Can’t Buy a House With Cash? You Can Still Land the Home

Buyers who aren't paying cash for a house aren't necessarily out of luck. Here's how you can gain an edge over cash buyers.

All-cash buyers are active in many markets, and they can strike fear in new home buyers. The cash buyer can perform and close quickly and provide sellers with a sense of comfort.

But, does this mean a solid buyer putting down 20 percent or more shouldn’t attempt to compete with the cash buyer? Absolutely not.

What if you can’t buy a house with cash?

The truth is, a buyer getting a mortgage can still compete against a cash buyer and win.

These are the questions that can make the difference:

  • Do you have a 20-percent down payment?
  • Are you well employed?
  • Do you have cash reserves in addition to your down payment?
  • Do you have very little debt?
  • Do you have good credit?

If you answered yes to most or all of these questions, your purchase should be as bulletproof as a cash buyer’s.

Paying cash for a house doesn’t guarantee a buyer will win over the seller. Well-qualified buyers who put in a little extra effort can seal the deal.

How can you compete against a cash buyer?

  • Be up front about your finances. Make your offer as strong as cash by providing the seller the confidence they need to accept your offer. In addition to a pre-approval letter from your lender, be open to allowing your agent or lender to provide financial information with your offer. Tell them what you make, and how much money you have in the bank. Show bank statements and even a copy of your credit report. Overload the seller to show them that you’re as solid as the cash buyer.
  • Ask your lender to get a head start on the mortgage. See if your mortgage professional can move the process along sooner. Send the lender a copy of the preliminary title report, if available. If you’re buying a condo, find out if a condo questionnaire is available and give it to your lender. If you take any of these steps, let the seller know. Of course, if you have not already, provide the necessary financial documentation to your lender right away.
  • Shorten the loan and appraisal contingencies. Ask your lender how quickly they can send an appraiser to the property, and how long the loan would take to turnaround. In some parts of the country, loans are being approved in less than 14 days — sometimes even 10.
  • Pre-order an appraisal. This may not be as easy with a bigger bank. But smaller banks, direct lenders or mortgage brokers can line up the appraisal in advance. At the time your offer is written, tell the seller the appraisal has already been ordered. If you can get the appraiser out within 24-48 hours of coming to terms with the seller, it’s half the battle.
  • Inspect quickly. Along with the quick appraisal and loan contingencies, get your inspector in and out. Shelling out a few hundred dollars and getting the inspections done within days of having your offer accepted shows the seller you mean business. It also gives them comfort that they’ll get over the biggest hurdle quickly.
  • Overpay. Cash buyers nearly always expect a discount from the seller simply because they’re offering cash and are a sure thing. As a result, the cash buyer will often make a lower offer. To increase your chances, top the cash offer, even if means paying a little more than you think the home is worth. If a seller is faced with a few thousand dollars’ difference, the seller probably wouldn’t risk it. But what if your offer is five percent higher than the cash buyer’s? The seller, perhaps wanting the best of both worlds, may ask the cash buyer to raise his or her offer. Some cash buyers will offer more, but not always enough to match. If you plan to live in the house for many years and it’s the home of your dreams, paying a little more to get the deal might only translate into $20 per month over the course of a long-term mortgage.
  • Make yourself known to the seller. Some buyers write “love letters” to sellers, hoping to appeal to their personal side. Does this work? Sometimes! If you’re competing with a cash buyer, particularly an investor who plans to rent the home out, it can’t hurt to get a little personal. The seller almost always wants to know more about the potential buyer. Ask your agent to write a cover letter and an introduction. Let the seller know who you are, why you like the home and what your intentions are. It usually works.

Do the best you can and be realistic. Make sure your financial “‘house” is in order. Work with a good local real estate agent, and start working with a local mortgage professional well in advance. Structure your offer to show that you’re ready to roll.

For more home-buying tips, check out our Home Buyers Guide.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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Buyers Entering the Market Solo Struggle

Accumulating a down payment is a struggle—and even more so for singles, according to a new report.

Singles are facing more than 10 years of saving, assuming they make a 20 percent down payment on a median-priced property, an analysis by Zillow reveals. Conversely, couples can do it in half the time: 4.6 years.

In addition, buyers have limited options when solo: 45 percent of inventory, compared to couples, who can afford 82 percent of supply.

“Nearly two-thirds of Americans agree that buying a home is a central part of living the American Dream, but for unmarried or un-partnered Americans, that dream is increasingly out of reach,” says Aaron Terrazas, senior economist at Zillow. “Single buyers typically have more limited budgets, which means they are likely competing for lower-priced homes that are in high demand. Having two incomes allows buyers to compete in higher-priced tiers where competition is not as stiff.”

The challenge is intensified in markets with rising values, the report shows. Couples face 14 years of saving in San Jose, Calif.—already a haul—but for singles, that span stretches over 30 years. In San Francisco, Calif., couples can amass enough for 20 percent down in 12.6 years, but singles have a longer road, at 27.8 years.

A handful of markets are more realistic for singles: Indianapolis, Ind. (7.5 years of saving); Cleveland, Ohio, and Detroit, Mich. (8 years); and St. Louis, Mo., and Pittsburgh, Pa. (8.1 years).

Across the largest metros:

Zillow_Down_Payment

Analysts assumed buyers are portioning off 10 percent of their income each year to savings. According to 2016 Census data, annual earnings were a median $80,800 for couples and $34,500 for singles.

For more information, please visit www.zillow.com.

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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4 Things to Do Before Gutting a Home

Put down the sledgehammer unless you've already got these covered.

Do you have a bit of a fixer-upper on your hands? Or maybe you’re just ready for a major change? Remodeling your home can be a lot of work, but the results, when done well, are well worth it.

Before you get too excited and start tearing down walls and ripping up the floors, read through this guide to keep yourself on track.

Check the space allocation

Having enough space, especially in bathrooms and kitchens, can make or break a home. You can install gorgeous flooring, countertops and fixtures, but if your knees touch the wall or the bathtub when you’re sitting on the toilet, the amenities won’t make up for it. And if you forget to take large kitchen appliances into consideration, you can end up with a cramped space that only looked great on paper.

Before you gut the house and start moving walls, take the time to triple check your measurements.

Draw out your space with accurate measurements of desired appliances included before you change a wall or buy a tub. Make sure there is enough room for doors to open and close with ease. Ideally, you should be able to open your cabinet door and your oven door at the same time.

Remember — it’s easier and less expensive to make changes before you buy new appliances or knock down a wall.

Inspect the structure and foundation

Before you start gutting a home, look for problems that may be hidden beneath the surface. You don’t want to spend a lot of money on new flooring, for example, only to have to rip it out to deal with structure or foundation problems.

Put simply, fixing structural problems is hard, expensive, and requires knowledge and experience that the average new flipper or homeowner doesn’t have. Attempting to minimize costs via DIY efforts can lead to mistakes that make the process even more expensive and difficult.

This step is particularly important if your home (whether it’s a new-to-you fixer-upper or a house you’ve owned for years) has recently gone through heavy rain or flooding, natural disasters, or pest problems.

Shop around for professionals

Don’t wait until you need a professional ASAP before shopping around — you’ll quickly find yourself at the mercy of whoever is available with marginally good reviews. Before you start your remodel, do your due diligence and find professionals who fit your budget and project needs. You’ll thank yourself in the long run.

It’s a good idea to find an electrician and plumber before you start your project. While you can probably learn how to handle small projects like installing an outlet, you’ll need help before your remodel is through. Unless you have a lot of experience, you shouldn’t tackle extensive electrical or plumbing fixes on your own.

A trusted home inspector is also a must-have. Here’s a tip: Find an inspector who is used to houses similar to yours in age, design and location. They’ll be familiar with common problems others may miss.

And don’t just read the report at the end. If possible, walk through the home with the inspector. You’ll learn more and have the opportunity to ask questions as they come up.

Know what sells houses in your area

If you’re remodeling your house in order to sell it, invest in changes that will help sell the house and increase the sale price. Don’t waste your money on updates that don’t give you a good return on your investment.

Do your research. Talk to real estate agents in the area or tour houses in your neighborhood that are for sale. Do buyers looking in the area prioritize large windows or large bathrooms? Do they buy based on roof condition or flooring? Once you identify the factors that help houses in the area sell, build your budget accordingly.

This doesn’t mean you can cut corners. Unless a buyer is looking to flip a home, they’ll expect the whole house to be up to a certain standard. However, if you have to pick between hardwood floors and top-of-the-line kitchen equipment, it’s good to know which one will be more likely to lead to a profitable sale.

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What is Tax Assessed Value, Tax Appraised Value, and Market Assessed Value?

What is the value of your home? It depends on what you mean by "value."

Tax assessed value

This figure varies throughout the U.S. since it is determined by the taxing authority of the city, county, or state where you live. Sometimes it is the same as the market assessed value and other times counties will multiply the market value by an assessment ratio to get the tax assessed value, which is often lower than the market assessed value.
For example, suppose where you live, homes are assessed at 100 percent of market value. If you have a home that has a market value of $150,000, your home will be assessed at $150,000. However, if your taxing authority assesses homes at 70 percent of value, your $150,000 market value home will have a tax assessed value of $105,000.

Tax appraised value

This is the value of real or personal property based on the valuation established by a government tax assessor.

Market assessed value

This is the price the government tax assessor estimates the property would sell for on the open market as of the effective date for the assessed value for the year in question. The assessor’s market assessed value is based on actual historical sales of similar properties for a specified study period.
For example, a market assessed value with an effective date of January 1 may have been determined considering comparable sales during the previous 12 months ending September 30 of the previous year. Sales study periods vary by assessment jurisdiction. Because historical sales are used, assessed values are typically less than current market values.

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This Vermont Ski Home Has a Silo You Can Sleep In – House of the Week

This farm-style home is quintessentially New England, but — surprise! — the silo is for sleeping, not for storing grain.

It’s not every day that you find a silo you can sleep in.

Not that Victoria Crawford was even looking for a silo — let alone a house in snow country. The New York City resident and avid skier was casually home shopping during a weekend getaway to Vermont, when a house across the way caught her eye.

It was farm-inspired on the outside, luxurious on the inside and … perfect.

“We were across the street in the neighbor’s house that was for sale at the time. I saw this [house], and I said, ‘That’s it. That’s the one,’” Crawford recalled. “I put one foot in, and I knew that was the house. It’s kind of special.”

Photo by Grant Wieler.

Crawford fell for the quintessential Vermont-style design, and even though the 5-bedroom home was built in 2007, it had decidedly modern features. The floors were made of sustainably sourced bamboo; the windows were high-efficiency; a water-filtration system was fully automated.

The less-than-20-minute commute to the chairlifts was a bonus. A waterfall in the backyard didn’t hurt, either.

Photo by Grant Wieler.

“When I went inside this house, something happened. It’s magic,” Crawford said. “It’s difficult to explain. As soon as you get inside the house, you feel so comfy.”

But the unique aspect of this house, she added, is a silo that guests can sleep in. 

Photo by Grant Wieler.

Modeled after a traditional grain-storage cylinder, the space serves as a separate mother-in-law suite. A spiral staircase leads to a bedroom with rounded walls and a bathroom with a free-standing soaking tub. The suite also has a kitchen, a living room and a dining room, along with a private entrance.

Photo by Grant Wieler.

The silo has become a bit of a destination for Crawford’s friends from around the world.

“We have a lot of guests who come from all around — Europe, Canada, the United States. When I have people visiting, they want to have their privacy,” Crawford said. “The space is so unique and neat.”

Photo by Grant Wieler.

In the main house, a glass-filled great room is a family favorite. Because it faces southwest, it swells with light throughout the day, Crawford said, giving the illusion that you’re almost outside. In the winter, the space is especially illuminated by the sun reflecting off the snow.

Photo by Grant Wieler.

In fact, she and her husband love the room so much that she often falls asleep there. They also enjoy breakfast on the porch in all seasons, with sounds of the waterfall in the distance.

The nearby kitchen is large and open, with subway-tile backsplashes and an island built for entertaining guests.

Photo by Grant Wieler.

The backyard includes a fire pit and what Crawford described as a “mini forest” with 250 types of trees and shrubs. There’s access to 40 acres of shared land, which can be used for cross-country skiing straight from the yard or hiking and biking in summer.

Photo by Kathleen Landwehrle.

The family often enjoys a beach near the waterfall or floats the adjacent Little River in warm weather. The nearby green space is protected state land, which keeps it quiet and natural, Crawford said.

Photo by Kathleen Landwehrle.

The duo was reluctant to put the house on the market but felt it best to sell, considering they aren’t spending as much time outside of Manhattan as they used to. 

“The beauty of that property — that location — it’s called a golden town. It’s a town for the four seasons, whether you want to bike, hike or ski,” Crawford said. “Honestly, I don’t want to sell it, because I’m so attached, and I know I won’t find something like this again. But on the other hand, I don’t have the time to go there.”

Photo by Grant Wieler.

Sharon Bateman of The Bateman Group carries the listing.

Top featured image by Grant Wieler.

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