for a buyer? A whole bunch of stuff. Whatever we just discussed. If you have a buyer who wants to buy cash,
are you kidding me, let them buy their house cash. There’s tons of benefit. They know what they are doing. And congratulations on getting a buyer who
wants to buy cash. All right, hope this helps you out. If you have any questions or concerns regarding
this topic, do us a favor, leave a question or comment down below. And if you haven’t already, what are you waiting
for, subscribe to our channel. Have a great day.

3 thoughts on “Ep. 76: 5 Benefits Of Buying Real Estate Property With Cash

  1. Keep dropping that knowledge Rico! I watch your training videos nightly as part of my CaRT courses. You make learning easy. Your acronyms & catch phrases are great learning tools. "A $5 bill is a $5 bill, study long study wrong!" Thanks Rico

  2. I'm planning on buying a home with cash toward end of this year. What do you think my chances are of requiring my RE agent to forfeit 1% of their commission for my business? Do you think that would be a good idea and if shopped around an agent would bite knowing it is a quick slam dunk?

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