The Downsides of Cash

Cash home buyers need to guard their interests


Q. I am selling my home, where I have lived for many years and have built up a lot of equity. I plan to buy a less expensive one for cash. I realize that cash buyers usually have an advantage over someone who must get a mortgage, but are there any disadvantages?


A. All-cash offers usually trump all others because the seller can be sure that the lender won’t kill the deal by not approving the buyer’s financing or appraisal. Since cash buyers can close quickly, sellers who are ready to move on with another home purchase find that a plus, too. So cash buyers often can buy a house for less money than someone who must get a mortgage.

But the flip side is, without a bank as a backstop, you can easily make a mistake, and the consequences will be your responsibility alone.

Most buyers find getting a mortgage to be a nail-biting hassle because they have to go through various levels of approval. They must make a down payment, meet loan-to-value ratios and pay for independent appraisals, title insurance and homeowner’s insurance.

These precautions are done for the bank’s protection, not the buyer’s. But they have the ancillary effect of protecting buyers who may be swept away by emotion after finding their dream home and pushed by agents eager for a commission into making a purchase they shouldn’t.

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