Buying Your Houston Home With Cold, Hard Cash? Here’s Your Step-By-Step Guide

Houston Home Buying Guide For Cash Payment: Process, Pros, & Cons

After saving a large sum of cash, you're finally ready to use it to buy a home. Or maybe you've accumulated your current home's equity and want to sell it to downsize to a house bought in cash.

Or you're probably struggling to compete in the current market after hearing about the new Cash Offer programs advertised by real estate tech companies.

You wonder: Should I even buy with cash in 2022? What is the process? If only someone would create a step-by-step guide for you.

You’re in luck because we just created one! This article includes the finer details of buying in cash. Here’s the step-by-step guide on how to buy a Houston home for progressive buyers: the process, pros, and cons.

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"The Houston Properties Team is fantastic! I found the team through their highly-informative website, guides, and resources to the Houston area as we prepared to relocate halfway across the country. After reaching out, we were lucky enough to gain Kim Vargas as our realtor. She made our home purchase and move as seamless as she possibly could. If we needed support on anything, she jumped right in! Her market knowledge and expertise helped guide us and ensured we made a sound decision on our home purchase. We can’t thank her and the Houston Properties Team enough!" - Rachel (Google Review)

Sellers' Love For Cash
Cash Home Buying Process
Cash Home Buying Pros And Cons
Is There A Way To Get Cash Benefits Without Emptying Your Savings?

Sellers' Love For Cash

"Outstanding service, for both buying and selling! Courtney has an eye for detail, helping us understand strengths and vulnerabilities for each property we considered. She also gave expert advice on how to make our property stand out for prospective buyers. Professional, expert, and an absolute joy to work with!" (Rothdent, Google Review)

Buying in cash is beneficial. You'll be mortgage free, avoid the extra expenses (mortgage insurance), and save thousands on loan interest.

But the main factor why buyers are using cash in the Houston seller's market is to gain an advantage over other bids.

Houston's best Realtors love working with cash buyers. Even with a pre-approval letter, you could still lose your financing if you buy with a mortgage loan. So, cash buyers provide sellers an assurance as it is one less way to lose a deal.

Appraisal’s Controversy

Speaking of failing deals, let's first talk about appraisals.

A mortgage-backed deal requires an appraisal. It helps the lender verify your home's value and set borrowing limits. If the house doesn't appraise and you can't cover the difference, the seller will have to either accept a lower offer or relist it for sale.

Appraisals have become a controversial topic for buyers and sellers. Thousands of deals were jeopardized last 2021 as multiple estimates came in below the offer price. It can put off an entire transaction which is why sellers prefer cash offers that don't require one.

Now, seller decision points come down to specifics due to the competitiveness of home offers. Removing the appraisal condition can often seal a deal, even when a rival mortgage-backed buyer offers a higher price.

Cash Home Buying Process

"This was one of the best home buying experiences I've ever had. Holly and Laura were patient and professional. We found the perfect home and they protected me along the way providing amazing insight into the market that I needed coming from out of town. I will use again." - Ahaji (Google Review)

1. Gather The Cash

First, make sure that you gather your cash together.

You've probably got enough money in your savings account for your dream home. But if your cash is in multiple tabs (stocks or money market), you'll need to cash these out and gather your money in one place.

Also, you might want to consult with a tax or financial advisor before cashing your money out. This is to ensure your understanding of your account liquidation's tax implications.

Once you identify where to get your cash quickly, the next step is to get proof that you have it.

2. Obtain Proof Of Funds From Bank

If you want a competitive cash offer, secure a bank letter as proof that you have the cash available.

Request a letter of proof from your financial institution stating that you can purchase in cash up to a specific amount. Attach this letter with your offer.

Submitting a proof-of-funds letter is more secure than a bank statement that holds sensitive data.

3. Pick Your Home

Now's the best part, shopping for your home!

Houston's top Realtors can help you narrow options and determine whether a seller's asking price is fair. Just because you have enough saved cash doesn't mean you should overspend it on your home.

Note these important details as you pick your home:

Think about your life five years from now. The home you're interested in might suit you today, but it might also change five years later.
Decorative details like landscaping or paint colors are easy and inexpensive to change. Don't dwell on its minor details but focus on the home's systems. Are the appliances updated? Are the windows, roof, and HVAC system in good condition? Consider the larger picture because a home with efficient systems will give you the most money value.
Location is the most crucial detail in home buying. You may change anything you want in a property except for its location. If you love the home but have concerns about its location, think twice before deciding.

4. Set The Best Offer Strategy With Your Agent

Making the perfect offer is the most important in the Houston real estate market.

Due to multiple offers, every clause in a contract could be a potential turning point in buying a home.

It is no longer as easy as coming in and sealing the deal at the asking price like it used to. Now, every detail of your offer has to be perfect, or you risk losing out to the next buyer.

Yet, it doesn't imply that you should risk yourself. Carefully assess whether to include contract contingencies to protect you in the deal.

A contingency means you can buy the home under specific conditions. You won't need a financing contingency, but try considering an appraisal or inspection contingency.

Remember, you can remove a contingency, but it doesn't mean you should. Most buyers utilize inspections for a reason. Also, an appraisal may appear like unneeded lender red tape, but it could prevent you from overpaying.

So how do you protect yourself while being competitive? Strategize with your Realtor to create an offer that caters to the seller's conditions. It often means offering a higher price, a rent-back agreement, or a more flexible closing timeline. And occasionally strategically removing contingencies.

5. Offer Your Bid

After researching your seller and creating the best bid, you're now ready to get your dream home. It's time to submit your offer and hope for the best. Move quickly with your cash in hand once your bid is chosen!

6. Get A Settlement Agent

Even if you don’t need a lender to deal with, you still have to undergo the closing and title process. It is to ensure a smooth transaction and prevent future title problems.

Depending on the home’s location, your settlement agent will take a few actions on your behalf. They will facilitate the title search and transfer and act as an independent third party to keep, account, and transfer the money.

In some areas, the closing may be handled by attorneys, while some are title or escrow companies. Talk to your Realtor about which settlement agent to choose for a complete and thorough deal.

7. Secure Your Earnest Money Check

Secure a cashier’s check for the earnest money amount if you offered one as part of the deal. It is better than bringing a wad of cash since no one wants a counting pile of cash. The settlement agent will keep the earnest money until the sale is complete.

8. Book An Inspection

Schedule an inspection to ensure that there aren’t any hidden problems with your new home.

Some cash buyers add an inspection contingency in their offer “for informational purposes only.” You can walk away if something is disclosed, but you won’t ask for damage repairs.

Suppose you include an inspection contingency in your offer for informational purposes only. In that case, you’re telling the seller that you won’t ask for repairs no matter what the inspection reveals. But if it shows a major issue, you reserve the right to walk away. Otherwise, you want to buy the home as is.

9. Participate In Title Research

Title research is essential in the home buying process, handled by your settlement agent. It is to ensure that there are no unknown home claims or liens before you take ownership.

Also, try to consider getting title insurance. Should the title research miss something, your ownership rights to the property are insured.

10. Get A Land Survey

Consider getting a land survey if you're buying a property with an unclearly defined lot or a large plot of land. The survey will identify the property boundaries, determine if it's on a floodplain, and outline any easements.

11. Get Homeowner’s Insurance

Getting homeowner's insurance is a wise decision, even if it's not required if you're buying in cash. You're investing your money into a hundred thousand worth of an asset. So it's best to insure it in case the unexpected occurs.

Consult your insurance agent to know which kind of homeowner's insurance you need. Your car insurance agent is a good start if you don't have a homeowner's policy on your current residence.

12. Consider An Appraisal

Even if you don’t need an appraisal when paying in cash, you might want to consider it. It is to confirm if the home’s value is worth your money for your peace of mind.

13. Secure A Balance Check

Now that you’ve appraised and inspected the house, it’s time to prepare for your payment.

Secure a check for the remaining amount due, less the paid earnest money. Gather the funds in a cashier’s check or prepare for a wire transfer.

14. Identify Other Needed Funds

Are there homeowner’s association fees needed to pay? Will you or the seller pay for the closing costs? Your purchase contract should lay out these terms.

Ask your Realtor what you owe beyond the purchase price to ensure everything is ready to go.

15. Run A Final Walkthrough

Conduct a final walkthrough before the home closes to ensure its expected condition.

Ensure the house is clean, and everything is complete (were any missing appliances included in the deal?). Also, check for any significant mess the sellers left when they moved.

16. Attend Closing

It’s time to become an official homeowner!

The closing process will be faster since you’re not applying for a mortgage. A cash deal often closes in one to three weeks. It could also last a month or more if inspection or title complications occur.

Nothing takes as long to buy with cash since you don’t need to undergo financing procedures. In contrast, lenders can slow the process, which requires more time.

Bring your ID, cashier’s check or wire transfer, and anything else your Realtors advises you need at the closing table.

17. Move In!

It’s time to settle in and enjoy your new home!

You won't need to worry about your mortgage due every 15th of the month since you purchased your home in cash. Enjoy the freedom of a mortgage-free lifestyle.

Cash Home Buying Pros And Cons

"I had a great experience working with Brittney Coyle of Houston Properties. She had great advice to help narrow down my choice. She and the team was great during the entire process. Even after the sale was complete Brittney followed up with me on multiple occasions to ensure that everything was going smoothly. I would definitely recommend her and the Houston Properties services!" (Efrain, Google Review)

So far, paying in cash sounds like a win-win! It’s faster and more secure than getting a mortgage. Yet, there can be significant drawbacks to consider. Let's dive into its pros and cons.

Pros

Create more competitive offers.
Select your contingencies (wisely).
Skip stressing about changing interest rates.
Saving on mortgage insurance and interest.
Pay fewer loan fees and closing costs.
Avoid years of paying a mortgage.
Close faster and smoothly.
Instant and outright home ownership.
Bonus: If needed, you can always refinance later.

Cons

Your cash is all invested in one asset and isn’t liquid once needed.
Your money might get more returns on other investments.
No tax breaks on mortgage interest.
Avoiding appraisal and inspections is financially risky.
Cash payment could have delays.
Lesser cash discount on price in the current market.

Is There A Way To Get Cash Benefits Without Emptying Your Savings?

"The Houston Properties Team was great to work with. They were always patient and diligent, and always represented our best interests throughout the home buying process. We couldn't have asked for better or more competent représentation." - Abu (Google Review)

Paying in cash can simplify the home-buying process, but it’s not always the most beneficial decision. Depending on your cash savings and home costs, you could be in a tight spot in the future. Watch out for funds needed for home repairs, maintenance, or funding a life event.

Houston’s best Realtors, The Houston Properties Team, have years of experience buying homes that will help you provide the best offers. Contact us to get personal advice on buying your home with cash.